Thursday, September 09, 2010

What A Muddle About Adam Smith

Renford Reese, Ph.D. is a professor of political science and writes in The Afro News HERE

‘Adam Smith’s capitalism, in its purest form, allows the “invisible hand” of the market to work its magic without interference from the government. So at any point there is government interference in domestic affairs, it can be construed as socialism.

What an odd assertion about Adam Smith and his use of the metaphor of an invisible hand in Wealth Of Nations.

The statement, as it stands, is complete nonsense.

Clearly its author, Renford Reese, has not read Smith’s single reference in the Wealth Of Nations (Book IV, chapter 2, paragraph 9) otherwise he would know that Smith’s referred to a merchant trade deciding whether to invest his capital in the domestic economy or send it abroad to the Continent or the colonies.

It was not about – and said nothing about – the ‘invisible hand’ ‘working its magic without the interference of the government’. In fact, it only required that the merchant was concerned with his ‘security’, which would lead him to invest locally. The metaphor ‘led by an invisible hand’ referred to the motivation for the merchant to add this capital to the total amount of domestic capital (the whole is the sum of its parts).

Moreover, the 18th-century British economy was riddled with government-inspired ‘interference’. There were no ‘free markets’ in Smith’s day.

The British domestic economy suffered the attentions of local government legalised monopolies; the towns of Britain were run by local monopolies, sanction by the laws applying to Guilds, Incorporated towns, patents and restrictions on the freedoms of labour to move wherever they wished in search of work (Settlement Acts, Apprenticeship Laws) and Britain maintained a total monopoly – enforced by the Royal Navy and the Customs Commissioners – of British imports and exports to the colonies. All of which had to be carried in British flagged and crewed ships.

If such interference is ‘construed as socialism’ by Renford Reese, ‘Ph.D.’ and a professor of political science’, then its author is deficient in knowledge of the English language’, deficient in knowledge of what Adam Smith wrote, and deficient in knowledge of the realities of 18th-century Britain. Oh, and Smith did not know the word 'capitalism'; it was firstb used in EEnglish in 1854 - Smith died in 1790.



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