Sunday, January 22, 2012

The Truth About Adam Smith

It’s amazing how often Capitalists love to quote Adam Smith, the author of the book Wealth of Nations, which one might call the Capitalist Bible. Well, maybe I should rephrase that. I really should write that it’s amazing how Capitalists love to pick and choose quotes from Adam Smith but fail to mention views that he held that they disagree with.

Capitalists love to refer to Adam Smith’s “invisible hand” when it comes to the power of the market. I have no problem with that habit being that the market would still be an important part of an Economic Democracy. Very simply put, Smith was indeed right that what we today call natural selection when applied to the market can indeed make for a better product or service.

However, he made many statements in the Wealth of Nations that Capitalists and their defenders fail to mention.

Progressive Taxation
"It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."

Smith also wrote:
"The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities, that is, in proportion to the revenue which they respectively enjoy under the protection of the state."

These two statements are especially timely. Right now on Capitol Hill, one of the biggest arguments is whether the tax rates for the rich should be raised. It’s obvious that Adam Smith supported a progressive tax on the wealthy.

"No society can surely be flourishing and happy, of which the greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged."

Another hot topic right now is the fact that there has been such a growth in the disparity in incomes between the very rich and, well, everyone else. A small percentage of the wealthy American population has gained dramatically while the rest of the nation has seen dramatic drops in wealth.

Fair Wages v Profits
"Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people."

It's amazing how Capitalists fail to mention this statement. Smith is saying clearly that workers deserve a fair wage and actually refers to "the bad effects of high profits" and "the pernicious effects of their own gains."

Trade Associations
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary."

I wonder how many business trade associations would admit that they meet "in a conspiracy against the public?"

Labor Protection Laws
"Whenever the legislature attempts to regulate the differences between masters and their workmen, its counselors are always the masters. When the regulation, therefore, is in favor of the workmen, it is always just and equitable; but it is sometimes otherwise when in favor of the masters."

There’s a statement here that deserves repeating, "When the regulation, therefore, is in favor of the workmen, it is always just and equitable; but it is sometimes otherwise when in favor of the masters." Such regulation in favor of labor "is always just and equitable" but is sometime not when "in favor of the masters." The reader needs to remember that at the time the word master was used for the sole-proprietor or what we today would say boss.

Redistribution of Wealth
"All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind."

For Capitalists the term "redistribution of wealth" is a filthy phrase. However, here we find Smith saying the opposition of such redistribution is a "vile maxim."

Worship of the Wealthy
"This disposition to admire, and almost to worship, the rich and powerful, and to despise, or, at least neglect persons of poor and mean conditions, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments."

We all know the obsession many have with the 'Lives of the Rich and Famous.' Smith found such obsessions "the great and most universal cause of the corruption of our moral sentiments."

Looking Out for Number One
"How selfish so ever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it."

Even though much of Smith's writings seem harsh he couldn’t help but accept that it was in our nature to care for our neighbors. Even he admitted that altruism was part of human nature.

"The directors of such companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own.... Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company."

Capitalists have many ways of trying to explain away this statement. Some say he's only referring to sovereign entities that were created by the Crown and had been granted exclusive monopolies, such as the British East India Company. However, the establishment by the State of a company with a monopoly of the system doesn’t appear in his wording. His criticism is that the managers are watching over "other people's money than of their own." Another defense is that modern corporations have accountability systems set-up to compensate for this, which didn’t exist in Smith’s time. The problem with this argument is that recent history has shown this to be false. Companies such as Enron, Arthur Anderson and Countrywide Financial are just a few examples.

I’m not saying Smith was always right. Nor am I saying that if alive today he would be an advocate of Economic Democracy. However, I do want to bring some balance to the discussion on his work.

Sunday, January 15, 2012

The Return of Bill Moyers

Something I find exciting is that Bill Moyers has decided to return to the media with a new show on PBS "Bill Moyers and Company." Moyers has been a voice of reason and common sense for years and his return here in 2012 is a fantastic development.

We got a glimpse of what to expect from his show's premiere episode, on January 15, 2012, "On Winner Take All Transcript." At the end of the show, Moyers gave a fantastic commentary in response to an interview to someone who said the country was waking up:

Waking up is right. Waking up to the reality that inequality matters. It matters because what we’re talking about is what it takes to live a decent life. If you get sick without health coverage, inequality matters. If you're the only breadwinner and out of work, inequality matters. If your local public library closes down and you can't afford to buy books on your own, inequality matters. If budget cuts mean your child has to pay to play on the school basketball team or to sing in the chorus or march in the band, inequality matters. If you lose your job as you’re about to retire, inequality matters. And if the financial system collapses and knocks the props from beneath your pension, inequality matters.

I grew up in a working class family. We were among the poorest in town, but I was rich in public goods.

I went to a good public school, played sandlot ball in a good public park, had access to a good public library, drove down a good public highway to a good public college, all made possible by people I never met. There was an unwritten bargain among the generations -- we didn’t all get the same deal, but we did get civilization.

That bargain’s being shredded. The occupiers of Wall Street understand this. You could tell from their slogans. A fellow young enough to be my grandson wore a t-shirt emblazoned with the words: "The system's not broken. It’s fixed." That's right. Rigged. And that's why so many are so angry. Not at wealth itself, but at the crony capitalists who resorts to tricks, loopholes, and hard, cold cash for politicians to make sure insiders prosper and then pull up the ladder behind them.

Yes, Americans are waking up. To how they're being made to pay for Wall Street’s malfeasance and Washington's complicity. Paying with stagnant wages and lost jobs, with slashing cuts to their benefits and to their social services. And waking up to the grotesque Supreme Court decision defining a corporation as a person, although it doesn't eat, breath, make love or sing, or take care of children and aging parents. Waking up to how campaign contributions corrupt our elections; to the fact that if speech is money, no money means no speech.

So the collective cry has gone up loud and clear: enough’s enough. We won't, as I said, know for a while if this is just a momentary cry of pain; or whether it’s a movement that, like the Abolitionists and Suffragettes, the populists and workers of another era, or the Civil Rights movement of our time, gathers force until the powers-that-be can no longer sustain the inequality, the injustice and yes, the immorality of winner-take-all politics.

You can watch the entire episode online at Bill Moyers and Company web site along with other great web articles.

Welcome back, Mr. Moyers!

Sunday, January 1, 2012

International Year of Cooperatives

New Year’s Day usually brings hopes of good times to come. On a personal level, we make resolutions with promises of changes we plan to improve ourselves. We also can’t help but wonder what might 2012 bring to society as a whole.

In October of last year, the United Nations declared 2012 to be "The International Year of Cooperatives."

The President of the General Assembly Nassir Abdulaziz Al-Nasser correctly explained, "By virtue of their organizational characteristics, cooperative enterprises are user-owned and community responsive. They continue to aggregate economic power enabling communities to compete successfully in the global economy."

Deputy Secretary-General Asha-Rose Migiro also stated, "As self-help organizations, cooperatives are inherently people-centered. They not only meet material needs, but also the human need to participate proactively in improving one's life. Moreover, with democratic decision-making processes and a focus on cultivating member skills and capacities, cooperatives offer a model for harnessing the energies and passions of all."

Has the UN given us a preview of what 2012 might bring?