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The Democrats’ Rough Re-entry Into Reality
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Special Report
The Other 1776 Freedom Legacy
Another event of profound and enduring significance we should also celebrate.
Our nation will soon celebrate its 234th birthday. Another event of profound and enduring significance also occurred in 1776. It was the publication of Adam Smith’s The Wealth of Nations.
Our Declaration of Independence and the subsequent Constitution turned out to be enormously important for the cause of freedom not only in this country but what they inspired in other countries around the world. The Wealth of Nations and the lessons it taught have also reverberated far and wide since its publication. Smith’s insight and genius are reflected in the book’s full title — An Inquiry into the Nature and Causes of the Wealth of Nations. In a systemic way Smith set out to understand and explain the sources of a country’s economic health and growth.
The average life expectancy in England at the beginning of the 19th century was 41 years. At the beginning of the 21st century in the U.S. the life expectancy was 78 years. What accounts for that unprecedented improvement in human welfare? There are numerous factors — better nutrition, sanitation, refrigeration, advances in medical knowledge, for example — but most of them would not be possible without dramatic improvements in productivity and material wealth.
Recent history has reminded us of the widespread hardship resulting from economic stagnation. The worldwide recession has made virtually all our societal problems worse. More than two and a quarter centuries ago Adam Smith recognized the critical importance of economic growth and vitality.
Smith took issue with the prevailing political-economic philosophy of the time, something called “mercantilism.” The mercantilists believed that a nation’s power and strength depended on accumulations of gold. The mercantilists advocated government policies encouraging exports and discouraging imports, something we now refer to as “protectionism.” It is a policy that some still advocate.
Smith built a devastating case against mercantilist logic. He showed that a nation’s strength stemmed from its productivity and the efficiency of workers and businesses. He explained how a free market economy generates incentives and signals that push the economy in the direction of productivity and growth.
The first sentence in The Wealth of Nations makes the following observation: “The greatest improvement in the productive powers of labor, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed, or applied, seem to have been the effects of the division of labor.” Smith was referring to what we now call specialization, and it continues to be one of the most important sources of economic progress. If not for the market and voluntary exchange we would all need to be self-sufficient. Self-sufficiency makes specialization impossible.
Just as our Constitution laid the groundwork for political freedom, The Wealth of Nations established the intellectual foundation and rationale for economic freedom. He showed that government interference with the free market almost always does far more harm than good. He showed that unfettered voluntary exchange is the best path to economic progress.
Smith explained that in a market economy, “Every individual necessarily labours to render the annual revenue of society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how he is promoting it. He intends only his own security; and by directing that industry in such a manner as to produce the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”
Smith was a persuasive and masterful writer. For example, “Taxes on the necessaries of life have nearly the same effect upon the circumstances of the people as a poor soil and a bad climate.”
Smith did not invent the free market. No single person did. He was the first, however, to grasp and understand how a market system functions. He therefore made it possible for others to understand and see the benefits of the market.
The primary value of having a theory of the free market is to provide a defense against those who want to interfere with it. Since well before Smith’s time there has been no shortage of those who want to substitute their judgment for that of the market.
A market economy can function whether or not anyone understands how it functions. A free market system is one of “spontaneous order.” The auto-pilot nature of the market is one of its greatest strengths, but it is also its greatest vulnerability. The market’s immense benefits get taken for granted. Since being aware of how the market functions is not a necessity, most people don’t bother learning about it.
The central theme of Milton Friedman’s classic Capitalism and Freedom is that a free market is a necessary condition for achieving political freedom. You can’t have one without the other. As we celebrate the birth of our political freedom we should also give thanks for another event that year that helped make our freedom meaningful and enduring. We can give thanks for those freedom-loving geniuses who lived on both sides of the ocean.
And using Adam Smith as an inspiration we should all do what we can to combat the latter day “mercantilists” in all their various incarnations. Many things have changed since 1776, but our fundamental challenges remain the same.
About the Author
Ron Ross Ph.D. is an economist who lives in Arcata, California. He is the author of The Unbeatable Market. Reach him at rossecon@gmail.com.
Faffnir| 7.2.10 @ 8:08AM
I have long maintained that both Smith and Friedman should be required reading, at gunpoint if necessary, for the 535 fools on the Hill. They are as clear an argument as has ever been devised for keeping the dead hand of government off the throat of enterprise.
I am constantly amazed at the fools at the various "economic summits" who riot and rail against the free market system, the ONLY system which has a constant record of success is lifting millions of people out of the grinding poverty that has been their lot since time immemorial. The only thing the Socialism they advocate has ever done is spread the misery, except, of course to those who live lavishly attempting to run things.
When did this perverse idea that an economy can in any sense be planned and controlled come to such prominence? From my readings in history, it did not start with Marx, although he did give it a mighty shove. When will the foolish "elites" learn?
Ken (Old Texican)| 7.2.10 @ 10:18AM
Mr. Ross, thank you for the reminder.
Faffnir,
brilliant comment. I would like to make a whack at your final question.
I am sorely afraid that the "elites" HAVE learned, and that they are not foolish at all according to their goals.
Sir, I am convinced that they want us ...literally... in "soup-lines".
ie: a majority of us totally dependent upon their mercies.
Instead of raising armies to crush us, they are busily smothering us one regulation at a time.
This we do know:
We know the players and their goals. We know their arrogant attitude toward those of us who make the country run, one paycheck to an employee at a time. We know they want to degrade and "humble" us...or perhaps "house-break" us.
We also know that the leftists, (as opposed to Liberals), have been quietly promoting racial slavery by building a multi-generational welfare class among minorities. That welfare class sees absolutely no option except to squat in their "ghettos of the mind and spirit".
We older folks have more or less gone along with a grumble or two, not truly realising that we have become "enablers" of these leftist bastards...until just recently. The leftists have finally rubbed our noses in the poop, literally, with glee.
And look where we are.
I personally want to apologise to you younger people. We are on the verge of putting you in the middle of a civil war that will determine whether freedom and personal hopes and dreams as envisioned by our forefathers will be something you too can enjoy for a life time as many of us have.
These communists, (pardon the shorthand), are going to try to break you. They are going to try to make your "careers" a nasty chore instead of a self-directed vocation utilizing your best talents and skills....that you decide to employ in your own way.
In short terms...these communists, (pardon the shorthand), want you to be pliable, frightened, and alone in your thoughts and fears.
So.
The one last gift we old fartes can give you, is our outright refusal to let these communists take over your futures.
We can refuse to comply, and the economy WILL crash in a way that will make the great depression look like a sunday school pik-nik...though for a shorter period.
I spoke yesterday about "push-back is going to be a bitch".
I don't truly know what ways we shall choose to stop them. I don't know what precise methods will be employed to stop them.
(But I have some really splendid "routes of march" inked in. http://judgeroy.wordpress.com ).
Freedom and Liberty for the rest of history is at stake.
We know that "America" is the last hope on this earth. These days, we still have the power to stop this slide into oblivion.
One way or another we will use that power.
You have our word of honor.
JmsA| 7.2.10 @ 10:51AM
Ken (Old Texican),
Hear, hear. Though it appears the worm is beginning to turn.
Gerald Stephens| 7.4.10 @ 7:57AM
FREEDOM LEGACY...
Let it be further recorded for the ages : GREAT WISDOM and COURAGE prevailed in the year of our Lord, 2010 wherein grave danger to the nation was again defeated.
There is no seat on the Supreme Court for one unable to proclaim the existence of Human Rights.
Alan Brooks| 7.2.10 @ 11:16PM
Finally, a good Friday piece. The other AS articles today are boilerplate.
But Smith would roll over in his grave if he knew what Bush 41 & 43 did in the name of freedom; I am not blaming one of them-- but what you can't seem to understand is:
1st) the 1990 Disability Act, that does little to help the disabled, and harms busdrivers who have to roll out that big damn contraption.
2nd) the immediate squandering of Reagan's post Cold War legacy, starting in late 1989!
Then you elect another Bush in 2000.
Good thinking, and then you say (after Dubya signed on to the stimulus Nov. '08- Jan. '09 that them librals are erodin' free markit policies in America.
AMENBRO| 7.4.10 @ 8:28AM
CIVICS 101
CONGRESS PASSED THE ADA BS long in the works before neither NEW WORLD ORDER BUSHIE came along.
HISTORY 101
Maynard Keynes was a spoiled insipid ELITEST TOAD, TRUST FUND BABY, & PISS POOR PICKER/INVESTOR i.e. LOOOOSER in the FREE MARKET/STOCK MARKET that never created a GD thing but his economic policies which were his opinion of excellent remedies for his consistently LOUSY BUSINESS decisions ALAN.
MF never ever succeeded in the FREE MARKET.
Brian Mc| 7.2.10 @ 8:15AM
Much food for thought and two, new(old) books to read.
I thank you for the reminder that the 'pie' continues to grow just so long as there is ample "Soil and Climate".
Bydand76| 7.2.10 @ 10:24AM
Excellent article!
A really good historical companion to include on this subject as it really lays out Smith's contributions to our modern society is Arthur Hermans " How the Scots Invented The Modern World".
Pro Libertate!
JmsA| 7.2.10 @ 10:37AM
One of Adam Smith's greatest contribution to modern economic thought, in addition to his arguments that against Mercantilism, was his warning against monopolies. He thus wrote in Wealth of Nations: "The policy of Europe occasions a very important inequality in the whole of the advantages and disadvantages of the different employments of labour and stock, by restraining the competition in some employments to a smaller number than might otherwise be disposed to enter into them. The exclusive privileges of corporations are the principal means it makes use of for this purpose. The exclusive privilege of an incorporated trade necessarily restrains the competition, in the town where it is established, to those who are free of the trade."
As he further posited that markets are driven toward the public good by an invisible hand, which gained him great praise from free market doctrinaires, he further postulated that the progress of human well-being resulted and will continue to do so primarily from free exchange. The division of labour thus making such possible, he further felt that government could not hasten this natural process, as the government's chief function is to protect freedom of exchange by upholding justice, that is, property rights.
Al Adab| 7.2.10 @ 1:51PM
Don't forget Gibbon. It is not coincedental that these three published in 1776. There are lessons to learn from Rome.
Northern Rebel| 7.2.10 @ 4:47PM
Faffnir:
I don't know the exact answer to your last paragraph's question, but in old Europe, kings would grant feifdoms (towns, counties) to Earls or lords, and that particular area of land was theirs, including the peasants that lived there, as property. The lord, or earl could govern these lowly peasants as he saw fit, as long as the ruling lord paid proper tribute to the king. (taxes)
This is exactly what democrat socialist-liberal-progressive-communists (whatever their calling themselves this week) think of normal working Americans.
It is our lot according to them, to toil and scrape, and produce value, so that we can send it to the kingdom of Washington DC lords, so they can spend it as they see fit.
The peasants of America, (the people who make the country work) are merely property, and a source of revenue in their eyes. We lack the intelligence or sophistication, to know what's best for us, and the ordinary Americans who rebel against this notion, are far more dangerous to them, than Fidel Castro, Chavez, Ahmadinijhad, or some pot bellied dictator from North Korea.
On the contrary, they admire these despots, and seek to emulate them, jealous because that stupid American Constitution prevents them from being like these tyrants.
So they worm their way into the education business, attempting to dumb down these American peasant's children, hoping the values our country was founded on, will disappear from our children's, and grandchildren's thought process, and they will learn that depending on their particular lord or earl, is in their best interest.
If we aren't vigilant, the beacon of liberty and freedom that is The United States of America, will cease to exist as we know it, and the world will suffer for it, for without our constitution intact, and solid, (not "living") all hope is lost.
ANTHONY | 7.21.10 @ 4:13AM
I'm open to a "divorce". We split America in two - Libs take one part, constitutionalists take the other. Let President Obama and all his communist cohorts and sycophants of Lesser America see what he can do without the law-abiding people who desire to either work or run a successful business for a living.
Then we can move in and pick up the pieces for pennies on the dollar in about 25 years.
And all the dopes on the Left will either be in Havana or disabused of their lunacy.
I am serious. Let's do it.
Halg. P. Colebatch| 7.4.10 @ 2:59AM
Note P. J. O'Rourke's excellent book summarising "The Wealth of Nations." Another book that should be compulsory reading.
dvd to ipad mac | 7.6.10 @ 3:42AM
ahh