Adam Smith is something of a saint for right-wingers. The big grand-daddy of liberal political economy, Adam Smith literally wrote the book on how people can, through “truck, barter and exchange” unintentionally create the best conditions for human happiness. He’s even had his name stamped all over one of the biggest, baddest right-wing think-tanks in the UK – The Adam Smith Institute. The funny thing is, though, that Smith would actually disagree markedly with most of the ASA’s recommendations, if he were alive today. In fact, the ASA practice a philosophy so far removed his own, Smith’s cadaver must currently have greater RPM than a washing machine in spin cycle.
Here’s why: According to most liberals, a (perhaps the) key function of the state is to defend liberty. In economic terms, this means a responsibility to defend the freedom of the market. Both classical liberals (Smith) and neoliberals (the ASA, Thatcher, Reagan… in fact, most mainstream politicians and economists) agree on this. But unlike Smith, neoliberals envision the free market as a world of do-as-you-please – where, to quote Gordon Gekko (and the ASA), greed is good. For Smith, by contrast, it is not the greed for profit that creates prosperity; it is the freedom itself. Greed (defined as self-interest without restraint via empathy) is actually seen by him as dangerous.
In the elegantly liberal formulation of Smith’s thought in The Wealth of Nations, it becomes rapidly apparent why he believes greed to be so dangerous.
- The market, as the free circulation of goods and services by competing merchants, is a valuable and powerful institution for securing the common good. It must be protected from monopolistic interests that distort beneficial market forces.
- However, markets have a natural tendency towards monopoly.
- Here we have the central problem. Markets are victims of their own success – the good businesses created by the market eventually stifle the freedom of the market itself. How can this be solved?
- Answer: Within the market, monopolies are forbidden. This is enforced by the state by strengthening economic actors’ freedom from other, more powerful actors (via anti-trust legislation, civil liberties) and freedom to act themselves (via a welfare state, affordable start-up loans).
- But in order to achieve the power necessary to put in place these provisions, how does the state avoid the worst excesses of monopoly itself?
- Answer: By developing an internal market of ideas (a true democracy), the state benefits from the insights of independent citizens, but nonetheless retains the power that comes with being big.
Though it sounds paradoxical, in order to create a truly free space for commerce, you need to restrict the freedoms of some for the benefit of all. Think of it like a garden – if you want to grow a wide variety of plants, you don’t just neglect the garden completely. If you do, all you’ll get is nettles.
At this stage, sadly, we don’t have this arrangement. Anti-trust legislation is not strict enough, nor is the welfare state efficient enough. Big corporations are able to use their financial muscle to influence policy makers, town planners and consumers in ways that benefit their own business models, but are detrimental to the common good. Worse, their huge market share means that big corporations are “too big to fail” – as if they did go under, vast numbers of employees and consumers would be affected. The welfare state (where it exists), though insulating people from the worst excesses of poverty, makes the poor reliant upon the state taxation of big business, creating resentment and class warfare, and making the state even more reliant upon large corporations. What we are left with is neither fish nor fowl – a system that necessitates state interference in the market and collusion between huge monopolistic interests rather than the liberation of real people.
There’s one final question here – qui bono? It’s obvious – the rich. They get to make vast profits, while the rest of us reap the whirlwind of a dysfunctional and decidedly un-free market. Having twisted the liberating ideas of Smith into giving carte-blanche for greed, supported by the ideologues at the ASA, the rich have once again used ideology to fox ordinary people. And because they are at the top of a monopoly, they are able to lobby the government to legitimate even greater concentrations of wealth and even greater distortions of the market to suit their ends; keeping an unfair system limping on that bit longer, to they can squeeze that bit more blood from our stones.