Economic policy in the hands of the few serves those few – just ask Adam
Smith
Although he advocated liberalisation of markets, Adam Smith shared some
key concerns of today's critics of neoliberalism
_David Wearing_ (http://www.guardian.co.uk/profile/david-wearing)
_guardian.co.uk_ (http://www.guardian.co.uk/) , Monday 30 July 2012
Free market economics has taken such a battering of late that one might
almost begin to feel sorry for it. In 2008, a cataclysmic meltdown in the
barely regulated financial industry plunged the world into an economic crisis
from which it has yet to emerge. For Nobel laureate economist Joseph
Stiglitz, "market fundamentalism" _was as discredited_
(http://www.vanityfair.com/politics/features/2009/07/third-world-debt200907)
by this experience as
communism was by the fall of the Berlin Wall. Recent scandals _at Barclays_
(http://www.bbc.co.uk/news/business-18671255) and _HSBC_
(http://www.guardian.co.uk/business/2012/jul/22/hsbc-lord-green-mexico-drugs-cash)
have
merely served to underline the point.
Meanwhile the Conservative party, which derives _half its funding from
big finance_
(http://www.guardian.co.uk/politics/2011/sep/30/city-conservatives-donations) ,
has set about making the public pay for the bankers' crisis,
with disastrous results. "Market fundamentalism" told George Osborne that,
as the dead weight of the public sector was cut away, the thrusting
dynamism of private enterprise, hitherto crowded out by the state, would be
unleashed to create jobs and propel growth. Instead, austerity destroyed
demand,
wiped out the recovery and plunged Britain into a new recession.
"Expansionary fiscal contraction" _proved to be exactly as oxymoronic_
(http://www.telegraph.co.uk/finance/economics/8439865/Britains-deficit-cutting-plans-are-o
xymoronic-says-former-US-Treasury-Secretary-Larry-Summers.html) as it
sounds, _breaking the reputation of the chancellor_
(http://www.guardian.co.uk/politics/2012/jul/28/george-osborne-disaster-will-hutton?newsfeed=true)
barely two years after he entered Downing Street.
So all in all, there's never been a better time to quote Adam Smith,
especially if you're a socialist. Counterintuitive perhaps, but true
nonetheless.
Smith, the 18th century Scottish philosopher, is of course best known for
advocating the liberalisation of markets (arguably necessary at a time when
the punishment for illegal livestock export was to have one's hand cut off
and nailed up in the local marketplace, for a first offence, and the
penalty for a second offence was death). However, what is less well known is
that
Smith shared some of the key concerns of today's critics of neoliberalism.
His most famous work, The Wealth of Nations, offered a powerful political
critique of the "one per cent" of his day, to borrow the terminology of the
Occupy movement. In what he himself described as a "very violent attack"
on an unjust status quo, Smith repeatedly emphasised the role of power,
influence and class in distorting economic policy to serve the interests of a
narrow elite.
Smith noted that the "English legislature has been peculiarly attentive to
the interests of commerce" because policymakers were continually "imposed
upon by the sophistry of merchants". The vested interests "like an
overgrown standing army … have become formidable to the government, and upon
many
occasions intimidate the legislature". They argue their case "with all the
passionate confidence of interested falsehood", predicting national ruin if
their demands are not met. Of course, all this has a _very familiar ring_
(http://www.guardian.co.uk/politics/2012/jul/09/finance-industry-lobbying-bud
get-revealed) .
The politician who serves the one per cent, Smith noted, "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 [he is subjected to] the most infamous
abuse and detraction". One thinks here of the _hysteria_
(http://www.newstatesman.com/blogs/dan-hodges/2011/09/miliband-ground-leader-party)
elicited
by Ed Miliband's mild suggestion in his last party conference speech that
some parts of the capitalist system were working a little less well than
others.
Smith observed that "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". The class power of wealth and big business makes the elite the
"principal architects" of policy, "an order of men, whose interest is never
exactly the same with that of the public, who have generally an interest to
deceive and even to oppress the public, and who accordingly have, upon many
occasions, both deceived and oppressed it". Smith repeatedly stresses that
while the mercantile system does not serve the public interest, it does
benefit the "principal architects" of policy, which is no less true of today's
hyper-financialised, neoliberal capitalism.
This is not to argue that Smith should be automatically deferred to simply
because he is a renowned intellectual figure, but rather that it can be
useful to return to his writings in light of historical experience. We have
learned that it is possible for deregulated markets to fail the public
disastrously. But the larger point is that when power and influence over
policymaking is heavily concentrated within an economic elite, policy will be
designed to serve that elite, often at the public's expense. What Smith can
teach us today is that the question of who decides, and in whose interest, is
crucial to our understanding of how economic policy is made.
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