Adam Smith Reexamined:
I had a recent e-mail exchange with D. Doty, an ardent supporter of Adam Smith's idea—that the unintended consequences of "unregulated" markets" was by and large, beneficial to society and far outweighed the negative effects. In light of that exchange I began to explore some of the most cherished myths of Capitalism. Which led me to the question...
Does Unregulated Capitalism Contain the Seeds for the Destruction of America Democracy?In his treatise, Adam Smith's, The Wealth of Nations, there is an often misquoted and not well understood passage. It still raises debate even among "expert" economists who claim that—man's greedy economic self interests provided unintended benefits for the public at large when "left unregulated" in a domestic market.
It is often referred to as the "invisible hand" of the market place.
It was, in its time, considered a brilliant observation of human nature and revolutionary, in that it elevated what was widely considered to be a sin—"Greed"—to be something that could be used to benefit men.
It was akin to asking. Can something as powerful and potentially dangerous as the atom be used to solve man's ever increasing demand for energy? Can something as powerful and potentially dangerous as unregulated greed be used for the ultimate good of mankind?
The difference is of course are obvious in order to "harness" the power of the atom it "must be rigorously controlled"—and regulated. The key word is harness as in tethered and under control.
So the question is: Is unregulated "greed" any less destructive and any less in need of regulation. You might be inclined to say: It can't kill you. Or can it?
Unregulated, It can produce ever more cunningly diabolical weapons of war that unleash the power of the atom in an uncontrolled explosion and produce massive deaths. And It can sew the seeds of conflict that make war a never ending cycle. And thereby create a never ending market place for those weapons it makes. [See Smedley Butler War Is A Racket] http://en.wikipedia.org/wiki/War_is_a_Racket
Unregulated, it can decide to move elsewhere—say China—depriving you of, the job it gave you and take with it your means to provide medicine, food, shelter and clothing, leaving millions to fend for themselves when they have forgotten how to survive in our post agrarian society. It can choose to ignore large segments of the population and leave them in utter poverty to starve from famine, and to die from unmet medical needs. It can exploit poorer nations for their resources, leaving a dictatorial ruling elite enriched and the general populace destitute. [See Globalization]
Unregulated, it can rob millions of their homes, their life savings and their hope, even leading the most desperate to commit suicide. It can kill. Without feeling or remorse. [See the "Inside Job"] http://en.wikipedia.org/wiki/Inside_Job_(film)
Unregulated, it can buy what it needs to preserve itself even representation in a government of the people, to the detriment of the people, even overturning elections with corruption. Unregulated it can pollute the environment and destroy the earth.
There are flaws in the theory that go beyond those I've already pointed out when you consider other factors. In its the modern adaptation of the theory—other theories that have been attached to it such as Ayn Rands' idea of "economic darwinism" which is Adam Smith on steroids—add libertarianism and it takes it to the level of sadism with the intentional infliction of damage on the weak—at its extremes. [See ENRON the "Smartest Guys In The Room"] http://en.wikipedia.org/wiki/Enron:_The_Smartest_Guys_in_the_Room
Those ideologies—Unregulated and Combined—impart a brutal disregard for the "unintended"—as in the case of ENRON— and the "intended" consequences of its "unregulated" effects of wantonness.
Decoding SmithI have intentionally left out a part of Smith's idea—that is largely ignored by modern adaptors of his theory. It contains the idea of mitigation. In the context of his theory he spoke of domestic vs foreign marks and the natural preference of domestic markets over foreign markets. But he only used the word unregulated in reference to domestic markets. In order to mitigate the effects of greed he was suggesting that this idea was applicable only to domestic markets. That without saying it—was his idea of "regulation." That still begs the question is unregulated capitalism on a massive scale under any circumstance a good idea?
The whole enchiladaIn his treatise, The Wealth of Nations, Smith made reference to "the invisible hand" and stated:
[quote]
"As every individual, therefore,
endeavours as much as he can both to employ his capital in the support of domestick industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it.
By preferring the support of domestiek to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other eases,
led by an invisible hand to promote an end which was no part of his intention. Nor is it "always" the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the publick good. [emphasis added].
[end quote]
A further analysisIn an the afore mentioned exchange of emails with D. Doty I went into some other aspects of its—in my opinion—obvious flaws:
[quote]
Dear Doty, RE: Adam Smith;
Because all men are flawed in their thinking—all products of their thinking are flawed. Therefore all ideologies of men are flawed. Spiritual, economic, and political. The human mind can not anticipate all the variables that surround him or all the variables that his mind cannot perceive—at best he can detect patterns from which he can extrapolate some but not all outcomes. The flaws in economic theory and political thought are at best attempts to control the world of chaos that surrounds us and eliminate as much of the uncertainty as we can.
E=mc2 is a brilliant theory but explains only a small percentage of the known universe and when pushed to its extreme limits seems to fall apart.
This is no less true in the area of political and economic theory. In the 18th century Adam Smith wrote his economic theory based on the prevailing economic theory of that age "mercantilism" a forerunner of Capitalism which is the dominant economic theory of the 21st Century.
Mercantilism stated a belief in the economic benefits of trade protected by government protectionism. And with protectionism come "strings" or if you will "regulation." His argument was in favor of "deregulation" of domestic markets without the strings.
Like everything written by men it is: 1. open interpretation and 2. contains flaws 3. it was written in the context of the history of his time.
Three variables that make it difficult to use as an theory that can be trusted in today's world.
1. Open to Interpretation: The invisible hand was only mentioned half way through his treatise, hardly a place of prominence for a central principle of his theory, which leads me to believe it has been given more weight than intended. Therefore deserves a very narrow interpretation which leads one to believe that he was talking about the law of unintended consequences as it applies to "regulated" domestic industry vs. foreign industry, thus my emphasis. The "invisible hand" was mentioned in his other works within a different context and meaning which would make it esoteric. Even professional economists have interpreted his work differently.
2. It's Flawed: It eliminates all other human characteristics of human nature except greed—and treats man's intentions as purely involuntary—not understanding or caring about the consequences of his actions. Man is treated as if he is a dumb pig rooting about and unintentionally plowing a farmers field. It does not address the flaw of monopolies that swallow up whole markets and strangle competition. It claims an efficiency that is rarely if ever achieved in any human endeavor. It trusts the fate of many people to the vagaries of speculation and the whim of the few. It is self defeating—at its extremes it cultivates extreme pockets of poverty and wealth which have produced violent upheavals including the French and American Revolutions—thus undermining the stable environment that is the primary prerequisite for markets to function, and the very reason American businesses have thrived while others faltered. What happens when the peasants see no hope and rise up?
3. The History of the times: There was a keen competition between Nations at the time and British Empire Building was nearing its zenith and his reference to the preference of domestic vs. foreign industry. There was a built in bias towards domestic industry—at the time "the sun never set on the British Empire" and all resources were considered "commonwealth" and therefore domestic. It does not apply to the International Markets of today's world he could not have foreseen that.
Those are the reasons I cannot see that Smith ever intended his theory to be applied as broadly as it has been in this modern "World Economy." While Smith's theory was brilliant for it's time—like Einstein's theory of Relativity it does not explain everything that needs to be considered.
Sincerely Mike
[end quote]
Is An Attack On Unregulated American Capitalism—An Attack on American Democratic Republicanism?As—Father, Tom Matchie, the best teacher I've ever had—would have said: "I call bullshit!
Meaning: That's utter bullshit! Think about what you're saying! Think about what you're reading! Think about what you are writing! Think about the meaning! Think about the Logic!
The short answer is NO!
When there is even a hint of critical analysis of "CAPITALISM" it gives rise to the usual viscous slurs of communist, socialist, liberal in a pejorative tone.
Nonsense! What a ridiculous leap of logic, but it is exactly the rabid response that is hurled at anyone deemed UN-American enough to say unregulated capitalism is flawed. As if there is no other alternative. Man's mind and skill at adaptation belie that simplistic notion. Extreme belief in flawed deeply rooted ideologies, is at the heart of most human conflict.
What's the difference?
Capitalism and Republicanism are two different disciplines.What Capitalist do to protect themselves from critical examination is wrap themselves in a political doctrine they hate—American Democratic Republicanism. Capitalists and capitalism self identifies as fundamentally inseparable from American Democratic Republicanism and therefore an attack on capitalist and capitalism is an attack on America. And any suggestion to the contrary engender a vitriolic flurry of personal slurs.
My contention is that just as Communism was deeply flawed and unsustainable. Capitalism too, is an economic theory, that when pressed to its ultimate logical conclusion—is unsustainable. It consumes everything and "conserves nothing." An obvious irony lost on the ultra right wing "conservatives." Even more ironic, is that the "unregulated" consequences of both ideologies—in their final extremes, enslave the people and take away their liberties. One through brute force the other through economic enslavement. And both contained the seeds of demise for their political hosts. I am an apologist for neither ideology. Only a critical observer of both.
But another question remains: Are Unregulated Capitalism and American Democratic Republicanism inseparable?Again the answer is no!
I repeat One is—economic the other is political—they are ideologies that work in symbiosis, but under deeper analysis are—at their extremes the antithesis of one another.
They are not inseparable! And a critique of one is not an attack on the other.
A better question is: Is Unregulated Capitalism an Attack on American Democratic Republicanism?When Unregulated Capitalism is detached from "American Democratic Republicanism" and its interests are different from "American" interests then a resounding, YES, is the correct answer.
Like a parasite that consumes its host—capitalism has permutated and is now a danger to its American host. It has slipped it's host after devouring it's assets and has now in pursuit all of the World's remaining wealth. A cancer cell out of control would be an obvious analogy.
There are other differences.
What are the Nature, Objectives and Principles Of These Two Different TheoriesUnregulated Capitalism, is by its nature is—sociopathic—as stated by Smith: it is the rigorous pursuit of self interest oblivious to the consequences of its economic activity good or bad. As we all know a sociopath in terms of individuals is a personality disorder manifesting itself in extreme antisocial attitudes and behavior marked by a decided lack of conscience. Furthermore, Unregulated Capitalism according to Smith has only one objective personal enrichment. It is narrow and fixed. Unregulated Capitalism can be summed up as: The self is greater than than the whole. Its overriding principle is greed. It is Individualistic and anti-social at its core. And when you add in Ayn Rand's idea of "social darwinism" it can be brutal and ruthless.
Contrast that with:
American Democratic Republicanism, is defined as the belief that all men are created and of equal value—none greater than another—in the eyes of their creator and in the eyes of their "government", which consists of—their fellow men elected by the people to regulate differences among various "factions". By its nature it is Social experiment based on a community of caring for the "general welfare" an all inclusive, concern about the "needs" of its people. Its objectives at the time of its birth were to end the oppression of the rich and powerful who controlled men's lives without regard for their human rights. It was "tolerant", "forward looking", "progressive", "open-minded"—it was based on—"enlightened thinking" in an age of suppression and oppression. It at its core is an experiment in "liberal democracy". At best it appeals to "the better angels of our nature." It was based on respect of all men not the few.
And maybe the final and biggest difference between the two ideologies is:Unregulated Capitalism treats a human as a "consumer of it's goods products and services without regard for any responsibility, if you can't pay you don't get the services you nee, even if they are life threatening needs, such as medical care. When they have taken all they can from you—they will leave you penniless, homeless and hopeless, you become useless to them and disposable. How will you petition a corporation for redress of grievances. You become just so much human refuse. They will knowingly or unknowingly trample your rights without compunction or remorse.
American Democratic Republicanism as a government, treats its citizens as humans with "unalienable" rights, as constituents who elected those who govern them to look out for the general welfare of the people they govern. It treats you as a citizen and values your contribution of service. A government that will protect the rights of the minority from the tyranny of the majority. The same cannot be said for unregulated capitalism.
The purpose of Government. So let's all get together and play nice.So, How do you reconcile the fundamental differences of, equality for all and the self interest of Unregulated Capitalism? Government "regulates' by means of laws—controlling the unbridled passions of one group that may try to impose it's will on another group—and establish "a tyranny of the majority"
With that brilliant idea that "all men are created equal" a debate began that is still raging today: How do you balance the special interests of the few or a small group whose interests, intentionally or unintentionally—destroy the rights of a minority. One of the debates from the beginning was should it be a Democracy or a Republic. Madison wrote of his preference for a Republic in the Federalist #10.
As a part of his argument, Madison contended that a strong robust government—consisting of the people's democratically elected representatives, forming a Republic—needed to be big enough to "regulate", disputes between "factions,"—in todays terms—"special interests." A fact that belies the modern Capitalists mantra "Government is Too Big" And the chant to "Deregulate Everything." Without Law (regulation) disorder will prevail. Hence the phrase: law and order—you need one for the other to exist.
Madison's' argument was that a weak government with little power could not in fact prevent one group from dominating another and thereby impinging on the rights of the minority. A weak government is ineffectual. A weak government cannot protect the weak from the strong. A weak government is impotent.
The Open Conflict of Two Diametrically Opposed IdeasAs an example: Take the economic interests of the south and it's dependence on slave labor to manage its "unregulated" agrarian economy—that was in direct conflict with the Constitution. While there are many reasons for not addressing the obvious conflict—the primary underlying reason was pragmatic—in the beginning the government was too small to enforce the Constitution. They could not have ended slavery even though some wanted to—every other reason ever given was subordinate to that glaring fact.
Evidence—as the government grew large enough to enforce the Constitution the country erupted into open rebellion and a Civil War over that issue. The American Civil War at it's roots—was about the injustice of "unregulated capitalist" economics. States Rights, and other so called causes, were, red herrings, meant to confuse the debate.
We falsely assumed that the Civil War ended, but the underlying cause—economic enslavement to unregulated capitalism is still being fought and this, American Democratic Republic is, once again at stake.
From the beginning these two ideologies—one political and the other economic—have been in direct conflict.
Now as during the Civil War Unregulated Capitalism is tearing at the fabric of our government of, by, and for the people and replacing it with a government of, by, and for the rich. Unregulated Capitalism has superseded the will of the people and simply buys what it needs, including representation in our former democratically elected government.
As the bible states: You cannot serve god and mammon because you will love the one and hate the other. Just so you cannot serve two ideologies that are in direct conflict with each other.
My argument is not with "capitalism" per se, it is with "unregulated" capitalism.
Smith was wrong in his presumption that markets are "self regulating" when left alone. The true test of theories is their application over time. American history is full of examples of unregulated capitalism and the devastation that can arise when left to their own—anything goes in the pursuit of profits mentality. As long as there are humans on earth there is a need for laws to regulate their behavior.
Commentary: Capitalists—have used the term "liberal" as a pejorative—twisting the meaning into mean something evil and sinister. They have deliberately associated its meaning to imply that a liberal is a communist.
As in: liberal1 tolerant, unprejudiced, unbigoted, broad-minded, open-minded, enlightened; permissive, free, free and easy, easygoing, libertarian, indulgent, lenient. antonym narrow-minded, bigoted.2 progressive, advanced, modern, forward-looking, forward-thinking, progressivist, enlightened, reformist, radical. antonym reactionary, conservative.3 broad-based, wide-ranging, general. antonym parochial, small-minded, provincial, narrow, conservative, illiberal4 flexible, broad, loose, rough, free, general, nonliteral, nonspecific, imprecise, vague, indefinite. antonym inflexible, strict, authoritarian, to the letter.5 abundant, copious, ample, plentiful, generous, lavish, luxuriant, profuse, considerable, prolific, rich; literary plenteous. antonym scant.6 generous, openhanded, unsparing, unstinting, ungrudging, lavish, free, munificent, bountiful, beneficent, benevolent, bighearted, philanthropic, charitable, altruistic, unselfish; literary bounteous. antonym careful, miserly.Notice the opposite of everything liberal—narrow minded, bigoted, reactionary, conservative, parochial, small-minded, provincial, narrow, illiberal inflexible, strict, authoritarian, to the letter, careful miserly—speaks to the attributes of a neo-conservative capitalist. The opposite of liberal is conservative—not communist.How illuminating when you truly understand a word and its opposite meaning and the information it conveys.You decide what kind of Nation you want to live in an—Unregulated-American Capitalist Plutocracy Or a Liberal Democratic Representational Republic as laid out by the founding fathers in the Constitution. Sign me, a proud unabashed liberal.On a personal note: I mentioned Tom Matchie and I dedicate this post to him. Tom Matchie, energized in me, with an absolute, life long love of language, critical thinking, and the power of words. Unfortunately, he appeared rather late in my academic life, but, the fact that he appeared at all is a blessing—I've been grateful for ever since. He awoke in me a latent intellect, I didn't have a clue, I possessed. He treated me—a self identified, "scarecrow"—as if I had a brain. Something no one else had ever done. Thanks Tom.
