Published: March 10, 2009 08:42 pm      

WE THE PEOPLE: Thoughts on bringing a recession to heel

Responding to the recent full-throated baying of conservative “economic watchdogs,” I slogged into the swamp of their icon Adam Smith’s murky tome, “The Wealth of Nations,” to see if they had finally treed anything of value.

In the late 18th century, Newtonian physical science invented oversimplified models and considered only measurable items, but produced spectacularly successful results. Adam Smith apparently tried this same technique on human behavior.

For example, he defined “wealth” as the monetary value of annually produced useful goods (and some services). To me, wealth also involves good friends, family, good health, a liberal society, music and occasional contact with unsullied nature, none of which was considered by Smith.

Even accepting his limiting simplifications, however, his results fall far short of Newton’s, and some of Smith’s predictions were totally wrong. For example, Smith claimed that British rule in America was advantageous to the colony, not England, and predicted (p.627) that the American “disturbances” would quickly die away (ironically, his work was published in 1776).

Nevertheless, there are many seldom-mentioned nuggets buried in Adam Smith’s pioneering work. For example, he considered baubles like jewels, mansions, antiques and flashy carriages to be harmful economic wastes (p.444). He had great faith in workers (p.175), and stated that corporations corrupt labor. He considered country ploughmen superior to sophisticated town dwellers.

He promoted a progressive tax on the wealthy (particularly on luxury goods) but no tax on food or necessities for the poor (p. 1126). Throughout his work, Smith opposed very large corporations. He repeatedly bemoaned the influence of merchants on government (corporate lobbyists in Nashville would be high on his hit list). He considered excess profits very damaging, economically, and he stated that “(wealthy entrepreneurs) complain about the extravagant gain of other people; but say nothing of their own.”

He groused that companies “frequently complain of the high wages of British labor…but they are silent about the high profits of stock” and he felt traders (including bankers and stockbrokers) were the least valuable members of economic society (p.847).

Smith defined “capital” as something that increased productive capacity. For example, better plows or increased soil fertility would build a farmer’s capital, as would improving his education or investing in productivity-enhancing infrastructure. Building LaGuardia airport, the Lincoln Tunnel, the Triborough Bridge, the West Side Highway, the TVA dam system, rural electrification, the Mathematical Tables Project and even Cumberland Mountain State Park were all capital increases.

Unfortunately, Roosevelt didn’t invest in building education or health care capital to an equal degree, or we might have seen even greater dividends. Nevertheless, he and Eisenhower (Interstate Highway System) indisputably presided over the greatest increase of national capital since early in our history.

All of it was criticized as “pork” by wealthy plutocrats at the time, but as classical economics predicted, an unprecedented period of American productivity followed.

We are presented with a similar opportunity today. If we focus on increasing our common national capital and resist the selfish, bauble-accumulating economic royalists, Adam Smith would predict another economic surge for our children.

Why, then, do we find his stingy, misguided, obstructionist hounds once again barking up the wrong tree? Bad Dogs! Go Home!