"ANON" GETS IT WRONG ON ADAM SMITH

“Anon” writes on “Falling on a Bruise” HERE  “Adam Smith Got it Wrong”

While Karl Marx is thought of as the father of Communism, his counterpart would be Adam Smith and his 'Wealth of Nations' book that decreed that the motivating force of economic growth was selfishness.

The Smith analogy was that: 'It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest' which means that the Butcher is not selling you meat because he enjoys or wants to sell you meat, he is only doing it to make money and this desire to make money benefited everyone as he spent this money hiring people and buying other things from people selling items and the money went around and everyone got a slice. 

While Marx's slogan was that Communism would produce enough goods and services so that everyone's needs can be satisfied, Smith's was being selfish and greedy is the key to satisfying everyone but as we now know, Smith underestimated the self-regulating powers of mankind when it came to selfishness. 

'How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him' wrote Smith but while his idea of selfishness running the economy has been taken up with gusto, his idea that considering the fortune of others would act as a brake on just how selfish we would be was wildly wrong. 

As we have suffered recession after recession for as long as i can remember, the time between them has been less and it seems that finally the recession of 2008 may well have been the final straw as countries go bankrupt and  the global crisis rumbles on six years later.  

This last recession was caused by selfishness in the financial sector, an area unconstrained by any of the moral sentiments Smith expected to stop it from happening. The mantra of 'greed is good' has not only brought down most of the World but has badly damaged Smith's own idea of how an economy should work.   

While the regular people are losing their jobs and their homes, the same people whose sheer greed led directly to where we find ourselves today continue to rake in huge pay packages and bonuses.

Governments know what caused the crash, know that Smith's idea of an economy based on selfishness has failed but continue to try and re-build their economies by telling business people to go on being selfish and greedy.

There will have to be a point when someone important points out that Adam Smith was wrong and greed is not good, it's downright bad for the overwhelming majority of us.

Comment

“Self-Interest” is far more than “selfishness”, especially in Adam Smith’s Works. ‘Anon’ displays little knowledge of Smith’s Works if he believes that his own identity of selfishness with self-interest is correct. For a start, Smith was adamant that humans stand in need of co-operation with many others, including the whole band of hunter-gatherers in the early multi-thousand millennia of the human species and since humans left the forest, led by a few tribes about 10,000 years ago in what we now call the middle east, that the human trait was interdependence then and since. The interdependence of self-interested humans has increased, albeit slowly, to modern societies today, and in the global economy co-operation is mandatory.

To co-operate, from its primitive forms (reciprocity, sharing, gift exchanging, and such like, to co-operation in its its modern complexity, requires that natural self-interest must be mediated by each individual addressing the self-interests of others by, such as, gossip, conversation, persuasion, and through degrees of co-operation along that specturm to ‘higgle, haggling’ and ‘bargaining’ via classical times, to today.  

Of course, in the circumstances of powerful tyrannies and dictatorships (historically the most common form of human politics and rule), co-operation is and was imposed by violence - a characteristic observed in ALL regimes from the early slave empires, through warlords and feudal kingdoms, and remarkaby, in their supposed socialist experiments since 1917, through to today’s North Korean, ideological dictatorship.

“Anon” quotes Smith's  famous “Butcher, brewer and baker” paragraph but completely misses  Smith’s main point.  It was not a praise of selfishness, far from it!  He advises both customer and seller to seek what they want from the other person by persuading them that each would serve their own self-interests - the buyer to acquire the ingredients for her family’s dinner and the sellers to acquire the wherewithall for their family’s welfare - if each addresses the “self-love” of the other party (NOT their own self-love!).  Both do this by showing the other (the customer and the seller) “that it is for their own advantage to do for for him/her “what he/she requires of them”.  This exactly is what is meant by the inter-human activity know as “bargaining”: “Give me that what I want and you shall have this which you want” (Wealth Of Nations: Book 1, chapter 2, paragraph 2).

In bargaining, we exchange proposals, which may start far apart or near together, and we arrive at a mutually acceptable conditional proposition - “IF you give me this that I want THEN I shall give you that that you want”. 

[Readers may consult my MBA text, 1991, “Negotiation”, available from Edinburgh Business School, Heriot-Watt University, or in the second-hand market. A popular alternative is my paperback, Everything is Negotiable!, Random House - both available via Amazon].

“Anon” sneers at Smith’s simple example of bargaining: “the Butcher is not selling you meat because he enjoys or wants to sell you meat, he is only doing it to make money and this desire to make money benefited everyone as he spent this money hiring people and buying other things from people selling items and the money went around and everyone got a slice.”  

"Anon" also quotes Marx's “opinion” that the alternative to markets: “Communism [which] would produce enough goods and services so that everyone's needs can be satisfied”! Well, Marx’s opinion was tried in practice in both Russia and China - and still is in North Korea! - and always proved costly in human life with millions dead from starvation, brutal treatment and horrifying tyranny, all well short of the “promised” utopia, even if some individuals managed to queue long enough and were privileged to have access to whatever little was available.

Only after China abandoned its socialist/commmunist ideaologies and began to allow limited markets into the communist system, did their living standards grow towards those of the market driven West (with still a long ways to go).

Smith never said anything about humans being “selfish and greedy” as “the key to satisfying everyone”.  The “Greed is Good” mantra comes from a 20th Century Hollywood Scriptwriter but never Adam Smith in the 18th century!

“Anon” only quotes Smith from the opening paragaph of his “Theory of Moral Sentiments”.  T’is a pity "Anon":  does not read all of it (likewise with Wealth Of Nations beyond Chapter 2, pararaph 2!).