Meet the real Adam Smith

http://onlinejournal.com/artman/publish/article_5427.shtml

Meet the real Adam Smith
By Carlos Navarro
Online Journal Guest Writer
Jan 5, 2010

Time to debunk the propaganda and myths: Modern-day American capitalism is not totally synonymous with free enterprise; making money is not necessarily the same thing as creating wealth; Wall Street and big government are but flip sides of the same power structure; the big-time money makers behind the scenes who finance the careers of political leaders and, in fact, write for them the laws that make their dealings legal are not entrepreneurs in the true sense of the word.

In his iconic The Wealth of Nations (1776), Adam Smith exposed and warned against the kind of corrupt laws and customs that in his day stifled free markets. Unfortunately, few mass media pundits nowadays have read the book or, if they have, they deliberately ignore its message, latching instead on the author’s “invisible hand” simile, quite out of context, to justify the unbridled greed of making money for its own sake. They conveniently fail to mention that Adam Smith was first and foremost a moral philosopher, not the amoral, dog-eat-dog economist that he has been portrayed to be, as is evident in his other classic, The Theory of Moral Sentiments (1759).

Adam Smith’s moral philosophy was simple enough. He rejected as unnatural the two conflicting philosophies of his day that social order could be achieved only by means of a strong dictatorship or by promoting a Christ-like brotherly love among the citizenry. He realistically held that humans at bottom were selfish creatures, concerned primarily with their individual survival. Thus, the only way to assure social stability was by allowing them to freely exchange labor, goods, and services for profit. If you have something that I want and I have something that you want, and if no king or deity prohibits us from trading what we want from each other, and if whatever those wants are, are not harmful to society, then despite our religious and political differences, whether we like each other or not, we can live in harmony. And if others approach us with better deals, then, to maintain our trading relationship, we would have to trump our competitors with even better deals. Taken at a mega level, it was clear to Smith that the whole of society, as if guided by an “invisible hand,” would benefit from this competition.

Therefore, the main, if not the sole, role of government, according to Smith, was to assure that the competition was free and fair, and, moreover, that the competitors were imbued with a moral conscience, for otherwise the completion would degenerate into the law of the jungle. In his calm, philosophical voice, Smith noted how in his day the overlong terms of apprenticeship (a form of slave labor), the local restrictions against laborers from outside communities, the collusion among wealthy owners of land and capital to set prices, the stashing of bank gold deposits in private coffers and covering withdrawals with unsecured paper notes -- stealing the gold, in effect -- were, among other ruses, preventing the “invisible hand” from working its magic.

In modern-day America, free enterprise as Adam Smith envisioned it is, for the most part, alive and well among proprietors of shops, restaurant and other small business on Main Street. But the convoluted collusions between big government and Wall Street tell an entirely different story. The name of the game at this level is not to enable a free, fair marketplace but to manipulate it by whatever means necessary. And if the collusions at times take illegal twists, you can wager that laws will be enacted to make the twists legal. And morality, of course, never enters the picture.

Overpaid CEOs, high power lobbyists, corrupt politicians, and others of their ilk have plunged America, and much of the world with it, into a deep, protracted recession. Still, it may be argued that in some mysterious, elliptical way that only they have the brains to understand they are contributing to our long-range economic wellbeing. Maybe the crumbs they leave behind after gorging themselves on shareholder and taxpayer money is profit enough for us ordinary folk at the bottom rungs of the pecking order. In the real world, after all, the losers are many and the big winners few. But those who buy this argument can’t invoke Adam Smith for support. That was not at all what he meant by the “invisible hand.”

Adam Smith, for the record, was a man of modest tastes and means. The fabled guru of capitalism was no capitalist. He never owned a business or held a private sector job. His most remunerative employment was in the public sector as commissioner of Customs in Edinburgh.