Tuesday, October 30, 2012
Adam Smith was not “the Father of Capitalist thought”. He was a moral philosopher who described society as he saw it and the people within it who behaved in certain ways. He never knew the word “capitalism” (it was not invented until 1854).
Adam Smith never said there was an “invisible force” at work. He used a metaphor of “an invisible hand” (popular in the 18thcentury and used widely, mainly by theologians) on two occasions only to “describe in a more striking and interesting manner” (Smith, "Lectures on Rhetoric", 1762, 1983, p 29), two instances in two quite separate instances, separated by centuries, where the individuals concerned – “a proud and unfeeling landlord” forget he shared his crop, and an18th-century “merchant” - worried about the security of his capital if he sent it abroad in “foreign trade”, acted to protect their interests.
I am often asked why I spend so much time on this Blog bashing away at the so-called idea of Adam Smith’s that “an invisible hand” of “markets”, “supply and demand”, the “economy”, or whatever, so arranges the economy (“miraculously”) that people left free to arrange their capital in the way they choose in their “self-interest’ (even their “selfishness” claimed Paul Samuelson), will inevitably advance the “best interests” of the community. No such entity exists. The politics and moral conventions of society decide how a society’s people behave…
The “entrepreneurial spirit” gets going from a genuine freedom to do so. There is no “invisible hand” awaiting release. And it didn’t come from Adam Smith in the form it is widely known as today.
Even in the most desperate of circumstances, where state corruption, criminal gangs, and petty laws plague big and small entrepreneurs and their workers, as is common in the city slums of Asia, and in gangster corrupted capitalism, much entrepreneurial energy is found at work, if often “underground”, to keep ahead of government inspectors, gangsters, and the money-lenders. Unleash that entrepreneurial force and apply the advice of “markets where possible, the state where necessary”, and stand back and stay back.
For evidence just look at 20th-century
… and how the West really started in the 19th-century. Sure, we had
widespread slums to contend with, but without entrepreneurial-led markets, we
would still be there in those slums in the 21st century.
Labels: Adam Smith