How to Start World War III & IV

I get to read several Blogs a week which I would not come across normally. This one caught my eye for reasons that will be obvious to regular readers of Lost Legacy:

“Unshackling Adam Smith’s invisible hand – Carbon Credits” by Aldon Hynes (he’s here):

“The conversation drifted to Adam Smith, and how the political spectrum is not a line, but a circle. The further to the left or right you go, the closer to those on the other side you end up. I think an interesting illustration of this is what I’ll call The Progressive Capitalist.

I must admit, I’ve only read very brief passages of Adam Smith’s Wealth of Nations, so I may be off based on some of my observations. Smith’s had big concerns about fairness and normative cultural values. Jock argued that Smith believed in a local marketplace, with local ownership and was opposed to absentee ownership and remote accumulation of capital. In a world of large multinational corporations, the market is no longer local. The playing field is not fair. A local community can no longer exert its cultural values on the businesses in its locality.

Indeed, if we are going to allow Adam Smith’s invisible hand to have an effect, we need to avoid entering trade agreements that give other countries unfair competitive advantage. For example, a country that puts disproportionate amounts of carbon dioxide into the air, a country that is essentially robbing its neighbors of a clean air and a healthy climate has an unfair advantage that would be unacceptable to Adam Smith. Instead, trade agreements should include fairness. If we want to unshackle Adam Smith’s invisible hand, we should tie our trade agreements to fairness. If we want to see a real market force, let’s require all imports to be carbon neutral. Instead of tariffs, companies would need to buy carbon offsets. Let’s tie Kyoto to all our trade agreements.

This is just a start. We should spend time thinking about how to make sure that in an increasingly flat world, Adam Smith’s invisible hand can help maximize human happiness.”

Comment
A very honest opening about having ‘only read very brief passages of Adam Smith’s Wealth of Nations, so I may be off based on some of my observations”. That’s not so unusual – to have only read the occasional passage – but to admit it is what I suppose could be described among trendy week-end book readers, as a ‘Black Swan’.

Smith didn’t ‘believe in a local marketplace’ as a preference (‘you should watch ‘Jock’; he’s stretching the facts). Such markets dominated the scene in Scotland, as contemporary prints of the period show clearly, but Smith makes it clear in several places in Wealth Of Nations that production for ‘distant sale’ was an important step in the development of markets and, a crucial step in raising the ‘enjoyment’ of the progress towards opulence.

Hence, the thesis that Aldon Hynes develops is based on a false basis, at least as far as Adam Smith’s name is invoked in support of it. Smith’s ‘invisible hand’ did not mean ‘we need to avoid entering trade agreements that give other countries unfair competitive advantage’. That no doubt is the expected wail from the merchants facing competition from other merchants sending products some distance.
Smith welcomed competition, especially in lower priced products because he was concerned with the interests of consumers, not producers. Lower prices raised real wages for the labouring poor. If competition was only allowed if everybody charged the same price is would hardly be competitive.

“For example, a country that puts disproportionate amounts of carbon dioxide into the air, a country that is essentially robbing its neighbors of a clean air and a healthy climate has an unfair advantage that would be unacceptable to Adam Smith. Instead, trade agreements should include fairness.”

Sorry, but that is Aldon Hynes’ view – to which he is perfectly entitled – not Adam Smith’s. The proposition amounts to a statement that all trade must be suspended until every country has exactly the same policies in place, which is really a call for undoing society to the lowest common denominator, itself a proposition that would require a totalitarian imposition to enforce. As trade shrank among the nations, countries dependent on trade would have to reduce their living standards in short order to avoid collapse. Countries in debt to others would face the problems faced by the Weimer Republic in post-War Germany after 1918 (which led to Hitler in 1933) in its hopeless effort to pay reparations.

Dismantling the international trade system in any time period likely to make a difference in a lifetime would threaten a catastrophic collapse of civil order. However, that’s not my point on Lost Legacy. No such scenario had any validity as a claimed endorsement from the views of Adam Smith.

Consider Aldon’s concluding sentence in which he describes everything he lists as “just a start. We should spend time thinking about how to make sure that in an increasingly flat world, Adam Smith’s invisible hand can help maximize human happiness.” I shudder to think what he means by maximising ‘human happiness’ after what he proposes is so glibly imposed on six billion people.