Friday, October 17, 2008

'Any Port in a Storm'

In Business Week, 16 October, HERE:

Forget Adam Smith, Whatever Works” by Pete Engardio

"Federal Reserve Bank of Dallas President Richard W. Fisher addressed the high and mighty of global finance in Washington during pivotal meetings of the Group of Seven and the International Monetary Fund. The gravity and complexity of the 15-month-old credit crisis called for action that transcended familiar ideological categories, he hinted, such as free markets vs. state intervention. Fisher even borrowed a Chinese proverb popularized by the late Chinese leader Deng Xiaoping: "No matter if it is a white cat or a black cat, as long as it can catch mice, it is a good cat."

The reference to Adam Smith is in the headline alone, with nothing else about him in the text.

I agree, if the implied meaning about forgetting Adam Smith if this refers to his alleged, though false, views about the laissez-faire, zero government, invisible hand toting version of the mythical Adam Smith touted by Chicago trained or influenced economists.

However, I disagree if Pete Engardio refers to the real Adam Smith born in Kirkcaldy in 1723 and author of the Wealth Of Nations, who was never an ideologue, nor an extremist, nor even a single- issue exponent of moral philosophy and political economy.

The real Adam Smith was a pragmatist in all his policy advice. For example:

regulate those aspects of private banking services where the public were put at risk from the imprudent behaviours of individuals who borrowed or lent (Book II);

promote free trade and reduce or abolish tariffs slowly and gradually to prevent domestic employment being reduced suddenly; recognise that defence is more important than opulence, therefore keep the protectionist Navigation Acts in place, despite working against British commercial interests; leave some level of tariffs on foreign imports because they are necessary to fund government revenue (Book IV);

choose between public commissioners or private managers on grounds of which worked best; arrange where feasible for luxury users of publicly-funded roads to pay higher tolls than poorer people; charge small fees for parents sending their children to publicly-funded local ‘little schools’, and charge less or nothing at all for the most indigent (Book V).

Whatever works’ is sound advice, especially in emergencies and crises. 18th century Sailors used to say: ‘any port in a storm’.

There is of course a need, afterwards, to pay prudent attention to the detail, but the broad admonition should be entertained, rather than rigidly rejected in a fit of ideological purity.



Blogger artie said...

Looks like the USA has become a socialiost country. What do you expect people will be paying in taxes in 10 years? 70%?

2:11 am  
Blogger Gavin Kennedy said...

Thanks for your comment.

Like Adam Smith, who rarely made predictions (the only case I can think of is his prediction that the independent former British colonies in North America would be the wealthiest econony in the world by the 1870s), I think forecasting and predictings are inappropriate.

Apart from broader assessments - this or that economic arrangement may lead to higher of lower living standards (in socialism it would be lower living standards - the taxation level would be immaterial once you undermine economic performance from which taxes are drawn), therefore I make no prediction for 'ten years ahead'.


6:43 am  
Blogger artie said...

Hi Gavin,

Very interesting idea to have such a focused topic for a blog. I am almost tempted to open a "Karl Marx" blog and dialogue along with you. Problem is, I'm not an economist. But maybe just for fun? :)

I found your blog because I was writing a post about the economy in my own blog. See Socialist America. As I said, I'm no expert so maybe you can give me some feedback as I sort my thoughts on this timely topic.


3:55 pm  
Blogger artie said...

I would like to search your blog! But negatori!!

8:30 pm  
Blogger Gavin Kennedy said...


I write Lost legacy in among many other tasks - some duties I retained after retiring after 35 years as a university teacher (business school); referee for various projects from publishers - two currently on deadlines for this week; my own major research projects on Adam Smith - commenced reading for one last month; new editions of earlier books - 2 this year; and family duties - grandchildren, etc.

This limits my time to do other than cursory new tasks, and I am not able to offer open advice to your projects, even assuming I understood what it is you want or expect.

If you have specific questions about Adam Smith, I would try to answer them; I am not into deep though about current crises and I only comment on my own country's politics and policies.


7:31 am  

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