If you are a follower of the great Scottish economist Adam Smith—author of The Wealth of Nations, the Bible for market capitalism—a pilgrimage to his grave site in Canongate Churchyard in Edinburgh is a must. Of late, however, you will find it hard to locate his resting place. Poorly marked and signposted, it has been neglected by the custodians of the Churchyard. But then again, Adam Smith may just be hiding from those who claim his mantle as champions of capitalism.
While Adam Smith had considerable faith in the wisdom of the free market, he was highly suspicious of economic actors, who, in his day, were merchants, traders and manufacturers. Their interests, according to him, were not to promote market competition, which could only mean smaller profits for them. Rather, they were intent on gaining advantage through manipulating the market, creating cartels to control prices or promote regulations that benefited them and them alone.
Adam Smith was particularly concerned with how commercial interests were eager to convince governments to pass legislations that would serve their narrow interests. In Adam Smith’s own words:
The proposal of any new law or regulation of commerce which comes from [merchants and master manufacturers] … ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from 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.
Updating this quote, the “merchants and master manufacturers” are now corporations, and lobbying is now the normal part of doing business in the twenty-first century. What has not changed is that when a corporation succeeds in having a piece of legislation written to its specifications, it often has the effect of oppressing and deceiving the public.
Today, through the power of generous donations to cash-strapped politicians, lobbyists now have a stranglehold on the democratic system, a development that would have greatly distressed Adam Smith.
Whether it is the creation of tax concessions (read: loopholes), subsidies, handouts, or special rules that limit competition, the free market has become anything but “free.” To its credit, the market-oriented Cato Institute attacked corporate welfare, finding that it added $92 billion in the US alone, in which corporations have turned money-politics into an art form.
In the latest example of corporate influence over a legislature, the Stop Online Piracy Act (SOPA) was promoted and virtually written by the big Hollywood studios. In tackling infringements of copyright and other intellectual property, SOPA creates a system in which unsubstantiated allegations can be made against any site, resulting in it being shut down by the US government. What is even scarier is that the very mention of the so-called prohibited site can also result in punitive action. Thus, if I commented on this blog that it was unjust for the US government to shut down a particular site (and I name that site), I, too, can be summarily shut down. This extends the application of US legislation well beyond its borders, offending all principles of natural justice and, in this particular instance, assaulting free speech everywhere in the world.
Legislation like this is now commonplace, and Adam Smith has every reason to bewail the ability of corporations to get their own way with legislators, and in so doing “deceive and even to oppress the public.”