Remembering Adam Smith

Remember the cool distinction just a few years ago between the "old" and "new economy," the celebratory mood of the business media which seemed every day to remind everyone of the divinity of new technology? Each trading day on the New York Stock Exchange seemed like a cocktail gala, and every nightly recap like an ebullient invitation to join the merry party. There was the sense that the market had ushered in a kind of classless society, that everyone had money just because he owned Cisco stock or Lucent stock. If average citizens wanted to get to heaven or experience nirvana, they needed only to trade Internet stocks or pour their earnings into one of umpteen mutual funds. They could forget about thrift and all the tart moralisms about greed and hard work and just pay attention to the new prophets.

It remains to be seen how society and the business community will respond to the woes of companies like Adelphia, Enron, Global Crossing, Halliburton, ImClone, Kmart, Lucent, Merck, Tyco, WorldCom et al. The old antipathy to government regulatory measures is quickly abating among an aggrieved stockholder community and a concerned citizenry. But who knows? Who can say if twenty months from now the old credulity and old faith will have been revived and people everywhere will be funneling their hard-earned money into the market again?

It is well, in the meantime, to remember Adam Smith's insights into the ways of the market. The real Adam Smith, that is to say, the economist and moral philosopher who despised monopolies, was leery of government-business relationships, and warned that certain checks on private industry were imperative lest overly self-regarding claques harm the commonweal. That Adam Smith, and not the imaginary apologist for oligarchy, rigged trade, and corporate control of society. Below is a small sampling culled from An Inquiry Into The Nature And Causes Of The Wealth Of Nations, his most famous work:

"Civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all." (W of N., Book III)

"The authority of riches, however, though great in every age of society, is perhaps greatest in the rudest age of society which admits of any considerable inequality of fortune." (W of N., Book III)

"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." (W of N, Book III, "How The Towns Improve The County")

"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest." (W of N, Book I, "Principle of Division of Labor")

"Corporation laws enable the inhabitants of towns to raise their prices, without fearing to be undersold by the free competition of their own countrymen. Those other regulations secure them equally against that of foreigners. The enhancement of price occasioned by both is everywhere finally paid by the landlords, farmers, and labourers of the country, who have seldom opposed the establishment of such monopolies. They have commonly neither inclination nor fitness to enter into combinations; and the clamour and sophistry of merchants and manufacturers easily persuade them that the private interest of a part, and of a subordinate part of the society, is the general interest of the whole." (Emphasis added; W of N., Book I, "Wages And Profit")

Further Reading:

Thomas Frank, One Market Under God (Doubleday, 2001).

David Korten, When Corporations Rule The World (Kumarian Press, 2nd ed., 2001)