Gee whiz, Adam Smith sounds like the intellectual father of the global Occupy movements. (Maybe he liked to defecate in public too, who knows?....)
By David Wearing
July 30, 2012 | Guardian
Free market economics has taken such a battering of late that one might almost begin to feel sorry for it. In 2008, a cataclysmic meltdown in the barely regulated financial industry plunged the world into an economic crisis from which it has yet to emerge. For Nobel laureate economist Joseph Stiglitz, "market fundamentalism" was as discredited by this experience as communism was by the fall of the Berlin Wall. Recent scandals at Barclays and HSBC have merely served to underline the point.
Meanwhile the Conservative party, which derives half its funding from big finance, has set about making the public pay for the bankers' crisis, with disastrous results. "Market fundamentalism" told George Osborne that, as the dead weight of the public sector was cut away, the thrusting dynamism of private enterprise, hitherto crowded out by the state, would be unleashed to create jobs and propel growth. Instead, austerity destroyed demand, wiped out the recovery and plunged Britain into a new recession. "Expansionary fiscal contraction" proved to be exactly as oxymoronic as it sounds, breaking the reputation of the chancellor barely two years after he entered Downing Street.
So all in all, there's never been a better time to quote Adam Smith, especially if you're a socialist. Counterintuitive perhaps, but true nonetheless.
Smith, the 18th century Scottish philosopher, is of course best known for advocating the liberalisation of markets (arguably necessary at a time when the punishment for illegal livestock export was to have one's hand cut off and nailed up in the local marketplace, for a first offence, and the penalty for a second offence was death). However, what is less well known is that Smith shared some of the key concerns of today's critics of neoliberalism. His most famous work, The Wealth of Nations, offered a powerful political critique of the "one per cent" of his day, to borrow the terminology of the Occupy movement. In what he himself described as a "very violent attack" on an unjust status quo, Smith repeatedly emphasised the role of power, influence and class in distorting economic policy to serve the interests of a narrow elite.
Smith noted that the "English legislature has been peculiarly attentive to the interests of commerce" because policymakers were continually "imposed upon by the sophistry of merchants". The vested interests "like an overgrown standing army … have become formidable to the government, and upon many occasions intimidate the legislature". They argue their case "with all the passionate confidence of interested falsehood", predicting national ruin if their demands are not met. Of course, all this has a very familiar ring.
The politician who serves the one per cent, Smith noted, "is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them [he is subjected to] the most infamous abuse and detraction". One thinks here of the hysteria elicited by Ed Miliband's mild suggestion in his last party conference speech that some parts of the capitalist system were working a little less well than others.
Smith observed that "all for ourselves and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind". The class power of wealth and big business makes the elite the "principal architects" of policy, "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". Smith repeatedly stresses that while the mercantile system does not serve the public interest, it does benefit the "principal architects" of policy, which is no less true of today's hyper-financialised, neoliberal capitalism.
This is not to argue that Smith should be automatically deferred to simply because he is a renowned intellectual figure, but rather that it can be useful to return to his writings in light of historical experience. We have learned that it is possible for deregulated markets to fail the public disastrously. But the larger point is that when power and influence over policymaking is heavily concentrated within an economic elite, policy will be designed to serve that elite, often at the public's expense. What Smith can teach us today is that the question of who decides, and in whose interest, is crucial to our understanding of how economic policy is made.