I'm surprised it didn't mention an obvious difference from modern conceptions of the free market: he thought landownership was a monopoly privilege that could be taxed without harm, so long as you are taxing only the land rent itself, not the improvements.
"Ground-rents are a still more proper subject of taxation than the rent of houses. A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground." - Wealth of Nations, Book V, Chapter II
Smith does not seem to be a private-propery-idealist as almost anyone in the mainstream today. Take this passage for example, also from book V.
"Wherever there is great property there is great inequality. For one very rich man there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many. The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy, to invade his possessions. It is only under the shelter of the civil magistrate that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security. He is at all times surrounded by unknown enemies, whom, though he never provoked, he can never appease, and from whose injustice he can be protected only by the powerful arm of the civil magistrate continually held up to chastise it. The acquisition of valuable and*23 extensive property, therefore, necessarily requires the establishment of civil government. Where there is no property, or at least none that exceeds the value of two or three days labour, civil government is not so necessary.
Civil government supposes a certain subordination. But as the necessity of civil government gradually grows up with the acquisition of valuable property, so the principal causes which naturally introduce subordination gradually grow up with the growth of that valuable property. "
>>[The rich] consume little more than the poor, and in spite of their natural selfishness and rapacity…they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.
Evidently, Smith was unfamiliar with golf courses. I see the whole paragraph (of your quote) as being even more detached from today's reality than his oft-cited quote regarding famine and government.
I'm guessing this is generally not obvious to the people who frequently cite him or portray him as some sort of free market champion.
It's interesting how the issues addressed by him are just as relevant 240 years later, the main ones being insufficient taxation of wealthy landowners and eventual consolidation of capital.
Interesting, then, that the growth of inequality in the US in recent decades has occurred alongside a marked and ongoing fall in crime. Is it just that the rich can now afford electronic locks and security cameras?
Taxes on land have been popular forever. Adam smith talked about it, then Ricardo formalized why rent is what it is, to which Marx barely made an addition and Henry George made an economic and moral argument for Land Value Tax in California. That was over 100 years ago.
Today, Krugman, Stiglitz and Milton Friedman agree on land value taxes.
The economic consensus on this topic was achieved long ago. Its a political issue , not an economic one.
Popular with economists maybe. What has worked well in practice is the government owning much of the land and raising money by renting or selling it which is how Monaco gets by with zero tax and how HK raised quite a lot of money while keeping tax <17% on income, zero on gains.
I cant speak for the details of your examples, but taxing land or owning it and renting it out are economically identical.
High Land value taxes really does mean that the land is not owned by a private individual. But Im perfectly fine with that, definitely better than taxing work or consumption.
I like to view this another way - too much concentration of power is a bad thing and we should strive for decentralizing it. So if merchants, in collusion with the state hold too much power, then the state needs to be cut down. Conversely if private players accumulate too much power, that too needs to be cut down, increasing the role of state if necessary.
There is no universal approach that will always be true. Depending on the circumstances, either a hands off approach to markets or more intervention from the state is required.
All that is very nice in theory, but who is doing the "cut down"?
By definition it has to be some entity more powerful that the entity that is cut down. And who should control that entity but the majority of the society?
So, we finish with the (very imperfect) solution of a democratic government. We should recognize that it's going to be a lot of interest trying to corrupt it and we (the people) have to keep watching and steering.
I agree it has to be a democracy. The right points to harms of government overreach to argue for less government. The left points to exploding inequality and argues for more government in order to tackle it. A good faith assumption could be that both are trying to decentralize power and maybe putting it that way will make it easier to reach across the ideological divide.
I think there's an increasingly compelling argument to be made at this moment in history, with the rise of powerful increasingly intelligent software that can 1) rigorously shape policy to ensure that ends are met and that 2) the means to those ends employ minimal bias, and 3) do so adaptively, shifting policy dynamically as circumstances evolve. I believe it's time to start planning for the day when we shutter the voting booths and find a better way to govern using networked sensors and dispassionate computers.
Democracy is dying. Long live automatic government for the people.
Is this really necessary? IMHO, yes. It's become clear that the easy manipulation of a gullible, clueless, and intellectually lazy electorate has broken all three branches of US government:
1) we have an imbecile President and a cabinet of grotesques who border on insanity
2) we have a congress that for over 30 years has done almost nothing constructive, that campaigns on one set of principles then serves others, the primary two being: the financial interests of Those With Money, and paying lip service to the fantasy-laden desiderata of Those Without.
3) a legal system that imprisons over 90% of those charged without a trial.
What brought America to such a dysfunctional State? The democratic popular vote, of course. Nothing else could.
Thus I believe it's time there was a serious discussion (outside of Washington, of course) about alternative ways to shrink and de-bias all three branches of government, at all levels.
I'm convinced that software soon will be powerful enough to fairly, effectively, and adaptively guide the players (both citizens and businesses) in questions of policy to reliably and precisely achieve desired ends, rather than relying on the venerably bent tools of power -- a gigantic incoherent mass of self-serving, ends-oblivious, and inconsistent principles chisled into marble long ago by power brokers to preserve eon-old biases that reliably serves only vested interests.
If we want AI to reach its true potential, I propose better government be its ultimate objective. Start from the bottom up -- local government -- and introduce ends-driven smart services to serve civic and main street business needs at that level -- where feedback is clearest, most immediate, and most accountable. This way we might just put government right, from the bottom up, cutting away Caesar as we go.
The idea that AI would rise up and seize power over its human creators has always seemed preposterous to me. But it is not at all preposterous, as your comment demonstrates, that we might imagine AI as some kind of savior and put it in that position intentionally. This is the real danger.
It is a prescription for dystopia. Either the machines, acting without understanding, will botch things up royally, or unscrupulous people will find a way to use the machines as cover while they pull the strings to their own benefit. Or both.
Yea... technology at large scale has, countless times, been a large detrimental to large amounts, if not all, members of societies. I can already see the hyperintelligent AI realizing the only way to force pliability amongst very slow-to-change socialized humans is what many throughout our history have also learned - force and slavery allow the cogs to adapt to where you need them. I'd rather not be totured because I don't modify my behaviors to keep up with the ever-changing, cost-optimizing algorithms that be.
Also are you suggesting that, instead of the standard dystopian model of AI overthrowing humans, that we, instead, have a revolution to put AI in the place to do all that it may? That would be ironic. More realistically, no one would join in the bloodiest revolution in human history for the glorious resolution of running our government on AWS.
Fictitious fun thoughts aside, and to quote J. Tillman, I'd rather not have the "world [be] written in lines of code." And, to be honest, your response is exactly the type of extreme SV character response I'd write in mocking hyperbole on a site where those very ideals might, quite frighteningly, actually be lurking.
I agree with your analysis of the problem. However, I deeply distrust your solution.
Two problems: One, do we really get unbiased software? Or do we get software that's claimed to be unbiased, but has actually been quietly biased according to the authors' prejudices (and all attempts to criticize it get shot down because "it's really unbiased, so the problem is with you")? Or do we really get a good-faith attempt to write unbiased software, that winds up biased in ways and for reasons that we don't understand?
Second, how are you going to make this happen? It's going to involve taking power away from the existing powers-that-be. And you don't sound like you're going to do it by democratic means, since you see democracy as broken. How do you propose to do it? ("Bottom up" isn't enough of a plan. At each step, it's going to be a war against entrenched interests. How are you going to win?)
I'm not worried that much about software bias - I feel that a lot of good could be achieved with software clear enough for all sides to accept it represents their interest in an ok-ish way.
What I'm worried about is this: technology has always been a force multiplier for those who wield it. For now it's us (maybe in the future it will be a superintelligent AI, maybe not). Even if we manage to write a pretty unbiased governing software, how are we going to ensure that it isn't subtly manipulated by some interested party? And can we ensure that while also making the system extensible, so that it can cope with the demands caused by the impact of ever-progressing technology on our societies? It seems to me that the two goals - a system above humans and a system that can evolve with us - are fundamentally incompatible.
Democratic popular vote did not lead to a dysfunctional state. The lack of democratic vote has led to the problem. We have two entrenched parties because of our winner take all system, gerrymandering designed to take away voter rights, laws restricting rights to vote, and vast media conglomerates.
Back at the dawn of the US, the one with the most votes became President; the next became Vice President. This was a good idea, as it would at the very least encourage some bipartisan discussion. Perhaps the VP would be found more often on Capitol Hill, in the role of President of the Senate.
This is exactly why the US was set up with a balance of powers between the separate branches of government. The judiciary/legislative can hold the executive to account, etc.
Here's an interesting thought: That is is not true that "the business of government is business", as President Coolidge said, but more that the business of government is the regulation of business. A well-leveled playing field can accommodate the free market, assure fair competition (which will in turn assure more competitive pricing), and will protect against unwanted side effects, like a poisoned environment, or use of slave- or underpaid labor.
Nice article – gives a bit more background on Smith's ideas and why it's wrong to flag him as an absolute free market advocate.
TL;DR – The invisible hand doesn't symbolise the problem of state intervention, but of state capture (i.e. merchant elites lobbying governments to protect their monopolies). On the other hand, merchant elites are a "necessary evil" and the art of good governance is balancing over- and under-regulating them.
> The invisible hand doesn't symbolise the problem of state intervention, but of state capture (i.e. merchant elites lobbying governments to protect their monopolies). On the other hand, merchant elites are a "necessary evil" and the art of good governance is balancing over- and under-regulating them.
The second sentence is 100% true and completely in line with Adam Smith's thinking and the overall Scottish Enlightenment.
The first sentence is an accurate summary of the article, but the article is slightly but profoundly wrong. Smith and his ilk probably would think that the (modern) idea of "state intervention" vs "state non-intervention" to be silly. By the time of Ricardo, JS Mill and Marx, "moral philosophers" like Smith were referred to as "political economists" because they understood that the state was the base layer on which the rest of society was built. After all, even if someone is a complete "market fundamentalist" today, he or she still depends on the state enforcing property rights, enforcing general criminal laws against theft, murder, rape, etc., and enforcing private causes of action like torts against neighbors who cause a nuisance, pollute, etc. Were Adam Smith alive today, he would be in favor of all of those "state interventions" in the market, as he seems to have been in his own time. (As a parallel, the concept of "civil society" has followed a similar arc: Originally, Aristotle meant a community bound under a common set of norms and the rule of law. Over time, the concept came to mean groups that exist "outside" or exclusive of the state.)
At the same time, he would have likely been against some of the more heavy-handed regulatory approaches that modern states use from agricultural planning to zoning rules, and he would be against them for the same reason that he disliked the Mercantile System in the 18th century: they give huge advantages to incumbents, they often fail to solve the problems they are organized to solve, and they depend on effectively arbitrary rule by the state.
In my opinion, modern thinking has overzealously accepted black-and-white dichotomies like "for or against state intervention" or defining huge enumerations of incontrovertible "rights." In reality, the intelligent question would be (and the one Smith, Hume, et al. seemed interested in), as your second sentence suggests, "How much should the state intervene so that outcomes are better than the alternative?"
From the man himself:
> All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society. According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works and certain public institutions which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expence to any individual or small number of individuals, though it may frequently do much more than repay it to a great society.
This article is mostly accurate about Smith (although the man himself was much more favorable to entrepreneurs and innovators than is presented), but fairly inaccurate that “Right-wing” politics is some perversion of Smith. At the end, we get a taste of what he means in that Thatcher privatized various state industries during her run as Prime Minister in the '80s.
Otherwise, an entire sub-field of economics (it would be a sub-field of "political economy" if that term were widespread today) is Public Choice, which demonstrates rather well that often state intervention is at the behest of the "merchant interests." Public Choice is a direct descendent of Adam Smith’s thinking. Indeed, the very term "state capture" that the author invokes frequently probably derived from "regulatory capture," a term Public Choice helped propagate.
There is also a misunderstanding that Smith’s "invisible hand" concept implies some sort of Utopian paradise, when in fact, Smith meant more that aspiring monopolists who are nonetheless in competition with each other (and often in cooperation with others) lead to an increase in social gains, which on its own seems paradoxical and is highly counterintuitive. Modern economics seems founded on maximizing or minimizing every possible variable of interest, so I suppose some people may actually argue that the invisible hand is a statement about maximization, which it definitely isn’t. In practice, the only people I see invoke the "Invisible Hand" in this manner are harsh critics of any sort of free enterprise regardless of the context, and always advocates of state intervention and thus regulatory capture ("[people] of the system", indeed).
I am most surprised that Smith's sympathies for labor do not appear in this essay, as they seem to be quite strong. Smith discusses the effects of specialization that happens during industrialization, and goes so far as to say it makes workers with repetitive tasks "stupid." In context, his sympathies are clearly with the worker.
I guess as someone with relatively Smithian-Hayekian views, I am missing the overall point of this article, other than to hand-wring that so-called Neoliberalism (I have never met a Neoliberal) is actually unrelated to Smith’s ideas and are a perversion. He is entirely unconvincing, even if one accepts for the sake of argument that "neoliberalism" exists as a coherent philosophy or even ideology (it doesn't).
That's because neoliberalism is not an ideology, but a label used to try to understand a historic period.
Neoliberalism would be the bastard child of neoclassic economics and liberal ideology and it can be defined by events and people that definitely exist.
The intellectual parents would be the economist in the orbit of Milton Friedman and the 'Chicago school' and the political parents would be Reagan and Thatcher. The playground rules would be the Washington Consensus [1].
The foundational charter would be the Powell Manifesto [2], that I recommend to read to everybody that want to get and insight about the last forty years.
> That's because neoliberalism is not an ideology, but a label used to try to understand a historic period.
No its not. Its a term that is used by pretty much anybody for whatever they felt like.
> The intellectual parents would be the economist in the orbit of Milton Friedman and the 'Chicago school' and the political parents would be Reagan and Thatcher.
That is just false. Friedman never called himself a neoliberal.
The actual word is derived from Post-WW2 German economists, but that term is not used today.
It was after the Pinochet coup that the political left has started to use the term 'neoliberal' as a politcal slur against anybody who they don't like. The use of the term has exploded since then and has be now become to mean about the same thing as 'evil'.
There is no actual 'neoliberal' philosophy or any neoliberals. Only people who leftists politics accuses of such, that includes everybody from some left supply-siders to crypto-anarchists.
The amount of different polices and ideas that are 'neoliberal' by some definition are so broad that the term is
meaningless. This has been shown in research on the use of the term across many fields.
> > The playground rules would be the Washington Consensus [1].
The idea that the 'Washington Consensus' derive from the same basic ideas as the classical liberal ideas (such as Friedman) are also wrong. Classical liberals have been among the people who have very much opposed things like IMF and World Bank.
You make your live very easy by just throwing everything you don't like into some big evil 'neoliberal' bucket without an detailed understanding of the different people, schools of thought, historical events and so on that influenced and/or shaped any one or all of the things you don't like. This is not all part of some grand 'neoliberal' conspiracy.
Well, of course, now that the label it's fashionable, it's going to be used by everybody for everything. A little like using "nano" a few years ago, or "AI" nowadays. That doesn't mean that the term was originally void of meaning as you claim.
>"This is not all part of some grand 'neoliberal' conspiracy."
I beg to differ. Perhaps, conspiracy it's not the word, but very concrete policies have been imposed all around the world by very powerful actors. Those actors are clearly defined, and the times when this happened are also clear. So we can talk of a "neo-liberal" period. After all, we have to call it something.
>"The idea that the 'Washington Consensus' derive from the same basic ideas as the classical liberal ideas (such as Friedman) are also wrong"
Maybe they don't derive from the same basic ideas, but, for sure those ideas have been used to justify it.
> That doesn't mean that the term was originally void of meaning as you claim.
Historically it goes back to Post-WW2 German economist. You are also not using that definition.
The point is that the word 'neoliberalism' has gone threw a number of different definitions, and you are just focusing on one that was coined and almost exclusively used in a far left political movement, because they were unhappy with all classical liberals, everybody on the right and even the center left.
To be more exact the research shows pretty clearly that it was after the Coup in Chile where the left started criticizing that government any anything they saw related to it as 'neoliberal' and after that the term exploded and became ever broader in meaning.
There are a few papers that study the history and use of the word that you can search for.
> I beg to differ. Perhaps, conspiracy it's not the word, but very concrete policies have been imposed all around the
world by very powerful actors.
Yes but if you look at those then you will notice that is was implemented by a wide variety of different parties with different ideologies. The reasons given were also different in different places with different goals.
The people who recommend the polices also came from different schools of economics and different backgrounds.
If you sum this all up as 'neoliberalism', is a waste oversimplification that mostly serves as a political 'its was better before neoliberalism' and has not much content otherwise.
> Maybe they don't derive from the same basic ideas, but, for sure those ideas have been used to justify it.
Again, sure, but if you just throw all into the same 'neoliberal' bucket then you will never understand the differences between the wide variety of opinion on these things. Development economics has a long an complex history with many different economists giving their input, the 'Washington Consensus' was one particular idea written down by one set of people with a wide variety of opinions inspired by lots of different ideas from the history of development economics and economics more broadly.
This of course includes Friedmans and many others. Many economists would agree with part of the WC and others would agree with the idea but not with the way it was implemented. Others disagree with the whole approach. All of them are often called 'neoliberal'. The opinions are very different, labaling it all 'neoliberal' is only helpful for politics, not for understand the how and why of individual polices.
>"Historically it goes back to Post-WW2 German economist. You are also not using that definition."
I don't know about other users of the word. Part of the wikipedia definition, that I agree with, and I think reflects the current consensus of the word is:
"These market-based ideas and the policies they inspired constitute a paradigm shift away from the post-war Keynesian consensus which lasted from 1945 to 1980."
So, what make neoliberalism, as a word, informative is that it represents a change from another period. That makes, in my opinion, the word useful and informative. If you recognize there was a change, how do you call this period if not 'neoliberal'?
>"Yes but if you look at those then you will notice that is was implemented by a wide variety of different parties with different ideologies. "
Maybe we are looking to different things, but when I look to it what I see, for instance, is the IMF and a few other "american and european" institutions imposing development paths, that they didn't follow in the past, as the 'obvious' solution. And keep insisting in it, never mind the results.
though I otherwise agree with your points, a minor nitpick:
Lack of self-identification with the term doesn't necessarily matter. The terms "mercantilism" and "capitalism" were popularized by their critics (Smith, Marx) without anyone calling themselves a "mercantilist" etc.
Otherwise, yea "neoliberal" just seems to mean "the parts of more or less mainstream economics that I am feeling cranky about at the moment and would feel validated if it were reified into a bogeyman that we should all be outraged at."
The article gives a good description of a major facet of Neoliberalism: "[a] movement that seeks (as Thatcher hoped) to ‘roll back the frontiers of the state". If you have heard someone whining about the nefarious "Big Government" and the need for deregulation, then you've met a Neoliberal.
The point of the article is summarized by the author in a paragraph:
"""
The message that Smith conveys cuts across party and ideological lines, and applies to both Left and Right. It is about a pathological attitude that politicians of all stripes are prone to. If not kept in check, this can be the source not just of disruption and inefficiency but of cruelty and suffering, when those who find themselves on the wrong side of the plan’s consequences are forced by the powerful to suffer them regardless. Smith in turn urges us to recognise that real-world politics will always be too complex for any prepackaged ideology to cope with. What we need in our politicians is careful judgment and moral maturity, something that no ideology, nor any position on the political spectrum, holds a monopoly on.
"""
The dogma of today's right-wing "mercantile" politicians is a perversion of Adam Smith. These politicians state that the invisible hand requires complete government deregulation in order to function. They ignore Smith's point that the invisible hand requires both free markets and government regulation of monopoly to function. The article states that "According to Smith, the most pressing dangers came not from the state acting alone, but the state when captured by merchant elites." If you've followed US politics at all over the last year you could see how the article's point is extremely convincing.
By your definition. But the term has been used for a whole lot more in many different context and that makes it so useless.
> The dogma of today's right-wing "mercantile" politicians is a perversion of Adam Smith. These politicians state that the invisible hand requires complete government deregulation in order to function. They ignore Smith's point that the invisible hand requires both free markets and government regulation of monopoly to function.
No. That's not what they ignore. These "mercantile" politicians never had the slightest interest in Adam Smiths ideas or in limiting power of the state and or business in the first place.
The point of Smith and his fellows (like Hume) at the time was that business would try to capture the state and that was one reason they tried to limited the power of the state and strengthen individual freedoms. Sure they might have been in favor of some regulation but what we have now is so far beyond the wildest dreams of Smith that it is hard to argue that, this is what he meant.
The problem is that the state is forever growing and that no democratic procedures can prevent business (and voters) from competing to capture these rents, rather then the rents from the state.
I would recommend 'Public Choice' economics because they think threw these different intensives very systematically.
> If you have heard someone whining about the nefarious "Big Government" and the need for deregulation, then you've met a Neoliberal.
That is an very inaccurate generalization, liable to be wrong at least ~50-75% of the time these days, maybe not in the 1980s or 90s and earlier, but certainly today as it's become a catchall for everything the (new?) left doesn't like.
"Neoliberal" is typically a term of abuse, but I've seen a movement (from econ professors to /r/neoliberal) to appropriate as a term for centrist radical pragmatism. These self-proclaimed neoliberals are very progressive socially and (claim to, at least) support any policies that have actual firm evidence for it. Of course, this makes them pro-trade and pro-"globalism".
> support any policies that have actual firm evidence for it
A Neoliberal candidate lost the last US election because people from states whose middle class has been hollowed out by free markets and deregulation voted against them. I haven't seen them take that as "firm evidence" that economic policies that ignore important indicators of social well-being into account, like the level of inequality.
Today's Neoliberal believes that if you take everything from a poor person except their (now cheaper) imported TV and iPhone, they will be happy...because the GDP and stock market are growing. "The pie is bigger, so even though your slice is a smaller percentage, you're still better off," they say. It's too bad that they seem to think there is firm evidence that people are robots who would believe that nonsense.
This reads to me like: "globalization hasn't solved the problem of economic jealousy". That it sucks to see someone become 200X richer whereas you have only become 40% richer. (But richer nonetheless).
I mean, sure. It hasn't fixed sexual jealousy either. Witness the impressive phenomenon of "incel rage" on the internet: not rage at pressing personal need unmet, but at the relative sexual deprivation that results from the fact that attractive women will usually prefer attractive men.
This is what you find at the bottom of Pikettyism: economic incel rage.
Such an easy statement to make. The false assumption indeed is that if the US had not engaged in these polices people would now be better off.
Saying 'its not perfect' is easy, showing that your alternative path would have been better is hard, and there is little evidence for it. Thus most economist don't believe it.
There is overwhelming evidence that Globalisation has turned many undeveloped countries into developed ones. Do people in newly developed countries somehow not count as people in developed countries? Just look at China. That's over a billion people in a country transformed from a hopeless basket case in the 70s into a global superpower and economic powerhouse.
> globalism has not worked out for substantial parts of the population in most developed countries
Pardon my language, but that's crap. Every developed country has seen yuuuuge profits from globalism.
What, not all of it trickled down you say? That's a distribution problem. It's not a problem with globalization.
Shrinking the pie in order to pursue a more fair distribution is some ass-backwards, rube-goldberg-machine nonsense. Take the profits, fix the distribution. Invest in infrastructure while you're at it.
What gives you the impression the 'distribution problem' isn't inherently linked with the deregulation that enabled these massively increased profits that only find their way to a select few?
'Inherently linked' is a misnomer. We're in the driver's seat here, we're not at the mercy of the weather. If we can set our trade policy, then we can set our tax policy and budget.
Raise taxes on the rich (short of making globalization a net loss to them), fund infra projects that put lots of blue-collar people to work, and in a generation we've got a bunch of cool shit on top of increased mobility and a better consumer economy. Everyone wins.
There is also substantial evidence that it has. The poor in America are richer and have higher living standards than the poor of less-globalized places. Absolute poverty in developed countries is far lower than at any possible by in history. In fact the same could be said for absolute poverty globally. And that, is a direct result of globalization.
>"Absolute poverty in developed countries is far lower than at any possible by in history. In fact the same could be said for absolute poverty globally. And that, is a direct result of globalization."
Actually that it's not true. Absolute poverty better global numbers are due mainly to China. A little also to India. For the rest, it could be argue that they are equal or, in some cases worst.
You could argue that China have benefited from globalization, and, in a way is true. Except that their strategy is almost the opposite of the strategy recommended by the champions of globalization (IMF, etc..)
A condition characterised by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to services.
The percentage of people at this level has been falling for a long time and is now less than 10% of the global population, nowhere near 3 billion.
Extreme. The poor can refer to the bottom quintile of socioeconomic class. We don't have to jump to the bottom tenth of a percent. In that view, the comment is valid. The bottom earners in America earn more than most people on the planet. And have better infrastructure.
The bottom quintile had a mean household income of just $12,000 in 2016 (https://www.advisorperspectives.com/dshort/updates/2017/09/1...). I'm struggling to understand how such a household could afford to pay rent on $1,000 a month, let alone afford "luxuries" such as doctor visits. And, yes, they would qualify for SNAP assistance, but in my (second hand) experience it's not much and decreases faster than income increases (i.e., and increase in monthly salary of $x/mo results in a loss of food assistance greater than $x/mo).
"In 1765 Chydenius published a pamphlet called The National Gain (Den nationnale winsten), in which he proposes ideas of free trade and industry, explores the relationship between economy and society, and lays out the principles for liberalism, capitalism, and modern democracy.[5] In the book Chydenius published theories closely corresponding to Adam Smith's invisible hand, eleven years before Smith published his book, The Wealth of Nations."
That is not correct - it appears once in both. Part IV, Chapter 2 in "The Wealth of Nations" ("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 cases, led by an invisible hand to promote an end which was no part of his intention").
"The invisible hand was invoked not to draw attention to the problem of state intervention, but of state capture"
It's not so easy to separate the two. Intervention tends to have winners and losers, which make the decision makers a big target for all kinds of influence.
Especially in a large country like the US, where a single representative (on average) controls maybe $5B in yearly spending, plus all of the indirect ways they can pick winners and losers.
That doesn't mean it's impossible to have intervention without capture, but it's something to be wary of.
Aside: I don't like the word "capture" as though the poor politicians are somehow kidnapped by evil corporations. I suspect the idea of corruption usually starts with a politician looking for opportunities to exercise their power. Then, it quickly becomes a symbiotic relationship.
I've never been clear on why people who know nothing about Smith other than a few quotes appeal to his expertise. This article does a little to help, but really everyone should read Theory of Moral Sentiments and Wealth of Nations instead of some blog post if they want to be informed on the topic.
It is really hard for even professional historians to gain a good understanding of old technical works. There is just too much unavailable context. In the end, you get to ascribe whatever motivations you want by picking and choosing your quotes. So if Neoliberals want to use The Wealth of Nations as some sort of theological text, then more power to them. They just can't use it as some sort of appeal to authority as that particular world no longer exists. That applies to this article as well.
This is certainly a nuanced look at a figure who is generally cited in stark black and white. The notion of the "merchant elite" setting the tone of politics within the state -- and with neighbors and other competitors -- is a bit of a wake-up call. After all, for better or for worse, what finally dragged the US out of the Great Depression was World War II, and the sudden bulge of manufacturing it brought.
The question is, are we, today, seeing self-interested corporations stimulating or antagonizing hard feelings between countries, states, tribes, or families as a way to push up profits?
And a larger question remains: Is that inherently bad?
I suppose that there are many who would think that it is not, by its nature, bad -- not if your nation, or ethnicity, or religion is not harmed. I think that this is the central question the article poses.
Given that, what is the value of a single human life? Or, more broadly, what is the value of any living thing, or living system? Is it okay kill a man through black lung, in order to maximize profit from a coal mine? Is it okay to bulldoze and pave a vast swath of land, to harvest wood, replacing the forest with a monoculture that will not support diversity? Where does that end? Is a culture safe? A nation?
There are, of course, a great number of people who think that one life lost is one too many, that an ecosystem is a living thing, that a culture is sacred.
Smith seems to hew towards regulation of business and industry -- that the watershed must be considered in mountaintop removal mining, that heroin sales on the street are not in the best interest of society. (Even though illicit drug sales are probably the very best example of a truly open and free market.) I would lean with Smith on this account. Government has NO business in business. But truly free people must be free to regulate business in their own interest.
Your second paragraph is answered by post-9/11 American foreign policy in Iraq (to say the least). But just to echo that answer, yes - Halliburton (and plenty of other private military, security, cyber security service companies) did and continues to thrive off war profiteering. War is an economy. That's why the military-industrial complex is discussed so frequently. Not many other nations subsidize an entire market segment to the tune of hundreds of billions of dollars a year. One that, again, generates profit off of the selling of weapons and arms to be used against other human beings.
This is disingenuous in a number of places. For example, it quotes the passage in the Wealth of Nations warning of collusion between merchants:
>>As he put it in The Wealth of Nations: ‘People of the same trade seldom meet together, even for merriment and diversion but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.’
It uses this as a data point to support the contention that:
>>It is an irony of history that Smith’s most famous idea is now usually invoked as a defence of unregulated markets in the face of state interference, so as to protect the interests of private capitalists. For this is roughly the opposite of Smith’s original intention, which was to advocate for restrictions on what groups of merchants could do.
Which is absolute nonsense. Sangar omits the context in which the collusion passage appears. Immediately following that paragraph, we find this:
>>It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary. A regulation which obliges all those of the same trade in a particular town to enter their names and places of abode in a public register, facilitates such assemblies. . . . A regulation which enables those of the same trade to tax themselves in order to provide for their poor, their sick, their widows, and orphans, by giving them a common interest to manage, renders such assemblies necessary. An incorporation not only renders them necessary, but makes the act of the majority binding upon the whole.
So Smith very much endorses "unregulated markets in the face of state interference", which Sagar claims "is roughly the opposite of Smith’s original intention".
All of his warnings are against regulations that make collusion more likely, and he explicitly says that it would be impossible for any regulation that would prohibit people from the same trade from meeting to "be executed" or "be consistent with liberty and justice".
Every single admonishment was against regulations, whether on grounds of contributing to collusion, or being unenforceable and inconsistent with "liberty and justice".
> Every single admonishment was against regulations
Every single admonishment was against particular kinds of regulations. It's not at all clear that these amount to an argument against all regulation. In fact that strikes me as a very odd generalization... like saying "Java sucks so let's do away with software".
Yes you're right that he criticizes particular regulations in that passage. My point is that he doesn't endorse any regulations and criticizes several. This is context in which the passage about collusion between merchants, which Sangar claims supports his contention that Smith's intention was the "opposite" of that of modern free market advocates, appears.
That passage in no way conveys a position in opposition to the free market. If anything, it only supports it.
Moreover, I'd argue statements like "It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice" take a philosophical position against regulations in general, and there are many such statements in the Wealth of Nations.
I read the "[in]consistent with liberty and justice" quote as a stance against laws that inhibit the right to associate, and that is very closely related to the right to freely contract, which the vast majority of regulations inhibit.
If he believed that it would be consistent with liberty and justice to prohibit certain classes of contracts, he would have simply advocated for a law against collusion agreements/contracts as the solution to merchants colluding.
(I'm very much no expert) Thanks. So it seems you don't read that particular quote as endorsing unregulated markets in the face of state interference. It sounded like you did, thus my surprise.
Also, people in the 18th C from the same trade having a meeting, is so far from what we imagine by "unregulated markets" that..well, two things could scarcely be more different.
edit: Oh, you added your snarky first sentence. That's not an improvement.
I wasn't trying to be snarky. I genuinely don't see how his multiple warnings about particular regulations in that short passage doesn't contradict the author's claim that he opposed the unregulated market position. If anything, it supports the notion that he supported unregulated markets.
>>So it seems you don't read that particular quote as endorsing unregulated markets in the face of state interference. It sounded like you did, thus my surprise.
If "unregulated markets in the face of state interference" means that markets being unregulated and free of state interference, yes I do read that particular passage as endorsing that view, for reasons I've articulated.
>>Also, people in the 18th C from the same trade having a meeting, is so far from what we imagine by "unregulated markets" that..well, two things could scarcely be more different.
I don't understand what you mean by this. Could you elaborate?
Relevant excellent TV series [1]. After Raegan/Thatcher privatization there was a 2nd wave Clinton/Blaire of liberalisation. The idea was to dismantle "old hierarchy" / Big Government and replace it with market formed by everyone maximizing their individual self-interest.
The writer tries to pretend that there is something drastically opposite from knowing that the state captured by business is different from the danger of mere statism. Well, the answer that preserves liberty is to reduce the chances of the state being captured. This begins by having a limited govt. If the madam of the bordello is out of business, there is no need for customers to line up
I'm all for having leaner operations as far as that goes, but let's say there's a new law restricting people from bribing elected officials, complete with a funded enforcement arm.. is that 'less' or 'more' government? 'less' or 'more' liberty?
You will never, ever, ever have a government that's too small to be worth bribing.
> You will never, ever, ever have a government that's too small to be worth bribing.
Sure, orchestrating a state that has 0 returns to bribery is likely not possible without complete anarchism. That being said, not every state is going to have ridiculous returns to bribery (or more generally, "bureaucracy hacking") that we see today.
Before he became public enemy #1 and his sketchy financial dealings were uncovered, what returns did Martin Shkreli get because of weird FDA rules about generics and clinical trials? There may be some aspects of the FDA that are beneficial such that the benefits outweigh the costs (although off the top of my head I can't think of any), but clearly a smaller FDA with less (arbitrary) rule-making and enforcement authority would not have allowed Shkreli to explode the price of Daraprim.
Shkreli is a single example, but this happens all the time. Environmental protection departments are reluctant to punish land developers because they depend on the various land developers' fees for their budget, but will go after individuals with exorbitant fines for relatively mundane infractions. And we could talk all day about the ridiculousness of zoning regulations and the various zoning commissars/bureaucrats who effectively make small-scale, grass-roots, spontaneous land development impossible, and essentially only allow large developers or corporations who can afford to navigate the legal minefield of zoning rules.
Ideally, I'd like to have the returns to bribery be zero, but if that's not possible, then somewhere less than one would be nice. I have seen no real estimates of the returns to bribery in the West today - I'm not even sure such research exists yet - but I would guess that the returns are significantly greater than 1.
If you want to talk about continuous, evidence-based, detailed and unsexy reform of various laws and regulations in search of efficiency, I'm all on board. We all do that at our day jobs.
But none of that shit fits on a bumper sticker saying 'taxation is theft' or whatever, and it'll never be a byline on Fox News. I couldn't even give a short, vaguely accurate description of the FDA trials process, let alone an expert description. I think there are 4 stages? That's where I cap out. It sounds like you couldn't, either. But the current system, whatever its flaws, doesn't allow people to ship poisonous babyfood like happened in China a few years ago. Successful reform preserves the whole "don't kill people" thing while increasing efficiency.
Platitudes about 'small government' and 'liberty' don't enable reform, they hamper it by banishing thought. Look at the tea party's legislative record.
The alternative view is that 'power abhors a vacuum'.
If we, the society, don't fill it with a government and try to control it (admittedly not an easy, and always imperfect, endeavour), it will be fill by something that have not our interest as a priority.
Of course, this doesn't make sense for people who think, literally, that "there is no such thing as society" [1].
I seem to remember that Thatcher was all for society when it came to fighting wars (NB I am from the UK and old enough to vividly remember the war in question).
"You can't mug me, I have a right not to be mugged!"
It's not a law of nature. The laws of nature are things like "the strongest take what they want" and "cannibalism not only feeds you, it removes competitors from the food chain!". Inalienable rights must be enforced in order to exist.
> One of those may grant voting and/or other rights to some or all of its members.
That's an implementation issue.
In its purest form a government is set up by the people, to serve the people.
In its purest form, a corporation is set up by one or some people, to make money, usually paying people to be a part of it, and there ends the loyalty.
A government needs to be perverted to stop serving (all) its people. A corporation needs to be perverted to start serving its members, as the goal is simply profits and survival until further profits.
This isn't a moral distinction, it's the function of those concepts.
Without any restraints, one beast will always end up the strongest, and rule all other beasts. The only other possibility is for smaller creatures to cooperate to overcome it/keep it in check. This is what a society is.
Freedom isn’t government granting you rights, it’s government protecting you from coercion.
If government is the source of your rights, then government can take those rights away.
If government is the source of protection for your rights, they can only take that protection away. Leaving you your rights and now full burden of protecting them.
Corporations don’t have any power without government, which is why a limited government limits corporate power.
> Corporations don’t have any power without government, which is why a limited government limits corporate power.
They have as much power as they have resources to enforce, which is a lot more than you have, meaning they have a lot more - and in practice all - power.
> If government is the source of protection for your rights, they can only take that protection away. Leaving you your rights and now full burden of protecting them.
A governing body is a collective agreement over what rights and freedoms its members deem fit. If you have none, as you said, you have the full burden of protecting them. Someone else (in the case of n-1 of all people) will always have more resources to protect (or impose on others) their freedoms/rights.
You either end up losing your rights/freedoms, or you establish a coalition with other nearby people, but you won't call it a government, because for some reason that word is bad.
Unless corporations have the right to coerce you (which only government can grant them), they have no power over you.
Walmart is one of the largest corporations around and they have no power over me. I can voluntarily work or shop there, but they can’t force me to do it.
> Corporations don’t have any power without government, which is why a limited government limits corporate power.
That's a fairly naive view. Corporations have lots of power, potentially unlimited power, without government. A limited government has a limited ability to protect the people and limit corporate power. We need a strong democratic government, because in the end people are what matters.
You missed the part about no government apparently. If there is no external force to prevent corporations, any person or organization for that matter, from forcibly coercing people.
to be clear... my comment was only when there isn't a government involved at all, which was the context of the conversation. Thanks!
As somebody interested in these for many years, there is a periodic rewriting of this article.
The beats are always the same, Smith not actually like evil neoliberals (whoever that is) think. He also wrote 'The Theory of Moral Sentiments' and so on. Admittedly this is by far the best one I have seen in many years.
Nothing in the article is really wrong, and it is completely correct the same analysis Smith used can often be used against people on both sides of politics.
I would tell people not only to focus on Smith but rather see him in a broader context with Hume, Ferguson and there English predecessors.
Overall we need to value individual freedom of choice both socially and economically, we need to strongly protect human rights, the political power must be limited and so on. Free people working for themselves, their family or friend, their community can achieve things that are beneficial for all if these interactions take place in such a framework.
> Thatcher’s restructuring of the economy was as much a product of the ‘spirit of system’ as any Soviet strategy
While this critic is certainty true we must also realize that if you accept Smith and the Scottish ideas, we need to find some way back to the ideas of individual liberty and limited power of government, specially government and business working together.
So there is still a very, vary large difference between going towards such a system or to go towards the Soviet union.
From Paul Sagar's bio (the author of this article):
"i am lecturer in political theory in the department of political economy, king’s college london
i completed my doctorate at the university of cambridge (2014), after receiving an ma in intellectual history and the history of political thought from the university of london (2010), and a ba in politics, philosophy, and economics from the university of oxford (2008). from 2014-17 i was junior research fellow at king’s college, cambridge.
my doctoral thesis centred upon the political thought of david hume in the context of british debates over the nature of human sociability and moral psychology. i extended this research in my recently completed book, the opinion of mankind: sociability and the state from hobbes to smith, published with princeton university press. alongside my work in the history of political thought i also research contemporary political theory. i am in the early stages of researching a second monograph, which will explore adam smith’s political thought as grounded in his views of history and commercial society."
(the original is in all caps, hence the lack of capitalisation)
From you:
"Nothing in the article is really wrong"
Well, thanks for that. I'm going to take a wild guess that the author knows a hell of a lot more about Adam Smith than you do, even if you have been "interested in these for many years".
And I think that applies doubly to the other critics above.
Hey, this is a discussion forum, so can we please not appeal to authority here just to say (in so many words) "I don't care what your opinion on this linked article is because he's an expert and you're not."
What's the point of discussion if you simply say "Oh, but they know more so just shut up"?
Thanks for pointing this out. I appreciate the sentiment behind critiquing a blind reliance on authority but lately online I've seen a lot of knee jerk rejections of any authority which I find counter-productive at best. Surely we can agree that our presence on an online discussion forum doesn't obviate the fact that some people who have spent years professionally researching a topic are likely to have a stronger claim to knowing about it than those who haven't.
Everybody has a bias, his interpretation where it goes away from his words does so too. His own opinions color his view of Smith, as does mine.
My point was that his text was not wrong, but it played to people who interpret it in certain ways. A naive reading of his article would lead one to conclude that Treacher and Stalin were the same in the eyes of Smith.
I was just point out that just because they are the same in this one aspect of his thought, it is still a very large and important difference in the content. There is no question if Smith would prefer a more market oriented framework with stronger individual liberty then we have now.
I mean the state spends around ~50% of GDP in the developed world and has major regulatory powers in every aspect of the economy. I think he would admit that as well. Most scholars who work in the tradition of Smith tend to agree on that.
You will not that the podcast (and book) I linked are are equally authoritative as he is.
Given that The West adopted private capitalism whereas the Warsaw Pact adopted state capitalism:
This article's interpretation of Adam's warnings about the failings of both the merchants (chartered monopolists) and politicians directing allocation of resources, against the interests of the citizenry, is spot on.
I took the comparison of Thatcher and Stalin to be more about their top-down efforts to remake society based on some unattainable ideal, vs something about economics.
Favorite bumper sticker: "JESUS SAVE ME (From all your followers)".
Just like with the beatitudes, if Freedom Market™ cultists read Adam Smith for themselves, maybe we'd have somewhat more productive discourse.
FWIW, what I gleened from this "rewriting" is Adam's warnings about 'spirit of the system'. Rings true. As a recovering methodologist and self-proclaimed agent of change, humiliated by repeated failures (a la Alistair Cockburn), I wish younger me had grasped this sooner.
this describes the current "capitalist" system we have today, where powerful individuals can lobby the state to create laws favouring them directly.
the problem is, of course, the existence of the state.
The bigger issue is that societies organized around a state tend to conquer societies not so organized, because states are much better at forming armies
so you agree that the state is almost always the initiator of aggression? if so, it's simply immoral to allow it to exist, just as you wouldn't allow organized crime to exist.
my opinion about the state stems fully from morality, as presented in the non-aggression principle.
There's no "of course" about it. If you're going to claim that the problem is the existence of the state, you need a lot more evidence than "of course".
Certainly you cannot claim the support of Adam Smith in your assertion.
Sufficient to claim that the problem is the existence of the state? No, I don't think that they provided anything like sufficient evidence for that claim.
Rothbard did a lot of claiming, I'll grant you that. Sufficient evidence for such large claims? No.
"Ground-rents are a still more proper subject of taxation than the rent of houses. A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground." - Wealth of Nations, Book V, Chapter II