He isn’t a candidate. He isn’t even alive.
But America is going to be a
lot worse off without him.
Adam Smith (1723-1790) founded the discipline of economics, discovered the way economies work, showed how free enterprise creates prosperity, and wrote The Wealth of Nations.
If the message of that masterwork had to be distilled into one sentence it would be, “Free trade is good.”
Actually, the sentence would be more forceful than that:
“Free trade is absolutely vital to every aspect of human existence, otherwise your life would be a living hell, but not for long, because you’d die.”
As Smith puts it, “…without the disposition to truck, barter, and exchange, every man must have procured to himself every necessary and conveniency of life which he wanted.”
In other words, you’d have to get up in the morning to roast and grind the coffee beans from the coffee bush you grew, build a car from scratch, drill for and refine crude oil to fill the gas tank, pave a road to your office, construct an office building, make some microchips from sand and copper wire from naturally occurring copper nuggets, create a computer, send a carrier pigeon (having first bred them) to Al Gore asking him to come over and help invent the Internet, and then log onto Google News – only to discover that everyone else on earth was dead from exhaustion, exposure, and starvation.
And no American political candidate or sitting politician (with the possible exception of Rand Paul) has read The Wealth of Nations.
They wouldn’t read it if they could. America’s politicians are not only ignorant of the basic principles of economics, they are willfully so.
The current frenzy of populism gripping America means that every politician must bow to constituents who feel they’re getting ripped off – by big business, by international trade, by the free market.
We are in the Age of Grievance against all institutions, even the institution that is the most fundamental to our well-being and liberty: The marketplace.
No one is in a mood to recognize the enormous mutual benefits that arise from “truck, barter, and exchange” in that marketplace.
No one is in a mood to recognize any mutual benefits. The message of modern populism is that nothing’s popular. Everybody is mad at everything. Everybody’s mad at everybody else. Everybody’s motto is “Me First.” Everybody’s looking for a way to say, “F**k you, Jack. I’m all right.”
Elizabeth Warren Democrats hate domestic free markets. If it succeeds, tax it. If it grows, regulate it. If it fails, subsidize it. With Obamacare, the Democrats have destroyed the health insurance market. What’s next on their agenda? That triumph of the unfettered free market, the Internet. Democrats want to turn the Internet into a public utility – as reliable as the Puerto Rican power grid.
Donald Trump Republicans hate international free trade. They want to “bring manufacturing jobs back home where they belong,” and “take back those jobs China is stealing,” and so forth.
Abolishing international free trade won’t make America better – it will just make America more expensive. Almost everything we buy will cost more. And foreign economies will be destroyed.
We’ll be broke. They’ll be poor. How is this a recipe for more jobs with better pay?
In The Wealth of Nations, Adam Smith made the argument (never to be refuted) that what creates wealth is pursuit of self-interest, division of labor, and freedom of trade.
Any interference – domestic or international – with these economic fundamentals destroys wealth creation. The Democrats and the Republicans want to interfere with all three.
In economics, “Mercantilist” is the term for this kind of thinking (or lack thereof).
Mercantilism is the idea that a country gets rich by exporting more goods and services than it imports.
That would be true if a country were a lemonade stand. Or if money were a good or a service instead of a measure of the ever-changing value of goods and services.
Under Mercantilism, a government erects Trade Barriers to keep a country’s citizens from getting the things they want from overseas. It also creates Trade Incentives to get a country’s citizens to send the things they make to foreigners. The end result is a Trade Surplus, and the country accumulates a bunch of money.
Never mind that when people go to buy goods and services, they find the goods and services have all been exported and the money is worthless.
Mercantilism was the dominant economic policy in the 17th century, when world leaders were (as they are becoming again) completely ignorant about economics.
The main reason Adam Smith wrote The Wealth of Nations was to show that Mercantilism is stupid.
Mercantilism confuses money with wealth.
As Smith put it, “Goods can serve many other purposes besides purchasing money, but money can serve no other purpose besides purchasing goods.”
There’s a wonderful passage about the nature of money in Book IV, Chapter I of The Wealth of Nations. I quote it in slightly abridged form.
After the discovery of America, the first inquiry of the Spaniards used to be whether there was any gold or silver to be found in the neighborhood.
Likewise, Friar Carpino, a monk sent as ambassador from the king of France to the court of Genghis Khan, said that the Tartars frequently asked him if there were many sheep and cows in France.
The object of the two questions was the same. The Spanish and the Tartars both wanted to know if a country was rich enough to be worth conquering.
Among the Tartars cattle are the instruments of commerce and the measure of value. Wealth therefore consists of cattle as far as the Tartars are concerned. And wealth consists of silver and gold as far as the Spanish are concerned.
Of the two, the Tartar notion, perhaps, is nearest to the truth.
I don’t expect that our 2018 congressional candidates will abandon their populist Mercantilism. But, if any of them is tempted to let an intelligent thought enter his or her head, maybe the meaning of what Adam Smith had to say about free trade can be gotten across in the form of a parable:
The Parable of Japan in the 1980s
In the 1980s, American politicians, policy-makers, and pundits were alarmed about America’s trade deficit with Japan.
The Japanese kept giving us radios, TVs, stereos, and cars. In return, we kept giving them little green pieces of paper.
The Japanese were Mercantilists. They refused to buy anything America made except Michael Jackson audio cassettes. And Americans didn’t even make the valuable part of those – the cassette. This left the Japanese with a very large accumulation of little green pieces of paper.
According to Mercantilist theory, this made Japan a rich and powerful nation.
Japan thought it was such a rich and powerful nation that, instead of buying things from America, the Japanese decided to buy America itself using their little green pieces of paper.
They bought office complexes, golf courses, and hotels. They bought Rockefeller Center. They bought Pebble Beach.
The Japanese bid up the price of American real estate until the bubble did what bubbles do.
By the 1990s America had all the radios, TVs, stereos, and cars. And all the office complexes, golf courses, and hotels. America had Rockefeller Center. America had Pebble Beach. And America had all the little green pieces of paper too.
Meanwhile, the Japanese had stuck their economy in a place where the Rising Sun never shines.