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Tuesday, April 19, 2005

Adam Smith vs Robert Reich

The “invisible hand” should guide all aspects of our social and political activity, moral as well as economic.

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An “invisible hand” maximizes a nation’s economic and social welfare, when individuals are permitted the maximum possible economic liberty and when they are self-restrained by the moral dictates of our Judeo-Christian heritage.  One cannot function effectively without the other.

Adam Smith symbolizes individuality.  Robert Reich, President Clinton’s Labor Secretary, is an articulate advocate of liberal-socialism who symbolizes the opposing doctrine of statist collectivism.  Mr. Reich also has written that Christians are a greater threat to America’s future than Al Queda terrorists.  He appears to be an amiable and decent person, but his beliefs, with respect both to economics and religion are thoroughly reprehensible.

The essential aspect of Mr. Reich’s anti-individualistic, statist collectivism was captured in President Clinton’s opposition to reducing taxes early in his first term, when he said that, if taxes were reduced, the people would just spend the money on the wrong sorts of things.  This instinctive liberal-socialist reaction presumes that only collectivist government can improve people’s lives, therefore anyone advocating lower taxes is an enemy of humanity.

Most readers who know of Adam Smith connect him with his 1776 “Wealth of Nations,” a seminal work extolling the virtues of individual freedom under laissez-faire economic policies.  A nation’s wealth, he wrote, is maximized by facilitating the greatest degree of individual liberty, so that each individual is free to pursue what he calculates will maximize his personal financial gain.

In one of the most famous phrases ever penned, Smith used the term “invisible hand,” which appears in the following text:  “..and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.  Nor is it always the worse for society that it was no part of it.  By pursuing his own interest he frequently promotes that of the society more effectively than when he really intends to promote it.”

What is less known about Adam Smith is that his first calling was that of moral philosopher.  In 1752 he was appointed to the Chair of Moral Philosophy at the University of Glasgow.  Far from condoning unethical economic conduct, Smith assessed businessmen’s conduct by the standards of morality.

In 1759 he published “The Theory of Moral Sentiments,” which was largely based on his lectures at the university.  His teacher had been the famous Francis Hutcheson, who held the Chair of Moral Philosophy from 1730 until 1746. 

Hutcheson is credited with kick-starting the Scottish Renaissance that produced such famous thinkers as David Hume, in addition to Adam Smith.  Another influential product of this period of revival in Scottish philosophical scholarship was the Presbyterian minister John Witherspoon, who emigrated to the colony of New Jersey in 1768, where he became president of what is today Princeton University.  Among his pupils was James Madison, whose views later were so important in the crafting of the Constitution.

Originally, in the 18th century, Adam Smith’s laissez-faire liberalism meant economic and political liberties for individuals, as opposed to tightly regulated government monopolies in fundamental economic activities.  In England it meant, for example, reducing tariffs on imported grain as an inducement for individuals to shift capital funds into import and export trade, while finding new and more productive use for farm lands.  The result was to lower the cost of food and to make more of it available for everyone, including the poor.  The landed aristocracy got lower prices for their agricultural produce, but more people were employed overall, at higher wages, and the wealth and well-being of the nation increased.

Our Judeo-Christian heritage admonishes us both to love the Lord God with all our heart, soul, mind, and strength, and, vitally important, to love others as we want to be loved.  It calls on everyone individually to do his best to deal decently, pleasantly, and honestly with his fellows.  It is the opposite of liberals’ progressive education that teaches future business leaders the moral relativism that says right and wrong are unscientific value judgments.

Those two doctrines of human understanding ? individual economic liberty and individual moral responsibility ? are inseparably intertwined.  Mandating a purely secular society, as liberal-socialists do, is the equivalent of removing an individual’s oxygen and draining his life’s blood.  It is metaphorically to decapitate civilization.

An interesting insight on the close connection between individual economic freedom and the morality of the Golden Rule appeared in Forbes Magazine online.  In Ten Laws Of The Modern World, Rich Karlgaard lists the following:

?Drucker’s Law. Odd as it seems, you will achieve the greatest results in business and career if you drop the word “achievement” from your vocabulary. Replace it with “contribution,” says the great management guru Peter Drucker . Contribution puts the focus where it should be—on your customers, employees and shareholders.

Individuals, not government bureaus, are the key actors in making a good political society.  Economic liberty and personal moral responsibility are two sides of the same coin.  One cannot function effectively without the other. They worked hand-in-hand to create and to sustain the highest and best form of political society that the world ever has experienced: the England and the United States of the 18th and 19th centuries, when individual liberty and personal responsibility were paramount.  Without that liberty and the vast accumulations of wealth it generated, today’s technological marvels would have been unattainable.  Without the restraints of Judeo-Christian morality, law and order could not have survived this period of rapid change, and slavery would still exist.

In hideous, dark contrast, the statist collectivism of Mr. Reich’s liberal-socialism crushes the human spirit and introduces the horrors of totalitarianism and mass slaughter of dissenters.  Intellectual planners cannot possibly acquire and digest all the data about the lives and needs of millions of individuals.  They cannot possibly acquire the knowledge of special circumstances and opportunities that are known only to millions of individuals in millions of individual locations and individual circumstances.  Yet they must make decisions that control the lives and options of all these millions of individuals.

A near-at-hand example of the disastrous results of liberal-socialism was President Johnson’s Great Society, which substituted welfare entitlement for personal responsibility.  The Great Society in the late 1960s and 1970s was the worst period of social and economic disintegration ever suffered by our nation, in overall consequence, far more devastating than the 1930s Great Depression.

According to Nathan Glazer, a prominent member of the New York socialist intellectual community, New York City in the 1960s essentially abandoned its critical role of collecting garbage, policing crime, and building and maintaining roads, bridges, and subways.  Yet public spending by the city tripled, while housing, health care, and education declined in availability and quality.  Most of the increased city spending was absorbed by welfare payments and unemployment compensation.  What also rose, at a spectacular rate, was the number of public employees, particularly in the teachers? union.

Nonetheless, liberal intellectuals like Mr. Reich remain ever confident that individualism and Judeo-Christian morality are enemies of society.  Their confidence in their own sagacity makes them willing to mandate rules and forcibly impose new social-justice programs.  Judicial activism is a preferred method.

Liberal-socialists attack individualism as selfish greed.  Their implicit assumption is that individuals are incapable of making wise choices that will benefit the whole of society.  The further implication is that only socialist intellectuals are capable of doing so.

Encountering passive, or active, resistance, these intellectuals have repeatedly been willing to liquidate dissidents, rationalizing that they are doing it for the benefit of an abstraction called humanity.  American liberals, for example, refused to criticize the Moscow show trials of the 1930s and documented mass murders, because they believed that the success of socialism in Soviet Russia, as a model for the whole world, was more important than the loss of a few million lives.  Soviet Russia, even after public exposure of the KGB’s records, is still lamented by liberals as humanity’s lost hope.

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