Adam Smith today...

I wanted to keep my thoughts going with the current ongoing ideas, however, I needed to inject a bit today due to the current economic situation.

I wanted to dive into a few thoughts from Adam Smith, and his landmark book "Wealth of Nations", Book V, Ch.2, Of the Sources of the General or Public Revenue of the Society...

V.2.8

No two characters seem more inconsistent than those of trader and sovereign. If the trading spirit of the English East India Company renders them very bad sovereigns, the spirit of sovereignty seems to have rendered them equally bad traders. While they were traders only they managed their trade successfully, and were able to pay from their profits a moderate dividend to the proprietors of their stock. Since they became sovereigns, with a revenue which, it is said, was originally more than three millions sterling, they have been obliged to beg extraordinary assistance of government in order to avoid immediate bankruptcy. In their former situation, their servants in India considered themselves as the clerks of merchants: in their present situation, those servants consider themselves as the ministers of sovereigns.


V.2.9

A state may sometimes derive some part of its public revenue from the interest of money, as well as from the profits of stock. If it has amassed a treasure, it may lend a part of that treasure either to foreign states, or to its own subjects.


This seems to me to ring so true to today, just as it did then. Since this first publication back in 1776, I guess it shows that we have(?) come a long way as we look at our current state of affairs and the current band-aids that have plagued the American taxpayer in order to bailout the corporations. This shows us just how important it truly is for this current campaign and the result as to how and who should be running this country for the future. Do to the nature of our economic crisis, as well as, the global economic fallout and the necessary reparations to the perceptions of the world populace to our country this next leader is going to be pivotal to the future global political landscape for generations to come.

Let's look at the relevance to Smith's writings and today's economic crisis.

Recently, we have bailed out some of the largest corporations, and Treasury Secretary Paulson has publicly stated that we should make sure these businesses do not fail. There is some who think that Paulson has self interests involved in which companies succeed and which may fail due to some of the narcissistic patterns of funding and oversight thus far.

Perhaps this is the human pattern of self interest. The current Republican welfare state for the rich shows us that the trickle down theory of economics does not work. Smith tells us that the wages of the poor should be high in relation to their position, and he views that a common street porter was not intellectually inferior to a philosopher. In other words, as to the founding fathers, we are all created equal and should have equal rights and opportunities.

This brings me to Paulson's latest move. If we, as the tax payers and funders of the bailouts to the banks, insurance, and mortgage institutions that we have seen take place, we should also be given the voting rights as the stock holders to these firms. We should be given the opportunity to delegate our individual proxy votes for these companies with transparent oversight to these voting processes. This will give the American people the opportunity to truly protect the investment that our government has put our money into, and to maintain that the people that Paulson has placed into power positions are scrutinized and managed appropriately and fairly as with any other corporation. We, as tax payers, are now the major stock holders to these firms. As a Union of voters we should be given these rights and voting powers just as with any other corporate structure.

The interesting thing about this democratic capitalistic management philosophy that has transpired through the Bush administration is that we are riding a fine line to communism and or dictatorship. I use the first volume of Marx's major work, "Capital", which was published in German in 1867, as an example. In it, Marx focused on the labour(sic) theory of value and what he considered to be the exploitation of labour by capital. The labour(sic) theory of value held that the value of a thing was determined by the labor that went into its production. This contrasts with the modern understanding of mainstream economics, that the value of a thing is determined by what one is willing to give up to obtain the thing. Ironically, Smith is often cited for being the conceptual builder of free markets in Capitalism, and also cited as a main contributor to Communist theory, via Marx.

Smith believed that while human motives were often driven by selfishness and greed, the competition in the free market would tend to benefit society as a whole by keeping prices low, while still building in an incentive for a wide variety of goods and services. Nevertheless, he was wary of businessmen and argued against the formation of monopolies.

It seems that his fears have shown their relevance and we are in this global dilemma. AIG is the world's largest insurance firm, and is now quite possibly the world's fourth largest social benefiting program outside of Social Security, and Medicare which are also nearly bankrupt. For the third largest social welfare program we have the Freddie Mac and Fannie Mae bailouts and the new mortgage holding corporation of the United States of America. Then we have the multiple corporations that make up the new social banking system that has recently become part the nations growing stock portfolio program.

The difference to what the current administration has done here is created the sovereign social state policies that Smith discusses. The sovereign continually declare the welfare state as being dis functional until it is time to meet the needs of the sovereign.

An often-quoted passage from The Wealth of Nations is:

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

It is for this reason and this reason alone that there MUST be full transparency and accountability to all actions that are taking place in today's economic crisis. We as the major stockholders to all of these new corporate structures must maintain our position of such and demand that.



(c)Copyright 2008 Doug Boggs