Revisiting Adam Smith... and surprising trends in modern capitalism

For a decade I have been urging that we need to revive a conversation about Adam Smith, who was anything but the promoter of ruthless laissez-faire that today’s right proclaims. In the last year or so, especially on sites like Evonomics, ever-more economists and scholars have been gathering around this idea -- showing how Smith understood essentials – e.g. that aristocracy and oligarchy have always been the great enemies of open and creative markets. Now an academic work parses Smith in detail, showing that this Founder of our western enlightenment experiment was not values-averse or even values-neutral in his descriptions of healthy capitalism. See: Will the Real A. Smith Please Stand Up, by Matthias P. Huhn and Claus Dierksmeier in the Journal of Business Ethics.

This re-examination of Smith is long overdue. And our era’s oligarchs need this tonic more than anyone. For if they fail to understand the real Adam Smith – along with the moderate, benign Rooseveltean reset that made markets fair and productive for a generation – then they risk seeing another pair of names rising louder in our percept. Marx and Robespierre.

Among those rediscovering Smith, take this article from Evonomics: “Market Capitalism is Broken: Why Adam Smith Would be Outraged by Modern Finance,” interviewing CNN global economics correspondent Rana Foroohar about her book: Makers and Takers: The Rise of Finance and the Fall of American Business. 

Today Adam Smith would clearly be a democrat. No social-darwinist or laissez-faire fool, Smith reminds us that competition that is unregulated is always, always spoiled by cheaters. (The party of cheaters has no right to sully his name by even speaking it.) 

Republicans: study about Smith. See why capitalism and market enterprise – which generated our vast wealth – are top victims of the monstrous oligarchs who have hijacked your movement. 

Libertarians: relearn that ‘competition’ should be your keyword and not slavish propertarianism!  As for bureaucrats, while dangerous (I freely admit!) they have never ever been as awful enemies of freedom as feudal oligarchs were. And are.

More? Smith was the First Liberal! You are right that the flagrant-horrid surge of cheating must be stopped... but accept also that enterprise and competitive markets made the wealth that enabled us to do so much for people. Democratic administrations always (always!) do better with the economy.  Learn to brag about that.

Oh, as part of this huge trend... just released: Who Cooked Adam Smith's Dinner? Swedish journalist Katrine Marçal looks at women's often overlooked ‘invisible hand’ in the economy. She aptly deals not only with matters of justice but economic contradictions.  Like why does the GDP go down when an industrialist marries his housekeeper? See it reviewed in The New Republic. 

== Modern Banking ==

In 2015 IBM joined Intel, Cisco, the London Stock Exchange Group, JP Morgan, Wells Fargo, and others to form Hyperledger,an open source, blockchain-based project inspired by Bitcoin that the companies hope will one day provide a more secure and reliable way of trading stocks and other assets.

Goldman Sachs is entering retail consumer banking by letting even poor folks with just $1 open small accounts that will not (they say) be bled to death with nickel and dime charges. You can open a 401(k) even if you have credit card debt. Quite a shift for a 147 year old investment house known for catering to oligarchs. And at first sight there are potential benefits to Goldman (new customers and a better public image?) as well as the nation. Indeed, helping the poor to get clean bank accounts where they can cash their pay and evade the payday loan parasite industry is a goal that’s getting a lot of attention. 

Which is in part a reason to view this cynically. Goldman machers know that it’s likely that the next president and Congress will pay much closer heed to this problem.  There is talk of restoring the Post Office’s former ability to serve as a last resort bank of basic needs – like depositing social security checks and paychecks -- the way it did for many years, and most European and Japanese postal offices still do.  Combine this with ATM access and autopayments, and much of the tension would go out of life for those folks. (Throw in more education in schools about simple financial wisdom and debt avoidance.)

The crux? These guys at Goldman are clever. Seeing that writing on the wall, they are moving on an opportunity and perhaps may limit the extent of Democratic banking reforms.

Oh, and now this. Should you even use paper checks, anymore? Or give others your bank account and routing number? Even though it moves much more money than all of the credit card companies combined, the system the U.S. uses to transfer cash in and out of bank accounts – the Automated Clearing House, or ACH – is in many ways less secure than the credit card system.

== Do nothing Congress ==

Let's not mince words. The last five GOP-led Congresses were packs of lazy-worthless do-nothings, who did not even strive to advance any conservative agendas. (Other than trillion$ wars and ripoffs of the middle class.) Well, they do one other thing well.  Sabotage governance. Doing everything in their power to make “inferior government service” a self-fulfilled prophecy.

“In fiscal terms, there's no earthly reason for Congress to be stingy with Social Security's administrative budget. The money comes out of workers' payroll taxes and the system's other revenue, not from the general treasury. The Social Security Administration is one of the government’s most efficient agencies, with a core administrative budget of 0.7% of benefits.” -- writes Michael Hiltzik  in the Los Angeles Times. 

Number one on the goppers’ hit list, the IRS. Since no one will step up and defend that agency, despite it being absolutely essential that the nerdy accountants do their jobs well.  The chief beneficiaries of slashes in the IRS budget? Top 0.001 percenters. Of course.

The latest figures on developed economies show the United States is in far better shape than other countries. Of course the American consumer has hauled the world out of four big recessions (arguably six). But the fact that we are doing so again, after the calamitously huge one of 2007, speaks well for the vigor and dynamism of Americans… and poorly for all the cynics who keep moaning and spewing pessimism.

"Output has surpassed its pre-crisis peak by 10 percent, robust private-sector employment gains have sharply reduced unemployment, and fiscal sustainability has been largely restored,” reports Marilyn Geewax on NPR News. The upbeat assessment of the U.S. economy included these points: the unemployment rate of 4.7 percent is back to pre-recession levels; the gender wage gap is at a record low; inflation is down; the financial sector is more stable; and more people have health care insurance. Oh and although governments and corporations (especially the latter) have added debt, middle class Americans have continued to de-leverage. Household debt burdens have gone down.

(See how the infamous US federal deficit accelerates or decelerates with almost perfect correlation to which party occupies the White House.)

But the study also concluded many problems have worsened: income inequality has widened; gains in educational performance have slowed; entrepreneurship is down; productivity is declining; and public infrastructure spending is inadequate.  (Fault for the latter is clear: had the GOP Congress not blocked infrastructure bills, our recovery would have been much stronger and faster… which is of course why they blocked infrastructure spending.  Remember who to blame as 14,000 bridges teeter and corrode.)