Given the recent disaster in which deregulation of part of the U.S. financial sector played a key role, it may be useful to re-examine the writings of Adam Smith, the father of modern economics and capitalism. Many people are familiar with Smith’s seemingly all-knowing ‘invisible hand’, but several of his other important quotes are rarely mentioned.
Insatiable greed: Smith got to the heart of the problem when he wrote: “All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.” Perhaps it was this insight that is reflected in his view that the economy was supposed to work for the public good, not just for those at the top.
Need for government regulation: In an 1993 article Noam Chomsky wrote: “The invisible hand, he [Smith] wrote, will destroy the possibility of a decent human existence ‘unless government takes pains to prevent’ this outcome, as must be assured in ‘every improved and civilized society.’ It will destroy community, the environment and human values generally — and even the masters themselves, which is why the business classes have regularly called for state intervention to protect them from market forces.”
Living wage: “No society can surely be flourishing and happy, of which the greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged.”
“A man must always live by his work, and his wages must at least be sufficient to maintain him.”
“Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”
Progressive taxation: “It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion.”
Banking and risks: “Though the principles of the banking trade may appear somewhat abstruse, the practice is capable of being reduced to strict rules. To depart upon any occasion from these rules, in consequence of some flattering speculation of extraordinary gain, is almost always extremely dangerous, and frequently fatal to the banking company which attempts it.”
Legislation: “To widen the market and to narrow the competition, is always the interest of the dealers…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 to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.”
Conclusion: Our political/economic approach has evolved into the financial/corporate control of our government through legalized bribery that benefits the few at the top. Many suffer greatly as a result of this system. For example, almost 1 in 6 of U.S. workers are unemployed or underemployed and about 1 in 7 of us live in poverty. These statistics are more than numbers — they represent people including our families and friends. If he were alive today, I think Smith would be appalled by this U.S. system. Instead he would likely favor an economic system that treated people as if they really mattered.