Sunday, February 12, 2006

Has "The Invisible Hand" Become The Greedy Hand?

Adam Smith was very much aware of the destructive role of power and class on the market economy and is probably turning over in his grave right now as modern day capitalism is dominated by a small number of huge corporations. The irony is that many of our lawmakers today use Adam Smith to support their idea of "corporate welfare".

Smith made it clear that he believed in small, local enterprises. He assumed small-scale, owner-managed firms would invest at home and that the owners who normally share in the community's values and have a personal stake in the future of both the community and the enterprise would make decisions that would benefit society as a whole. He vehemently opposed any form of economic concentration because it "distorts the market's natural ability to establish a price that provides a fair return on land, labor, and capital; to produce a satisfactory outcome for both buyers and sellers; and to optimally allocate society's resources."

"Society may subsist, though not in the most comfortable state, without beneficence; but the prevalence of injustice must utterly destroy it...Justice is the main pillar that upholds the whole edifice.

--Adam Smith

“When, however, we learn that in the time of the Declaration of Independence it was supposed that corporations could never succeed in competition with individual enterprise, it becomes easy to comprehend the failure of ‘the men of 1776’ to guard against present dangers.”

--Ron T. Ely

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