Friday, October 30, 2009

The Incorporated Towns Were Bad, but the East India Company Was Worse

Sam Smith, who covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964 edits
UNDERNEWS (‘the online report of the Progressive Review’) (30 October) HERE:

RECOVERED HISTORY: MEET THE REAL ADAM SMITH”

“…Adam Smith is routinely and thoughtlessly invoked as the founder of modern capitalist though, based on unrestrained trade, limited government, and the mechanics of market economies. To this day, The Wealth of Nations is held up as the espousal tome for free-market ideology that decries government regulation, excessive taxation, and wealth redistribution (in whatever contrived shapes it may take).

As Chomsky notes, Smith saw the East India Company and other stockholding corporations as bending state policy towards the good of the few at the expense of the many. Smith to this end was in favor of heavy-handed government regulation to prevent financial and corporate powers from manipulating government policy for their own ends. This led him to conclude on the nefarious impulse of corporate manipulation, that when "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary
."

Comment
Much as I agree with the drift of Sam Smith’s post – after all, it recognises that the Adam Smith myth was invented in the 20th century (and the 19th century before that with assertions that Smith supported laissez-faire, though he never said so himself) – I am compelled to apply the same standards of accuracy as I would demand of a modern purveyor of the myth.

The East India Company was a private company, granted a Royal Charter by government on behalf of the sovereign, which operated nearly a year’s sailing away (nearly two years there and back) in India, and, thereby, well-beyond the ability of the government, and, as important, the ordinary shareholders, to monitor, by Smith’s accounts, the appalling behaviours of its officers and servants. Smith’s strictures against the Company are detailed in Wealth Of Nations (Book IV and V).

However, the quotation offered is quite separate from his discussion of the behaviours of the Chartered Companies in Book V. It comes from Book I, on an entirely different subject:

This led him to conclude on the nefarious impulse of corporate manipulation, that when "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” (WN I.x.2.27: 145)

This is part of a discussion of the role of the ‘towns corporate’ in Britain, where the old Trade Guilds still held sway: ‘Inequalities occasioned by the Policy of Europe’ (WN pp 135-59).

The inequalities that Smith speaks of were those associated where “the policy of Europe, by not leaving things at perfect liberty, occasions other inequalities of much greater importance” (WN 135), in particular ‘the “exclusive privileges of corporations”, or the “incorporated trades”.

To be employed in commercial activity in towns, the person had to serve a seven-year apprenticeship under a master, who was restricted to two apprentices only. Without an apprenticeship, served in the town, nobody could open a shop for trade (this happened to James Watt in Glasgow – he had served his apprenticeship elsewhere; Smith got a job for him at the University of Glasgow, just across the town boundary).

It was to these ‘tradesmen’ that Smith referred – small, single-trade shopkeepers and artisans, who owned their own little businesses and who exercised a monopoly of their trades in an “incorporated town”, who tended to exact monopoly prices for their merchandise or artisan services, and who swore to only buy from other incorporated tradesmen for any other items that they required, even where unincorporated tradesmen could supply at lower, more competitive prices.

In short, the Incorporated trades were a cabal of monopolists, living of their monopoly prices at the expense of the public.

But, be clear, these incorporated town monopoly trades and the tradesmen running them had nothing to do with Chomsky’s version of the East India Company, a massive international monopoly company operating East of the Cape of Good Hope to India and beyond,and behaving appallingly.

The local tradesmen who met for “for merriment and diversion” were small fry compared to the East India Company. Chomsky, apparently, conflates the two monopoly cases together.

Sam, a well-experienced journalist, knows of the importance of accuracy. So should Chomsky.

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