Sunday, April 17, 2011

Ron Forthofer, a retired professor of biostatistics from the University of Texas School of Public Health in Houston, was a Green Party candidate for Congress and also for governor of Colorado, writes (16 April) in Dissident Voice (HERE):

Alternatives to Free-Market Capitalism

Americans have been exposed to so much propaganda about free-market capitalism that few ever think there is any other way of running an economy. However, if they were to examine this system, they would see that its focus is on economic growth and the maximization of profit. In theory, this system would create enough wealth so that everyone would benefit. However, during the last 30 years or so, we have seen changes in the rules that guarantee most of the increases in wealth go to those at the top. During this time, there has been little-to-no concern about the resulting harmful effects of this system on society.”

“Free-market devotees often quote Adam Smith on the seemingly all-knowing ‘invisible hand’ as justification for their free-market theology. Somehow these advocates ignore Smith’s warning about the invisible hand. For example, in an 1993 article Noam Chomsky wrote: “The invisible hand, he [Smith] wrote, will destroy the possibility of a decent human existence “unless government takes pains to prevent” this outcome, as must be assured in “every improved and civilized society.” It will destroy community, the environment and human values generally — and even the masters themselves, which is why the business classes have regularly called for state intervention to protect them from market forces.” Unfortunately, as the 2008 crisis and the recent attacks on collective bargaining have confirmed, Smith’s concern was well placed

Ron Forthofer confuses what some over-enthusiastic “devotees” of “free markets” say with the Adam Smith, born in Kirkcaldy in 1723. Competitive markets are more of an ideal than a reality in what we call modern capitalism. Those who “often quote Adam Smith on the seemingly all-knowing ‘invisible hand’ as justification for their free-market theology” make a first-order error in associating “the seemingly all-knowing ‘invisible hand’” with Adam Smith’s use of the IH metaphor, which was altogether much more modest than their claims for it.

Ron Forthofer makes another first-order error in quoting Noam Chomsky’s own first-order error in his statement that claims that Adam Smith from Kirkcaldy ever wrote: “The invisible hand, he [Smith] wrote, will destroy the possibility of a decent human existence “unless government takes pains to prevent” this outcome, as must be assured in “every improved and civilized society.”

He never made any such statement in relation to the only two times that Smith made reference to “an invisible hand” – once in Moral Sentiments (TMS Part 4, Chapter 1, paragraph 9, page 184) where he wrote about ‘proud and unfeeling landlords’ and their feeding their peasants out of the produce of his fields (a consequence of his necessity to do so if the wanted his riches and greatness to continue from their toil - no subsistence, no toil) which had nothing to do with the IH “destroy[ing} the possibility of a decent human existence”. Smith’s very point was the exact opposite!

Being ‘led by an invisible hand’ led landlords to feed their peasants to prolong their lives and, unintentionally, led them to promote the “multiplication of the species” (all references to Smith on Lost Legacy always are to the definitive Glasgow Edition of the Works and Correspondence of Adam Smith, published by Oxford University Press).

From the quotation that includes the part sentence “unless government takes pains to prevent” this outcome, quoted by Ron Forthofer and apparently attributed to Noam Chomsky, actually comes from Wealth Of Nations (Book V.i.f.50, page 782) in a discussion about government arranging for the education of working-age children in ‘little schools’ in each parish in England (they already existed in Scotland, where Adam Smith lived). This admonition had nothing whatsoever to do with Adam Smith’s use of the IH metaphor and it is not valid (to put it politely) to suggest that it was, or that “Smith’s concern was well placed” in relation to the metaphor of ‘an invisible hand’ – he was concerned about the lack of education among youngsters who formed the bulk of the common labourers.

For completion, Adam Smith’s second use of the IH metaphor was in relation to some merchant traders who preferred not to invest their capital abroad because they perceived the greater risks in doing so, compared to the relatively safer practice of investing it domestically. The unintentional consequence of them doing so added to ‘annual revenue and employment’, considered as public benefits by Adam Smith because employment on the 18th-century was the only way for poor labourers to receive incomes that were otherwise unavailable to them.

Again the IH metaphor had nothing to do ‘free market ideology’. In the first case in Moral sentiments it was about the unintentional consequences of feeding peasants, serfs and slaves from the produce of land undertaken by their toil but owned by the “unfeeling landlords”. Invisible necessity “led them to do so, not their humanity (Smith had no illusions about the “rulers of mankind”). That was the object or meaning of the IH metaphor as used by Smith from Kirkcaldy.

In the second case, the unintentional consequences of the risk avoidance felt by some (but not all) merchants to avoid foreign risks and to invest locally was to the raise “domestic annual revenue and employment”. It was their perceived risks that led them to do so. Risk avoidance was the object – meaning – of the Adam Smith use of the IH metaphor.

Feudal Europe had little to do with markets, free, regulated, or otherwise; Mercantile Britain had little to do with free markets –they were riddled with monopoly laws, tariff protection, outright bans of certain imports, primogeniture, entails, and Guilds.

I suggest you read the previous post (below), which discusses these points and also discusses Adam Smith’s teaching on the role of metaphors in the English language, which I am sure that Noam Chomsky and his students know a lot about.

Those “devotees” of “free markets” that Ron speaks of are not representative of Adam Smith’s thinking (in fact they too make much of it up) and Ron quoting Chomsky appears to make it up too. Advocates of competitive markets on Lost Legacy are somewhat different in that they make the case and always quote the authentic Adam Smith without making anything up about him.

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