A Step Forward, a Leap Backwards

In Magic Morning Star, Millinocket, Maine USA (© Copyright 2005 by Magic City Morning Star), 25 July 2005, there is a piece by Stephen Crocket, “Breaking Monopoly Power”

It contains some interesting steps towards an analysis of Adam Smith’s writings that uncovers the fact that modern day capitalism is not what Smith wrote about or supported. However, it manages to get everything upside down and back to front.

Stephen Crocket writes:

“Traditional students of economic theory understand that Adam Smith put forward a great argument for capitalism. He outlined a capitalism that served the greater good of mankind and society as a whole based on individuals advancing their individual economic interests. His theories were based on premises that include free and equal access to capital (money) and knowledge. He supposes that no individual economic entity would have more market power than other. All players should be equal and not have undue advantage over others. Any system that permits such advantages is not truly capitalism.

Capitalism breaks down as an efficient economic system the more these premises are denied by reality. Nothing threatens these premises more than monopoly power. True capitalists should support government actions that create a truly capitalist economic system.”

Now that is not what Adam Smith wrote about. Smith neither knew of the phenomenon of capitalism, nor even the word (first used in 1858, not 1790 when Smith died). Smith never made an argument for capitalism; nor did he outline an argument that the greater good of mankind and society as a whole was advanced by people seeking their self interests. His premises did not include free and equal access to capital and knowledge (indeed, he recognized that these were not distributed equally), nor was market power distributed equally. The idea that he bemoaned any system that permitted inequality was not “truly capitalism”, a silly ideas as he did not know anything about capitalism, which developed a in the 19th century, not the 18th.

Smith certainly opposed monopolistic power but the monopolies he railed against were impositions imposed on markets by government regulations, local corporate laws and the petitions of “merchants and manufacturers”, adopted by gullible legislatures.

Stephen Crockett is misled by the belief that Smith was an advocate of capitalism. He was not. He wrote about mid-18th century markets – street markets and local fairs, selling local produce to local people and the activities of local skilled tradesmen supplying products and services to local agricultural interests and consumers.

He took inequality as part of the natural order and saw such inequalities being lessened by economic growth through the division of labour and the widening and deepening of markets. He had no idea that the joint stock company, of which he was suspicious and critical, would become the main vehicle of capital accumulation in the capital hungry centuries that followed.

So, Crockett and Smith in their intentions were similar but the foundation of Smithian economics was completely different from Crockett’s premise, namely that capitalism was something embedded in Adam Smith’s thinking. That is a myth developed by economists in the 19th and 20th centuries who had not bothered to read his books for themselves. If there is to be change in the way the economy works it is essential to first understand from where Adam Smith was coming from.

Crockett has made the first step; it is now time for him to focus on the real contribution of Adam Smith in “Moral Sentiments” and “Wealth of Nations”. He should start by reading "Adam Smith's Lost Legacy" (Palgrave 2005)

Stephen Crockett is a co-host, Democratic Talk Radio: www.DemocraticTalkRadio.com) Mail: 7A Planville Drive, Fayetteville, TN 37334. Email: midsouthcm@aol.com.