Misplaced Pages

This is an old revision of this page, as edited by 68.122.43.31 (talk) at 02:28, 21 June 2004. The present address (URL) is a permanent link to this revision, which may differ significantly from the current revision.

From the Ministry of Truth

This is an interesting sentence, and I've seen similar sentiments for two decades:

To Smith, the "well-governed society" is one in which free markets replace state command as the main method of resource allocation. Smith's argument is that increased division of labor (specialization) raises labor productivity. This in turn leads to lower costs, which are passed on to consumers in the form of lower prices (correcting for inflation).

• "replaces state command" - Smith was speaking out against any and all special interests. The state was cited as an example, but not portrayed as the sole nor primary offender. A more accurate view is that Smith saw much corruption. And what corruption existed in the state was a product of all parties benefitting - whether in our out of government.

Nations was written before Das Capital. Therefore the reference to a controlled economy is anachronistic and I believe manipulative. The commerce that Smith witnessed and wrote about was a market economy, the complaint he made was that it was fettered by special interest. The state - which was feudalistic, not communist, by the way - had their fingers in it, but so did many players outside of nobility and royalty. Visualize gangsters paying off police, or a modern day scandal of some sort.

• "well-governed society" - this, and "a tolerable degree of security" are qualifications. They are not central to his themes. For example, the free market economy he describes is wonderful assuming goods aren't stolen in transport.

• "correcting inflation" - costs were unnaturally high, not costs unnaturally rose. Whether or not inflation was a problem on top of an unfair market is a completely separate issue. Stagflation was a political hot button when supply-side economics came about, and to tack on 'inflation' to Smith's work for political points is manipulative - as is citing Smith in the first place. Quite the contrary to this orwellian interpretation, free markets often overheat and are characterized by rapid growth, heavy borrowing and inflation. In fact the Fed is currently keeping its eye on inflation due to very attractive interest rates.