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DiabloViejo
06-10-2012, 06:42 PM
Does economic principle justify the Republican position on laissez faire?
James Johnson
San Antonio Economic Policy Examiner
June 10, 2012
Examiner.com (http://www.examiner.com/article/does-economic-principle-justify-the-republican-position-on-laissez-faire)

GOP politicos love to call for deregulation and attribute their "principle" to the principle of laissez faire economics in Adam Smith's magnum opus on capitalism, The Wealth of Nations (http://www.gutenberg.org/files/3300/3300-h/3300-h.htm) . "Free market capitalism demands that government stay out of business," they rant. If they are not simply incapable of understanding it or engaging in intentional deceit, it's not surprising they confused their principle with Smith's. Wealth is a tedious read at best, and requires something more than conventional understanding of history to understand that the argument completely misrepresents Smith's views.

Smith's motivation for writing Wealth was to expose the flaws in mercantilism (http://www.encyclopedia.com/topic/mercantilism.aspx) . His hypothesis was centered around the proposition that the royal government's policies, which promoted mercantilism, acted contrary to the accrual of the wealth of the nation. He prosecuted his argument by reference to examples of free market trading, which showed that, contrary to mercantilist belief that wealth was fixed, wealth was fluid.


The cornerstones for increased wealth, its fluidity, were based on what we now call the law of supply and demand. Because mercantilism centered around supply without concerning itself with how demand interacted with supply, royal interference in trade and production was to decree enactments favorable to the corporations of the day, and suppress attempts by labor to improve pay and working conditions.

While Smith did not moralize about the squalor and poverty of the laboring class, he did point out how improving their lot in life would provide for an ever growing market for increases in production. Labor thus would generate the demand necessary for increased production with its consequent increased profitability for the owners, and increased revenue for the state, hence the wealth of the nation.

Smith postulated that the most harmful of the royal enactments were those that favored the corporations of the day. They were not what we think of as corporations today. Instead, they were in effect small fiefdoms, virtually autonomous businesses with their own set of laws, and quasi-governmental structure and hierarchy. Among the practices of these corporations was paying its laborers subsistence wages, often in script that kept them from having the means to leave and find better work elsewhere, and which kept them bound to "company stores" where they often had to go into debt to the corporation to feed themselves adequately, much like the mining towns that existed in the United States well into the 20th Century. Most even created and enforced their own laws prohibiting labor from leaving to seek better employment elsewhere, and those who did found themselves subject to the debtor laws and thrown into prison.

Though not all titled nobility, the owners of corporations were virtual barons of their domains within the kingdom. Like barons, they were fully supported by the military might of the king, and any strike against them was dealt with harshly. A People's History of The United States (http://www.historyisaweapon.com/zinnapeopleshistory.html) , by Howard Zinn, examines the dark underbelly of the social conditions of the time and the operation of the mercantilist system's enforcement mechanisms in the American colonies.

If any of the preceding has a familiar ring, it should. While today's reactionary Republican politicos press for deregulation, they nonetheless also push for policies that favor owners over labor, even to the extent that they attack labor. In fact, their attitude toward labor and the working poor come almost chapter and verse from Zinn's History. While their protectionism is not truly mercantilist, it both seeks to eliminate jobs in both the public and private sector by eliminating government agencies necessary to protect the pubic from corporate excess and disregard for the public's health and safety, and eliminating labor's collective bargaining strength.

Their protectionist policies are much like those of a royal government concerned about retaining all the wealth for the crown, but focused instead on retaining it for corporate owners. The effect of their policies have been to plunge the country into ruin, and significant numbers of middle class consumers into poverty. At the same time, incomes have gone flat for most of the middle class, whose consumerism drove our economy to its apex. Their policies have also stripped the working class of necessities that cut into their discretionary income, like vanishing healthcare plans, and soaring costs for those whose employers still provide them.

Were Smith to comment of reactionary Republican policy today, he likely would argue as he did against mercantilist policies:

The liberal reward of labour, therefore, as it is the necessary effect, so it is the natural symptom of increasing national wealth. The scanty maintenance of the labouring poor, on the other hand, is the natural symptom that things are at a stand, and their starving condition that they are going fast backwards.

Smith could not have imagined the publicly traded corporations of today, certainly not the damage they are capable of inflicting on the economy when unrestrained, as the Wall Street financiers did when they betrayed their fiduciary obligations (http://www.stwr.org/global-financial-crisis/sold-out-how-wall-street-and-washington-betrayed-america.html) to investors with the collusion of government. Nor could he have imagined the environmental damage they cause despite attempts to regulate them. His vision had been of a need to stop empowering them to suppress labor, to contribute to the wealth of the nation. This is where he urged restraint, and where reactionary Republicans especially violate the principles of laissez faire economics.

He in fact warned of potential business "conspiracy against the public or in some other contrivance to raise prices," and the collusive nature of business interests. Moreover, Smith warned that a laissez-faire economy was subject to conspiracy of businesses and industry against consumers, and to influence politics and legislation, positing that the interests of business were "always in some respects different from, and even opposite to, that of the public," and the "proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention."

This is the reactionary reality, an ideology to take society back to some nebulous pristine time in history, when everything was right with the world. The means and course they seem to have chosen through their policies appears however to be right only for the wealthy and those who serve their ambition to dominate society. They are the vicious few whom Howard Zinn wrote about in his History.

http://cdn2-b.examiner.com/sites/default/files/styles/large_lightbox/hash/c5/e4/1339340179_1563_hogarth.jpg
<span style='font-size: 8pt'>The squalor of the poor in 18th Century England, as depicted by William Hogarth (1697-1864) Photo credit: Photo courtesy of Wikipedia </span>

Soflasnapper
06-10-2012, 08:36 PM
As Rick Perry quoted a Biblical verse in his primary season, 'a prophet [Adam Smith, prophet of capitalism] is without honor in his own land [capitalism].' [my insertions, of course]

Their adherence to 'capitalism' and its chief prophet, if you will, is similar to their adherence to Jesus and his teachings as supposed Christians.

They have no adherence, except to claim they do. They don't.

Gayle in MD
06-11-2012, 07:38 AM
http://www.nytimes.com/2011/05/09/opinion/09krugman.html