Monday, July 21, 2008

A Marxist Turns Adam Smith On His Head

Jayapradeep Viswanath writes in Organiser, New Delhi, India (27 July) HERE:

A Marxist leader evaluates his ideology—IV:

”Marxian distortion of economics

(This article is based on the book written by Marxist leader P. Kesavan Nair. He is frustrated with Marxism and his expose has become a bestseller in Malayalam.”

“The Wealth of Nation of Adam Smith, published in 1976 (sic) accelerated the growth of capitalism, this book gave theoretical foundation to the market economy. This stimulated the industrialisation in Britain. Smith explained that the wealth of a nation is based on the productivity of its people and, basis of production is human-work and natural resources. He emphasised the necessity of usage of high machineries. Smith believed that the market is an invisible source and it protects the interest of the consumer and the producer. Instead of production for consumption, he said, the consumption should be in accordance with the production. Due to the balance of demand and supply, the free market decides the price of products, Smith argued. It is suitable for the uncontrolled exploitation of nature and labour.”

Comment
Followers of one god (Karl Marx) must be careful not to create another dynasty, even if it is Adam Smith.

Wealth Of Nations did not ‘give a theoretical foundation to the market economy’; it was one of several author's works that discussed how the commercial economy worked (Books I and II of WN). To say that WN, or any other book ‘stimulated the industrialisation in Britain’ is is fanciful.

Whether Smith had published WN or not, the industrialisation of the economy would have continued in ignorance of his works, just as the entire history of commercial societies, and the transition from hunting to herding and farming has commenced and continued over many millennia without the aid of a ‘theoretical foundation’. To indulge in such panegyrics is pure fiction and exaggerates the role of the philosopher (continuing bad habits from a ‘vanguard party’ sect); society does not depend on a book to change. Smith was right; Smith the role of the philosopher is to understand the world, not, as Marx alleged, to change it!

Smith did not “emphasise the necessity of usage of high machineries”. Power-driven machinery hardly existed in Smith’s time; ‘manufacturing’ was by hand-driven not power-driven machines, literally by hand. Power came later.

Smith knew of the Carron ironworks at Falkirk, set up by his friend Dr Roebuck, but he didn’t discuss it, and anyway it was a clear exception to the workhouses and small plants he knew about (the famous pin factory, nail makers, plough makers, weavers, blacksmiths, tanners, stone masons, and so on).

Smith did not believe “that the market is an invisible source and it protects the interest of the consumer and the producer.” It was very visible and he wrote about how it worked very clearly; competition protected the consumer. In fact he never mentioned the invisible hand (Book IV) in connection with his analysis of markets (books I and II).

As for “Instead of production for consumption, he said, the consumption should be in accordance with the production”, the Marxist author is so far wrong, I have to ask if we are reading the same Wealth Of Nations?.

Smith wrote:

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident that it would be absurd to attempt to prove it. But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce” [WN IV.viii.49: p 660]

One could add that it was not just in the mercantile system, but also in all state managed economies that “the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.”

Apparently, the original author of these misleading thoughts “is frustrated with Marxism”; I am frustrated with the [Marxist author’s] erroneous exposition of the alleged views of Adam Smith and I despair if this author’s expose is a best seller in any language, anywhere.

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