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For your enjoyment, the first of many original satirical cartoons to be posted only on this site. I'm slowly digitizing a lot of my previous work... so expect regular updates.

Greenspan admits that page 287 is relevant

Greenspan Concedes Error on Regulation
By EDMUND L. ANDREWS
Published: October 24, 2008
Alan Greenspan, the former Federal Reserve chairman, said he “made a mistake” in trusting that free markets could regulate themselves.



Amazing. You would have thought he would be up on his Wealth of Nations.... "...Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending."



Adam Smith understood why that was a dumb idea 237 years ago.

The "Lost Page" of the Weath Of Nations

Here are pages 287-8 of my copy of the Wealth of Nations, first my paraphrase, and then the literal text. This page, clearly stating Smith's understanding of how business interests  can be contrary to the public interest, has been completely ignored by the reigning "Pro-Business" political establishment. All Americans should understand why Smith said this:

My Paraphrase:

Any business that can profit by reducing market competition and raising prices (Airlines, Auto Industry, Gas Companies, Private Utilities, Microsoft, Enron... think of your own examples) will naturally tend to work against the public interest by keeping prices higher than they should be, and by those means creating a virtual tax on consumers (the extra price of the good) that serves to drain the public and enrich the business-people. The pro-profit orientation of the business leaders is bad for the public and should be kept strictly out of government. Instead, government should treat business fairly while maintaining the focus on the public interest at all times.

Actual Text From The Wealth of Nations  (In my version, pp 287-8, Text Borrowed from the Project Guttenberg Version, my notes in brackets, [], my corrections in forward slashes, //, my emphasis):

"His employers [the employers of labor]constitute the third order, that of those who live by profit. It is the stock that is employed for the sake of profit, which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operation of labour, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin. The interest of this third order, therefore, has not the same connexion with the general interest of the society, as that of the other two. Merchants and master manufacturers are [companies that re-sell goods and those that control both manufacture and sale], in this order, the two classes of people who commonly employ the largest capitals, and who by their wealth draw to themselves the greatest share of the public consideration. As during their whole lives they are engaged in plans and projects, they have frequently more acuteness of understanding than the greater part of country gentlemen. As their thoughts, however, are commonly exercised rather about the interest of their own particular branch of business /./ than about that of the society, their judgment, even when given with the greatest candour (which it has not been upon every occasion), is much more to be depended upon with regard to the former of those two objects, than with regard to the latter. Their superiority over the country gentleman is, not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest than he has of his. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity, and persuaded him to give up both his [the public consumer] own interest and that of the public, from a very simple but honest conviction, that their interest, and not his, was the interest of the public. The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market, and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can only serve to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. 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." -Adam Smith

I just don't know any basic issue that is more important in the USA. The difference between Smith's carefully thought-out analysis, and the slow and virus-like creep of "pro-business" agendas into the government is both frightening and revealing. It is a basic cause of the current mixed up governmental priorities that seem to place high profits over public interest.

Discrete Charm of the Republican Party

            What do "Pro-business" politicians have in common with Bunuel's “The Discreet Charm of the Bourgeoisie"? They have ideals, yet they are not sure what they are until caught in argument. They have been lulled, much to their own disapproval, into a false sense that all is right with society when merchants are rich - even though that indicates a sick economy and ailing society.

I'll call out a fallacy of our times: that "pro-business" politicians can or should be in government.  Otherwise, government becomes a rotund leach, slowly extracting wealth from the lower classes in order to deposit it into the upper.  Some taxes, are of course for public benefit.  Those that pay for a school system, health benefits, and so forth.  Then, there are many others, that pay, circuitously, through torturous pathways, back into the bank accounts of those that litigate, lobby, and lead our country toward a "pro-business" agenda. It should be accepted that those in power will tend to look first to their own wallets - and if that means going against the public interest, so be it. 

            Just as Burke describes in “Reflections on the Revolution in France,” there is no problem with having leaders that are from a wealthy, landed class, for if they were not, they would have no incentive for the country to continue uninterrupted, and instead it would be in a state of constant revolution (Cuba might be a great modern example of this effect).  At first this struck me as a weak argument, but it also has truth to it.  Smooth continuity of government is very important to peace and prosperity, and should never, unless totally necessary, be abandoned.  The energy, money, and lives lost to rapid changes in governance rarely are repaid by the benefits of a new ruling class (who soon become gentry themselves, of course). 

            Adam Smith, in “The Wealth of Nations,” demonstrated definitively how the market is best left to itself to find an equilibrium between supply and demand, without the burdens of tariffs, taxes, and subsidies.  His theory is almost universally accepted by economists, yet not so well by leaders, maybe for the simple reason that the term "protection" and "pro-business" sound better to the general public than "free market" and "pro-public", even though it always leads to steady reductions in the standard of living for Americans, and all those around the world. Smith also demonstrated that many companies that work in a free market have an incentive to cheat consumers, and hurt the productivity of the market as a whole.  He proposed strict regulation on business as the keystone to of the free market scheme, yet it has been almost totally discarded from the vocabulary of those that consider themselves to be proponents of the free market. These people are in fact proponents of their own profit margins at the expense of the entire economy and the wealth of all the people affected by it. In a reasonable free market system, the poorly-termed proponents of "business"would be kept wholly out of government, for in free market capitalism, we are all proponents of the market, not of special-interests over the consumer, which is what these people support, to the credit of their own institutions, and  to the discredit of the United States.   

            Many people sense a disconnect in todays politics between the terms that leaders use and their true meanings.  The example of 'Pro-Business' is a good one.  We live in a capitalist, semi free market society.  Our economic model is based on private business, so being Pro-Business should hardly be a surprise.  In fact, this terminology, which sounds so economically beneficial, is a key word for a less beneficial cousin, Anti-Regulation. This idea, that less regulation benefits our country, and that regulations such as anti-trust, labor, and environmental regulations are bad for the wealth of the general population are so wrong, and so ignorant of economic principles, that they should be banished from the earth forever.  Business can profit by manipulating the market.  This is reinforced to us every time a business is caught cooking the books, evading taxes, or overcharging consumers.  It is the natural tendency of businesspeople to increase profits by overcharging customers and disabling competition.  Without strictly enforced regulations,  these abuses quickly spiral out of control, and the burden is always borne by the tax payers.

 

Adam Smith and John McCain don't agree about the Free Market.

Isn't Adam Smith dead? Why does his philosophy matter?    Adam Smith is the most famous proponent of the Free Market. In the Wealth of Nations, his seminal work on the subject published in 1776 (actually called An Inquiry into the Nature and Causes of the Wealth of Nations), he describes why Free Markets are a natural outcome of human behavior, and also the best mechanism for distributing financial resources. However, Smith's words have been [figuratively] lost in translation over the many years since the publication of his large volume on the subject. Few people bother to read his book, even when they feel free to use his [mangled] words to defend their own stances on the economy. The purpose of this informational page is simply to clear the air on a few important differences between Adam Smith's beliefs, and those of John McCain, George Bush, and many politicians in the Republican Party. What does the "Free" part of "Free Market" really mean?   Adam smith believed that the optimal price of a good is the price that people are willing to pay for it, and that if the government or other entity changes that price, it creates a loss for the entire society. That freedom of the market to determine the price is the origin of the term "Free" in "Free Market". John McCain, George Bush, and many republicans seem to think (possibly because they haven't read the Wealth of Nations yet...) that "Free" means that the state should not regulate industries. This is totally incorrect. Adam Smith clearly describes why intelligent and reasonable regulation of industry is necessary for the Free Market to function properly. Without it, those that sell have both the motive and the opportunity to manipulate consumers into paying higher prices for fewer goods, effectively defrauding the entire society.  You mean Adam Smith believed that industries should be regulated?   Yes! He understood that individuals, and companies composed of individuals, would do just about anything to get ahead - including behaving unfairly in the marketplace. We all know that he was right about this, from Enron to Bear Sterns, many companies are willing to do anything, from risky financial moves to outright fraud, to turn a buck. So why do John McCain, George Bush, and other Republicans disagree with Adam Smith, the "Godfather" of the Free Market?    That is a difficult question to answer. I believe that the answer involves these parts: They never actually read the Wealth of Nations, so they just repeat some things they have heard. They believe that the "Free" in "Free Market" means no regulation, even though that is incorrect. Their party is heavily supported by industries that are anti-regulation exactly because reasonable government regulations prevent them from fleecing the public. Especially under the Reagan years, the Republican party slowly confused the concept of the Free Market with the concepts of small government. Politics can go against the interests of the society as a whole. Why should anyone listen to you?   I am a normal person that took the time to read the Wealth of Nations. It is a really good book (with a few boring passages), and I learned a lot by reading it. I am constantly shocked by how politicians (on both sides of the aisle) butcher his statements to serve their political purposes. I am convinced that if some people would go ahead and learn what "Free Market" really means, they will be surprised at how much sense it makes, and how it can only work with proper oversight. Please don't take my word for it, go pick up a battered old copy of the Wealth of Nations and read it yourself. You will know more than almost any politician about one of the fundamental building blocks of our society. You can download a free e-book copy of the Wealth of Nations right here from Project Gutenberg.