Sunday, February 19, 2012

“The triumph of global capitalism”

Jacob Lundberg (17 February) HERE

“The rise of global capitalism since 1980 has been the central factor in the massive rise in global quality of life. In this article, Jacob Lundberg explains why more liberalized global markets have meant richer and freer people.

Follow the link to the article in the Adam Smith Society’s (London) ‘Pin Factory Blog’ HERE This is the best antidote to the daily – nay, hourly – pessimism put out by “activists” that the Earth is going to hell on every dimension. It isn’t and won’t. Unless, of course, the obsessive pessimists manage to convince enough legislators to adopt their proclaimed remedies and they undo what progress has been made and, in the absence of resistance to activism, continues to make. Despite the congenital pessimists, the world has already made great strides in the right direction, well illustrated by the facts summarized on Jacob Lundberg’s article.

Adam Smith wrote at a time when many ideas were exchanged on what was happening in the world in his day and we can trace his nascent ideas of the prize awaiting any country that learned the lessons of history and moved closer to the philosophical ideas of ‘natural liberty’ and away from mercantile political economy. The ideas of Adam Smith should be discussed widely in the Academy because they deserve a wider audience, but only if participants cut through so much of the nonsense written about Adam Smith by all sides of the political spectrum, including “Left’ activists and ‘Right’ ideologues, and, sadly those senior academics who should know much better having read (supposedly) Adam Smith’s Works.

Smith wrote just before debates about income distribution began to shift from passive acceptance of the existing stations of people towards an interest in legislating in favour of some level of redistribution. In the 19th century these new ideas changed the millennia-long restrictive view of ‘distributive justice’ towards the newer ideas of people’s ‘rights’ to direct access to minimum levels of subsistence. This formed a central plank in what became the social-democratic platform, linked with pressure for a wider electoral franchise, and eventually in 20th-century notions of a Welfare State.

Meanwhile, from mid-19th century, Marxist theories of communist states spread, culminating in the 20th-century experiments in socialism in Russia, Eastern Europe, and China. Advocates of one-party state socialism believed their experiments would prove the superiority of state socialism over enfranchised capitalism. Well, events showed the fallacy of socialist superiority over market forms of sate-capitalism. The poor in communist states remained poor and disenfranchised.

Adam Smith took a radical stance towards the condition of the rural and urban poor and he articulated the view that the continuing division, and sub-division, of labour with the ever extending complexity of markets, would raise living standards to at least unprecedented subsistence levels in the first instance and, then through economic growth, make available to labouring people and their families, access to the ‘conveniences’ of life. This process would continue argued Smith provided that erroneous political economy could be curbed and replaced with markets where possible and state investment where necessary. This required a resolute policy in favour of market competition and an end to Elizabethan mercantile privileges favoured by a merchant order of men whose interests conflicted with the interests of consumers.

A similar reform to the habits of the rural landowners was called for, and Smith recommended an end to primogenitures and entails. The relative absence of these legal impediments to modernization in North America, showed what might be achieved in the consequential rapid rise in labourer’s wages and in the growth of agricultural production, and, therefore, consumption among labourer’s and the middle-class. The great diversion and entrenchment of landed interests from the slave traded held back North America from benefitting from the full affects of these desirable changes.

Nevertheless, in contrast to the Iberian dominance of Central and South America that held back this vast southern European continent, North America, even with its slave-economy, showed the possibilities of rapid economic progress compared to Europe as a whole.

Smith’s relied on the progress of markets towards opulence from their stimulus through applied technological innovation on a scale not seen anywhere before in human history. Those waves of innovation continue to this day, and now spread far afield, led now by North American state capitalism. Smith’s approach to the poverty of the labouring poor was pragmatic, not activist or political. Which arrangements would raise employment and living standards more surely than mere redistribution of some income by localized charity, which at best only ameliorated poverty (welcome as that was)? His answer to problems of mindless sub-division of labour was not to try to stop complex supply chains in markets, nor the sub-division of labour (a futile and reactionary quest), but to persuade legislators to part-fund the education of children from age 6 years onwards in literacy and numeracy (WN V.i.f: 758-88) to make them suitable for working lives and careers in the innovation-led sectors. Fortunately the Luddites lost.

He favoured higher proportional rates of taxation on the rich because they could afford them much easier than the poor, assuming government expenditures were requuired. He railed against useless wars in Europe, in which the poor fought on behalf of the dynastic interests of sovereigns or for futile reasons of ‘jealousy of trade’, a wholly reactionary interest inimical to the general population of consumers. The very last sentence in Wealth Of Nations advises governments of Great Britain to restrain their expenditures ‘in time of war ‘ and in ‘supporting any part of their civil or military establishments in times of peace’ by accommodating ‘her future views and designs to the real mediocrity of her circumstances’ (WN V.iii.92: 947). Instead, of course, governments, having learned nothing from losing the American war of independence, embarked onover a century-and-a-half of Empire building, with military establishments and world wars to match.

Yet despite this waste, the spread of opulence continued unabated at unprecedented historical rates of growth of ‘employment and revenue’ benefitting the formerly poorer segments of the population, well beyond ‘necessaries’ and deep into ‘conveniences’ on an unimaginable scale. Lundberg shows the consequence of these trends for the poorest in the so-called Third World.

It is a remarkable performance. And the activists claim that market capitalism is a threat to the future! They sit in tents talking among themselves, or join violence in the streets, smashing and burning buildings, as if that is going to put food on any poor person’s table. They make fantasy promises that capitalism is the problem, not the solution.

We’ve seen the socialist and activist alternatives and we have no reason to be impressed.



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