Compare And Contrast
In Which The Wealth Of Nations Beats Out A Blog Post For Wisdom
By Pejman Yousefzadeh Posted in Economy | Featured Stories — Comments (4) / Email this page » / Leave a comment »
In the marketplace we are competitive, selfish, meanspirited, and xenophobic, so it's no surprise that left to its own devices that's the kind of society a free market will produce -- in fact, has produced at various points in history. But although we're seldom strong enough to personally sacrifice our own immediate economic self-interests (yes, that means you too), we often recognize as a society that we ought to do better. And so, as long as the rules apply to all of us, we occasionally allow our better natures to be shamed, cajoled, or inspired into insisting on it. And civilization slowly progresses because of it.
Adam Smith:
But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavors as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labors 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 domestic 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 cases, 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 not 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 public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.
Drum disdains the invisible hand. Smith celebrates it. Guess who has been proven right by history.
Read on . . .
Oh, and note the following:
So slavery and child labor are gone, even though both were efficient means of production in their time. We went to war against Nazi Germany even though Hitler was as good a trading partner as the Weimar Republic. We pass minimum wage laws because our guts tell us that it's wrong to expect an adult in a rich country to work like a dog seven days a week for subsistence wages. And some of us continue to press for national healthcare not simply because it addresses known market failures (though it does), but because we think it's fundamentally wrong to make people beg, plead, and scrape in order to receive decent medical care.
Slavery and child labor are gone because industrialization has replaced them. Thanks to industrialization, we have had a growing economy which has enhanced the labor market and changed it for the better. We went to war with Hitler because in the immediate aftermath of the attack on Pearl Harbor, he declared war on us and even before the attack, Hitler was threatening and menacing our allies and our vital interests. Of course, if we neglect our vital interests, we risk harm to our economy and our overall security so the very "rationality" Drum sneers at in his last paragraph (which is full of rhetoric and desperately short on facts) was what led us to fight Hitler. Minimum wage laws are worthless and unworkable. And as for national health care that ignores market principles, well, good luck in making that work.
Kevin Drum's rhetorical indulgence is yet another attempt by the so-called "reality based community" to skew reality itself in favor of its own preferred ideology and the natural consequences of that ideology. Never did a community of political advocates adopt a less fitting name to describe themselves to the public at large.
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And you will indeed see that slavery and child labor become scarce with industrialization and the expansion of the economy and the labor market. I don't doubt that slavery is inconsistent with American liberty but the very free market that Drum derides helped bring slavery to an end.
Secondly, the key portion of the Smith quote is as follows:
. . . By preferring the support of domestic 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 cases, 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 not 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 public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.
Drum believes that the free market will produce a society that is "selfish, meanspirited, and xenophobic." Smith has correctly shown that the free market will "promote[] [the interest] of the society more effectually than when [a person] really intends to promote it." The two of them cannot be right on that score. And indeed, as mentioned, the two of them are not right.
Finally, don't tell me that I "fabricate" anything. It calls my honesty into question. And I don't like that.
"At times one remains faithful to a cause only because its opponents do not cease to be insipid." --Friedrich Nietzsche
The elevation of the hand of the market is perfectly commensurate with the elevation of Liberty. We forget this at our peril. And evidently, some are determined to be amnesiacs.
"At times one remains faithful to a cause only because its opponents do not cease to be insipid." --Friedrich Nietzsche
Markets are absolutley essential to maximize Liberty. I love markets and I love Capitalism.
However, I would not choose the "markets" of present day Russia over our own. Yet they are running a Capitalist system. But the power of that capital is used to manipulate the State in order to undermine market fluidity. Capital and the State praying together to undermine Liberty.
If you think that cannot happen here, I think you a fool, though I do not assign you that position.
We are presently attempting to expand the hand of Our market into the space of marginally disfunctional states, and create a draft for civl society to emerge into. That effort is driven by several factors: Corporate profit motive. The determination of much of high level civil society that the strategy has at least some sound principles for expanding the sphere of Liberty. Domestic welfare consumption actually requiring increasing economy of scale for demographic reasons. Natural market efficiencies, etc.
I'm good to go with that strategy. However, if we do not moderate federal spending growth and its encroachment into local affairs, and if we do not keep our sovereignty, that market will stop delivering increasing wealth to us, destroying it's own support system.
The two way prisoners dilemma does not deliver optimum results when it escapes its cage through self feedback. Attempting to reduce the entirety of human existance to a theoretical Market and State is insufficient to capture the actual complexity of the system.
As far as the slavery and child labor, I am fully versed in the arguments. Increased leisure time leading to societies ability to address the issue. Increased capital lowering the marginal cost of eliminating it.
A society with rapidly increasing wealth will most likely address those issues. Yet these issues are reappearing in post modern societies that have reasonable growth. I believe it is related to a contracting social environment due to social functions being taken over by the State. That is driven by elevating the hand of the market over Liberty.
I stand by first remarks. The hand of the market cannot be safely lifted above Liberty for more than a short burst, like war funding, or driving a quickly expanding market to outpace a totalitarian competitor.
That is not to say a theoretical market is the problem, but our natural tendency to steal others liberty when insufficient feedback is present to declare a particular path offlimits.
Pejman: Finally, don't tell me that I "fabricate" anything. It calls my honesty into question. And I don't like that."
I apologize. It's actually the treatment I've recieved from many market oriented types regarding the immigration debate that has brought me to this point.
Being called a racist xenophobe tends to grate on you, and it gets reflected back. So again, please accept my apologies.
Whether Drum has any idea why he has a point is doubtful. The reason he has a point is because THERE WILL ALWAYS BE people like Kevin Drum who use the power of the State to steal your wealth. In particular, he would use it to steal your local liberty through a repressive regulatory regime paid for by the capital market.
The question of Liberty is how to minimize that effect.
Regards.
There is no inconsistence presented by either. The inconsistency is fabricated by you.
Slavery and child labor are "gone" because they were inconsistennt with the internal logic of American Liberty.
Both slavery and child labor exist perfectly comfortably with industrialization. They are both found in many industrial states, and both are insidiously making a reappearance where they were previously removed from western society.
Secondly, Smith spoke of the annual revenue of a society, not of The State. This is further abstracted by the notion of wealth, which is not fully captured by TAXABLE market transactions. In fact, non-taxable wealth is in tension with taxable wealth.
For instance, Pfiser moved to take property in New London, Connecticut. This was driven by States desire for TAXABLE transactions. What is ignored is the untaxable wealth being stolen by the taking. For example, the value of being able to pass a house down to ones offspring. Knowing ones neighbors. A seaside view.
The State, for the purpose of maximizing Taxable transactions, crowds out untaxable transactions.
The maximum REVENUE point of the State is NOT the point of maximum Societal or State wealth.
The elevation of the hand of the market over Liberty is the worship of money.