THE RECORD

July 14, 1999

Fiat Lux

by Ed Deak

The driving force and justifications behind neo-classical economic theory, known as capitalism, are the distorted teachings of Adam Smith who died in 1790 at the age of 67.

Smith was an economist and a professor of moral philosophy at the University of Glasgow when in 1776 he published a huge book on economic theory, titled: An Inquiry into he Nature and Causes of the Wealth of Nations, now called The Wealth of Nations.

Apart from the writings of Karl Marx and the Bible, I don't think there's another book in human history that had been more distorted, misused and abused than Smith's work.

Now, 223 years later a few of Smith's words and expressions, randomly picked and misquoted are being used by the powers to expropriate, ruin, waste, and virtually murder millions of people, species of animals and the ecology. The most quoted of these words are the justification of self interest, in other words greed, that by the stroke of an "invisible hand" is supposed to create wealth and prosperity to all.

Both of these expressions originate in one short caption in the two volume Wealth of Nations. To clear the picture once and for all, here are Smith's exact words so that readers can decide what he really wrote. Then I shall show how his ideas have been misrepresented by modern economists and corporate bosses.

But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endevours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can.

He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of 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 not part of his intention. Nor is it always the worse for society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he intends to promote it.

I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need to be employed in dissuading them from it.

Now lets' look at the way this caption is being distorted by the chief guru of neo-classical economics and free trade, Milton Friedman in his 1979 book: Free to Choose, the foundation of Reaganomics:

One set of ideas was embodied in The Wealth of Nations, the masterpiece that established the Scotsman Adam Smith as the father of modern economics. It analyzed the way in which a market system could combine the freedom of individuals to pursue their own objectives with the extensive cooperation and collaboration needed in the economic field to produce our food, our clothing, our housing. Adam Smith's key insight was that both parties to an exchange can benefit and that, "so long as cooperation is strictly voluntary", no exchange will take place unless both parties do benefit.

No external force, no coercion, no violation of freedom is necessary to produce cooperation among individuals all of whom benefit. That is why, as Adam Smith put it, an individual who "intends his own gain" is "led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest he frequently promotes that of the society, more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good."

I intend to examine these statements in detail in my next column. In the meantime we can see that Friedman completely ignores Smith's words on the benefits of supporting domestic production and by doing so he changes the meaning of the whole concept to pursue his own ideological ends.

It is a common propaganda gimmick to select out of context quotations from the writings of prominent people so that they can be misused by shyster mind benders. The controllers of our media are making a profession of it to divert attention from the real facts. This is a brutal and despicable form of censorship, not by government, but by special interests.

Copyright (c) 1999, West's International