Friday, December 22, 2006

Monty Python v Adam Smith?

The International Herald Tribune, 22 December, carries a letter on Asia v Europe:

As an American living in Hong Kong, I'm astounded by the energy and commitment that Asians are investing in development. At the same time, the rush to make money has frightening consequences that will challenge this region and the world. After all, what is the cost associated with environmental destruction?
Meanwhile, the politics and economics of Europe have more to do with Monty Python than Adam Smith.

Mark Hooper, Hong Kong

Europe is a bastion of protectionism that damages the life prospects of millions of people in Africa. It is also riddled with regulations covering almost every imaginable area of economic life of millions of people in Europe.

But the ‘politics and economics of Europe’ have never had much to do with Adam Smith. Wealth of Nations is a critique of the politics and economics of Europe as Smith saw them in the mid-18th century. It has ever been thus. National State politics and Mercantile political economy – and before them, the barbarian shepherd societies, the war lord landowners, followed by feudal agriculture, the role of the Christian Church and its offshoots – all managed to have little to do with the philosophy and political economy of Adam Smith, and he was one of its severest critics.

If present-day Europe loosened its grip on the economy this would be of great benefit to the peoples of Europe and the rest of the world. To the extent that European countries have loosened their grips, their countries have flourished to a greater extent than when National Mercantile and dirigiste policies have been imposed.

Smith was seldom optimistic that Natural Liberty would be restored in Europe, but he was optimistic that even limited reforms would improve the lot of the labouring poor and would lead to opulence over the long run. And so they have. Perfect liberty is not a precondition of social progress. It certainly could speed it up, but it was not a necessary condition. If it had been a pre-condition, or absolutely necessary, Europe would still be barbarian, with living standards, life-expectancy, and absolute poverty to match.

Growth from compound interest mechanisms have done better in Europe than in the majority of the rest of the world. ‘Monty Python’ allusions are too strong; more like ‘Mildly Pathetic’ is the appropriate label, given what we know about the way markets work, if they are allowed to do so, and the evidence of history.

Read the letter:


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