Patron Saint of Free Enterprise

Adam Smith: Wealth of Nations

  • Influenced by teacher Francis Hutcheson and idea “greatest happiness of the greatest number” (utilitarianism?)
  • Discussed book with Ben Franklin prior to publication (what kind of influence could this have on Smith?)
  • General thesis likened to Niccolo Machiavelli: every human being is motivated primarily by self-interest. A desire for wealth is only one of the manifestations. Selfish impulses and incentives are the background of all mankind’s activities. Furthermore, than finding this aspect of human behavior objectionable and undesirable, Smith believed that the selfishness of the individual is conducive to society’s welfare.
  • Modern industry is made possible by the division of labor and the accumulation of capital—both of which are explained by self-interest, or the “natural order”.
  • A “divine hand” [invisible hand?] leads man so that, in working for his own gain he is contributing to the good of the whole.
  • There should be a minimum of government interference with the economic order.
  • Remember: Thomas Paine argued the best government is the government that governs least.
  • Smith sympathizes with the lowly worker: (1)“Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable…” (hmm this sounds like Abbe Sieyes borrowed some of this for his “What is the Third Estate?”). (2)Anti-apprentice laws and guild restrictions. “Apprenticeship regulations where an unfair interference with the workman’s right to contract for his own services, to choose his own occupation, and to transfer from a low-wage to a high-wage job”
  • Advice regarding slavery: “A person who can acquire no property, can have no other interest but to eat as much, and to labour as little as possible. Whatever work he does beyond what is sufficient to purchase his own maintenance, can be squeezed out of him by violence only, and not by any interest of his own.”
  • Condemned restrictions on colonies: To achieve monopolies of their trade as violations of the colonies’ “natural rights.” There would be a continual financial drain on the colonizing power for the colonies would never willingly tax themselves sufficiently to pay the expense of their own defense.
  • Principles of laissez-faire: Only through unrestricted domestic and foreign commerce could the nation achieve full development and prosperity.
  • Some limits or exceptions to “free trade”:(1)Industry that is necessary for the defense of the country should be more important than opulence. (2)Some tariff protection for ‘infant industries’ would enable them to develop more rapidly. (3)Tariff reductions should be made “slowly, gradually, and after a very long warning,” in order to protect plant investments in industries not capable of meeting foreign competition, and to provide time for workers to seek new jobs”.
  • Suitable functions for government: Warding off foreign attack and administering justice; Engage in “erecting and maintaining certain public works and certain public institutions” such as the upkeep of the highways, lighting the streets of cities, and water supplies; called for public education as “A man without the proper use of the intellectual faculties of a man, is, if possible, more contemptible than even a coward and seems to be mutilated and deformed in a still more essential part of the character of human nature.”
  • Saw little need for “insidious and crafty animal vulgarly called the statesman or politician”.

Too Many Mouths

Thomas Malthus: An Essay on the Principle of Population

  • Considered a contemporary of Adam Smith and Thomas Paine though considerably their junior
  • Initially searched for the nature and causes of poverty
  • Basic assumptions: (1) Food is necessary to the existence of man; (2) The passion between the sexes is necessary and will remain nearly in its present state.
  • Principle: “…that the power of population is indefinitely greater than the power in the earth to produce subsistence for man. Population, when unchecked, increases in a geometrical ratio. Subsistence increases only in an arithmetical ratio. A slight acquaintance with numbers will show the immensity of the first power in comparison to the second.”
  • There must be constant checks upon the growth of population: (1) Scarcity of food is the most drastic check; (2) Immediate checks -- unwholesome occupations, severe labor, extreme poverty, diseases, bad nursing of children, great cities, plagues, and family; (3) Preventive checks – Moral restraint
  • If humans are going to enjoy the greatest possible happiness (hmmm utilitarianism) they should not assume family obligations unless they could afford them. Therefore…Those without adequate means to support a family should remain celibate (particularly high school students, hint hint hint). Thus public policy like the poor laws should be avoid encouraging the laboring class and others to bring into the world children whom they could not support [anti-welfare state]
  • Charity, private or governmental, was undesirable because it gave money to the poor without increasing the amount of food available, thereby raising prices and creating shortages…The sole means of escape from this grim dilemma was delayed marriage with ‘moral restraint’”.
  • Prevention of a rapid birth rate was practiced increasingly by nations as they became more civilized [sounds like Social Darwinism before there was Social Darwinism] and better educated, and as they acquired higher living standards.
  • His Essay caused the English government to take a census of population in 1801, the first of any consequence since the coming of the Armada.
  • Also, the Essay influenced modification by the government to the Poor Laws to avoid some of the mistakes pointed out by Malthus”.
  • Birth control: A major factor in the population problem since the mid-nineteenth century has been the increasing acceptance of contraceptive techniques, bringing about planned limitations of families except among those lacking knowledge or who are deterred by religious scruples = Neo-Malthusianism. Malthus rejected and condemned contraception [though this was the typical belief in his time]