journalist, former judge, author-Patriot Acts
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Capitalists of America -- Unite! (Why Adam Smith would be marching today)
"That's my rallying cry for the protestors on Wall Street, for the millions of citizens who are unemployed, for the anti-government Tea Partiers and for the nation's small business owners and entrepreneurs. It is time to expose the imposters and reclaim capitalism for the American people.
Today, Adam Smith's Wealth of Nations is considered a Bible for capitalism, but when published in 1776, it was a blasphemous challenge to the big business, big government mercantilism in Europe. Smith's free market theories expanded economic opportunity, promoted competition and encouraged innovation, in large part, by attacking the "concentrated wealth and power" of Britain's commercial elite.
More than taxation without representation, it was the corrupt British economic system that ignited the American Revolution -- just read the entire Declaration of Independence. This insidious corruption was a major focus of Smith's economic treatise. Smith's theories dovetailed beautifully with Thomas Jefferson's political manifesto, and his writings became the framework for our capitalist philosophy. But as both men learned in their lifetime, theory and practice are rarely in sync.
In a Faustian bargain, our leaders pay homage to Smith's ideals, but from the outset, they have ignored his model in favor of rapid national expansion and global economic power. What we call capitalism is, in fact, the American version of mercantilism. Ludwig von Mises, a libertarian economist, summed up its benefits rather nicely: "Capitalism gave the world what it needed, a higher standard of living for a growing population." Measured thusly, the results have been breathtakingly successful, but if the goal is the long-term viability of our economic and political democracy, we are in serious trouble.
Just as Jeffersonian democracy operates best on a small scale, Adam Smith believed his self-correcting free markets were ideal for small businesses in a domestic economy. Integrated in their communities, these businesses would be influenced directly by the needs and demands of consumers, and any dangerous or abusive conduct would rarely affect the broader economy. But Smith treated large, powerful companies very differently. He said big business was led by "an order of men...that generally have an interest to deceive and even to oppress the public", and he referred to powerful corporations (then known as joint stock companies) as "unaccountable sovereigns" that were as dangerous to free markets as tyrannical governments. Unrestrained, they had the power to shape society and governments for their own purposes, and consumers would pay for "all the extraordinary profits" while suffering from "all the extraordinary waste", the inherent fraud and abuse, that accompanies such immense economic power.
Smith stated emphatically that a strong government, acting through democratic and legal institutions, was the only entity capable of challenging such corporate power. Smith supported necessary government regulations, labor and human rights, public education, and progressive taxation to ease the economic and social inequities he knew would occur in a capitalist system. Without these "liberal" measures, social and political unrest would threaten a nation's stability and his free market economy could not survive.
While Thomas Jefferson applauded Smith's theories, the 'father of American conservatism', Alexander Hamilton, denounced this philosophy as nonsense. Hamilton intended to establish America as a global powerhouse in short order. He was thinking big and didn't have time for Smith's small-scale, go-slow approach. Britain's mercantile system was elitist and abusive, but Hamilton knew it was the engine that drove England's powerful economy. As Secretary of the Treasury, he planned to use that very system to propel America onto the world stage.
Both his plan and its execution were brilliant. Hamilton set out to consolidate power in the new federal government by controlling the money supply, tariffs and trade and by managing the nation's industrial development. Farmers and shopkeepers couldn't provide the revenue he needed, nor could they finance the commercial development and infrastructure necessary for America to play in the big leagues. Hamilton needed big money and powerful partners in the private sector.
To accomplish this, he used the courts and Federalist Congress to institutionalize a powerful federal government and corporatist economy, a practice continued by his successors. The myth that corporations are somehow "persons" and equivalent to the human beings Adam Smith was liberating in his free market utopia is possibly the most successful coup in the history of the world, achieved with the stroke of a judicial pen in 1886.
Despite warnings by prescient Republican presidents like Abraham Lincoln, Teddy Roosevelt and Dwight Eisenhower, the American system has morphed quite predictably into a dog-eat-dog economic Darwinism, and the big canines have rigged the game in their favor.
Flying the capitalist flag, the really big guys have completely corrupted Smith's free market philosophy. They use their concentrated wealth and power to buy off politicians, skate around regulations, abuse their privileges and sometimes, break the laws to win. When their politicians and corporate-sponsored "citizen" groups insist that small government and the market itself are sufficient checks, that further controls are a socialist plot to destroy capitalism, they are counting on our collective naiveté to win the game. They are destroying free enterprise by abusing the very freedoms intrinsic to a market economy.
That so many conservatives, adamant that they are defending true capitalism, would fail to make this distinction, gives credence to the power of the "big lie." They have so internalized this nonsense, that again and again, they are willing to defend transnational behemoths over the well-being of the American economy.
As one (somewhat mysterious) financial trader said in a BBC TV interview last week, a crashing economy is a brilliant opportunity for savvy insiders to make a killing. The economic well-being of a nation or its citizens is not a major factor in the world of transnational commerce. Predicting that the economic crisis will deepen, he summed up his message with a smile -- governments don't rule the world, Goldman Sachs rules the world.
For true American patriots who believe in a vibrant free market economy, it is time to recognize we've been sold a bill of goods. The real enemy in the battle for American capitalism is not socialism; it is global corporatism. For true patriots, conservatives and liberals alike, the stakes could not be higher.
My new book, Patriot Acts -- What Americans Must Do to Save the Republic, examines the true nature of our constitutional system, how it has been interpreted and manipulated by conservatives and liberals since 1789, the effect of partisan ideology on this democratic system, including the economy, national security, health care, education and immigration, and how modern politicians betray the founding principles, constitutional system and economic capitalism that all Americans, left and right, profess to defend. Patriot Acts can be preordered on-line and will be released on November 1, 2011."