Adam Smith: Rethinking Capitalism
In current societal and political discourse, the word ‘Capitalism’ has become taboo. A word you might try using for small talk at a party, soon to find out it had the makings for a never-ending fight. Nice, you just ruined a perfectly good evening!
But, maybe we can reopen our dialogue about improving our capitalist economy. Allow ourselves to use the word ‘Capitalism’ proudly again. To help with this journey let’s turn to Mr. Capitalist himself: Adam Smith.
Specialized and Efficient Economy
Objectors to our capitalist economy point towards increased wage disparities between the rich and poor, the feeling of despair by being a cog in the capitalist machine, and not seeing their individual contribution valued.
See, Smith recognized a positive consequence of Capitalism: that it creates highly specialized job positions that create an efficient system for economic growth and prosperity. This perpetual growth and success push an economy utilizing this system to one of the richest in the world.
However, Smith recognized a potential danger in this economic system focussed on efficiency; he saw that the individual would begin to feel like just a part of the capitalist machine, they would lose sight of their purpose, they would lose sight of meaning in their life.
Interestingly, Smith’s insight from centuries ago has come to fruition. Modern, Capitalist economies are thriving, creating vasts amounts of wealth, and creating prosperity for individuals within the system. But there’s a downfall, a company in that system could often have thousands of employees — each with different work specializations. At first glance, this might not seem like an issue, yet it leads to workers wondering their place in the company––wondering if their work holds any meaning.
The Responsibility of Owners
In today’s economic system, many regular everyday workers find their work boring — and meaningless. Fortunately, Smith had an answer to this problem, that it’s up to the bosses, leaders, CEOs, and managers of those workers in specialized fields to remind their workers of the importance of their work.
The feeling of meaninglessness in the workers’ jobs shapes the individual’s mindset about the evil big bad corporation. They become the target for low-paying jobs, environmental issues, and workplace conditions. But Adam Smith understood something else, it’s up to the individual consumers within society to keep these corporations in check.
You see, those corporations are merely serving the interest of the consumer — they are feeding our appetites. It’s up to the consumer to buy higher quality things, demand proper pricing, and advocate for a working environment that maintains a sense of meaning. This mutual understanding can maintain a healthy capitalist system while keeping those looking to take advantage of discontent on the sideline.
As Capitalism deals with supply and demand, the consumer needs to remember to demand quality. We can do this by inserting our values into the system itself.
Can the Government Save Us?
Ahh, but you might be thinking the best extension of the demands of the people comes from the government. Well, this makes for a vital misunderstanding of Adam Smith. You see, for him, the beauty of Capitalism comes from allowing the individual the freedom to pursue his or her own self-interests — the consequence of this allowance becomes a system of efficient production and prosperity.
Governments, politicians act like the kings and queens of old in the eyes of Smith. They too are beholden to their human instinct of self-interest, except, unlike the everyday individual they have the system of law on their side — a power structure ready to boil over with corruption.
Smith recognized this issue of state-based economic structures, much of his criticisms were laid at the feet of Mercantilism, which utilized state organized financial planning for the creation of prosperity. It often became manufacturers and merchants who became favored by state officials and leaders who gained a dominating portion of the market. Leaving the individual at the hands of those in power: leading to economic hardship, unhappiness, and an unstable economy.
“Commerce, which ought to naturally to be, among nations, as among individuals, a bond of union and friendship, has become the most fertile source of discord and animosity. The capricious ambition of kings and ministers has not, during the present and the preceding century, been more fatal to the repose of Europe, than the impertinent jealousy of merchants and manufacturers.”
“The violence and injustice of the rulers of mankind is an ancient evil, for which I am afraid, the nature of human affairs can scarcely admit of a remedy. But the mean rapacity, the monopolizing spirit of merchants and manufacturers, who neither are nor ought to be, the rulers of mankind, though it cannot perhaps be corrected, may very easily be prevented from disturbing the tranquility of anybody but themselves.”––Adam Smith
We must be reminded of the warning signs in history when looking to the power structures of government to create change.
“The natural effort of every individual to better his own conditions, when suffered to exert itself with freedom and security, is so powerful a principle, that it is alone, and without assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often encumbers its operations.”––Adam Smith
For Smith, he held a sense of pessimism about the economic structures of Capitalism maintaining a holding. He understood the difficulty in educating the public — and keeping that education — in the understanding of market mechanisms.
Special Interest
Smith realized the persuasive power of those with special interest already in power. Those members of society who would — and still do — look to government to maintain their suffocating hold of the market. Tricking the public and buying off public officials to preserve the privileges, favors, and regulations that keep their grasp of the market.
“Not only the prejudices of the public but what is much more unconquerable, the private interests of many individuals, irresistibly oppose it . . .The member of parliament who supports every proposal for strengthening this monopoly, is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance.”
“If he opposes them, on the contrary, and still more if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public service, can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes real danger, arising from the insolent outrage of furious and disappointed monopolies.” ––Adam Smith
Takeaway
We should pay mind to systems and structures in society that can truly empower the individual. Ask yourself, do we need a complete overhaul of our capitalist system? Or do we merely need to re-educate ourselves?
We cannot allow ourselves to fall back into the abusive power structures of old. We cannot let ourselves to so quickly give up control to those with their own self-interest — looking to take advantage of the individual through oppressive power. We must reconsider allowing the individual the freedom to use their knowledge and abilities to best benefit themselves and society as a whole.
