Adam Smith Hated Corporations

A lot of supposedly free-market economists revere Adam Smith as one of the foremost proponents of free enterprise. Ironically, these same economists advocate corporate libertarianism, which ultimately allows powerful corporations, through special governmental favors, to make a mockery of the ability of people to freely exchange money, goods, and services. Adam Smith hated what corporations had become in 18th-century England. Today--at best--it's no better.

In today's world, money has become for most the sole measure of market value--civic, social, and environmental responsibility be damned. Without any sense of irony, today's self-proclaimed free marketeers argue that free markets should be completely unrestrained by government. Corporate law is their prominent blind spot, because, as these "economists" apparently haven't noticed, it is government regulation in favor of corporations that has allowed corporations to become 8- and 900-pound gorillas that are slowly choking out their competition. Meanwhile, the rich get richer.

This is not a problem unique to the 21st century.

Without any sense of irony, today's self-proclaimed free marketeers argue that free markets should be completely unrestrained by government. Corporate law is their prominent blind spot, because, as these "economists" apparently haven't noticed, it is government regulation in favor of corporations that has allowed corporations to become 8- and 900-pound gorillas that slowly squash all competition.

Adam Smith recognized corporations in his day for exactly what they are now--charters granted by government that ultimately cause the limitation of competition and the concentration of wealth into the hands of small groups of people. Smith termed corporations as "monopolies granted" by government "that has the same effect as a [trade] secret [which kept] the market constantly understocked." When markets are constantly understocked, products can be sold at prices far above their natural level. Which is not an advantage to the poor, by the way.

It is to prevent this reduction in price, and consequently the...profit, by restraining that free competition which would most certainly occasion it, that all corporations and [corresponding] laws have been established.

Corporation laws enable [corporations] to raise their prices without fearing to be undersold by the free competition of their own countrymen.

Or, as in the case of such paragons of free enterprise as Wal-Mart, it enables them to run their competition out of business first.

...the clamor and sophistry of merchants...easily persuade [governments] that the private interest of a part is...is the general interest of the whole.

Even if a large portion of that corporation's employees can't make ends meet without government assistance. With sophistication far beyond anything that George Orwell imagined in his book 1984, modern

With sophistication far beyond anything that George Orwell imagined in his book 1984, modern television commercials have somehow convinced far more than just governments that private corporate interest is the same as the general interest.

television commercials have somehow convinced far more than just governments that private corporate interest is the same as the general interest. Meanwhile, corporations continue to squash out their competition with greater and greater rates of success. And the rich get richer.

Smith warned that

People of the same trade seldom meet together,...but the conversation ends in a conspiracy against the public.

Which makes me wonder if a "War on K-Street" might not be much more productive than a War on Terror.

Restricted trade causes an agglomeration of companies (and workers) into bigger and bigger cities with bigger and bigger differences between the haves and the have nots, and with the bigger and bigger problems that come with the squeeze of city living. On the other hand, Smith teaches, that, through elimination of unfair governmental advantages to corporations, the

...lowering of profit in the [city] forces out stock to the country, whereby creating a new demand for country labor, it necessarily raises wages.

Corporations are all about maximizing personal wealth through blackmail and the obtaining of special favors, whereas true free enterprise (the free enterprise advocated by Adam Smith) involves service to fellowman in such a way that "all boats" are raised more or less together.

Today, corporations have the ability to uproot and move full operations on a whim and take them elsewhere, and, because of their limited liability, they don't suffer any penalties for the damage they caused to the social fabric they just tore apart, nor are they penalized for the destructive conditions in which their new employees work--employees in actuality nothing more than serfs who are never quite able to rise above the threshold required to actually get their own "piece of the pie". And the rich get richer.

...by restraining the competition...to a smaller number than would otherwise be disposed to enter into [various fields of labor], occasions a very important inequality.

Nearly one-third of all "market" transactions these days are in-house transactions--in other words, one-third of all goods and services are traded within the confines of individual companies. It's a fine way for the rich to get richer, but it does very little to help those who really need it.

Is it free enterprise when corporations give their CEO's

A "War on K-Street" might be much more productive than a War on Terror.

multi-million dollar salaries even when the company didn't make a profit? Adam Smith didn't think so, yet many economists who reverence Mr. Smith conveniently forget that he abhorred the advantages that had accreted to corporations. Corporate advantages are eerily similar today, except, as far as I know, they never received multi-billion-dollar bailouts. Adam Smith reached the conclusion that

The pretense that corporations are necessary for better government of the trade is without any foundation.

Hear, hear!

Smith talked disapprovingly of trade monopolies that were granted such organizations as the East India company.

The exclusive privileges of the East India companies...which these have procured them from their respective governments, have excited much envy against them. ...great quantities of silver [are] every year export[ed] from these countries...

In a very similar way today, the International Monetary Fund helps western multi-national companies to drain the economies of the countries that they purport to help. And the rich get richer.

I used to think that the rich were getting richer at no expense to the poor and through no fraud on their own part. I've come to discover that that's not true in a multitude of cases. I've also come to discover that those who support the distinct and unfair advantages that large corporations have in today's world had better stop quoting Adam Smith.

Because they would be lying.