The United States is a living breathing dynamic embodiment of Adam Smith’s works. In his first work, The Theory of Moral Sentiments, Smith explained the benevolent nature of man. In it, he professed that human beings will answer to disaster and the suffering of others by offering compassion and assistance during the worst of times. America’s generosity and benevolence during natural and manmade disasters abroad are a living testament of our American soul. However, this selfless, self sacrificing nature has been strained due to criticism of Americans and the accusations of greed, leading many to question why are we not providing this compassion and aid for our own here in the United States?
Enter “The Wealth of Nations” as the theoretical antithesis to limitless generosity. In his later years Smith came up with the theory that a man in pursuit of his own interests would benefit others. He wrote, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” Businesses offer us the necessities not because they are nice, but because they want to make a living and earn a profit. Yet, we feel that they operate only to serve us as a personal level.
Businesses want to please their consumers at any cost. Commercial advertisements concentrate on pleasing the public, and if the public does not approve of the advertisement or cannot be convinced of the desired effect of the product, that product will not do well in the market. Hence, businesses fail. Businesses seek approval and the public seeks to please. All of this is done without government intervention. This is what Smith envisioned as the market self-regulating itself. In fact, he believed that at the purest form, a free market would self regulate and self correct constantly without any government intrusion. While this was probably true in his day, as mercantilism was the government’s control of foreign trade and the economy, in today’s market, it would not be as effective. The market at present has changed because our communication systems have changed and they have made the market more accessible and instant rather than what Smith had available during his time. The market that Smith described is flawed by present standards, but it was the best alternative, to its predecessor feudalism.
History shows us that a global product from America starts out as a disruption or an innovation to fill a need in the market. When one looks at the entrepreneurial drive of Steve Jobs, Bill Gates, Mark Zuckerburg, Larry Page, Jim McIngvale, and others; they struggled to fulfill their needs and in the process provided thousands of jobs and billions of dollars in tax revenues. When Smith’s theories of Man’s benevolence and his acting in self interest are applied by management and elected officials companies, and economies unleash a wave of innovation and entrepreneurship. A modern example is the internet and the masses of digital entrepreneurs. The web is a near perfect example of free market globalization. Free software created by keen minds wishing to educate others in the operation and the benefit of computers, unleashed a massive playground for businesses and communication forms for the world. Everyone has benefited from the internet, by selling books on Ebay, streaming music, or selling products to those on social forums. This unregulated e-commerce has made millionaires of ordinary people.
The government intrusion in this area has been minimal possibly because the lack of jurisdiction in unknown territory. If the government were to intrude in the internet, Adam Smith and our founding fathers would argue that capitalism would stop working. The concept of choice to the individual would become minimal because the regulations on the market and the taxation would be so intrusive that many would see it as a protection for the larger businesses and special interests. The consumer, hence, would be the loser in this scenario of government intrusion as more regulations would leave the consumer with fewer choices.
Another example of market stagnation is that of taxation. If you recall, when Joe the Plumber asked then Candidate Obama about taxing businesses who earn over $250,000 a year, then Candidate Obama stated that it was good to distribute the wealth. In fact, Candidate Obama stated that most small businesses did not generate more than $250,000 and therefore, would be protected by not being taxed at a higher rate. Joe the Plumber had his version that those small businesses that made over $250,000 were successful and this taxation was a punishment under Obama’s plan. There was no incentive to live out the American Dream of success. Better yet, maybe those small businesses didn’t want to earn more than $250,000 because of fear of taxation. Obama’s reply was that spreading the wealth was what taxation was all about. Perhaps this is true in the antithesis of Capitalism which is Socialism, but this is not what our economy is based upon. Heavy taxation, over regulation, and reduced consumption in the market has led to failing, “too big to fail” market segments that have displaced millions of Americans and underemployed even more. What is needed is the loosening of market controls, less taxation, and incentives for small business start ups.
Many aging baby boomers and recent college graduates with little or no job prospects have resorted to starting small businesses. However, the success of these small start-ups depends on the incubation they would have against the monopolistic regulations designed to keep competitors from entering the market. One of these, is the taxation on the profit of over $250,000 a year mentioned above. This is hardly something anyone wants to pay and it seems excessive in the present market to say the least, not to mention it acts as a deterrent to success.
The “market” is driven by supply and demand of labor and goods. It is blind to geo-politics, ethnicity, legal or illegal status, and other forces. During boom times the U.S. economy creates a demand for labor that the existing workforce cannot fill. This vacuum and the prospect for attaining the American Dream is what have driven immigration both legal and illegal. The market is also manipulated by the passing of immigration laws that impact our economy. For instance, immigration laws in Arizona and Georgia, have jeopardized agriculture, hospitality and construction markets. In fact, Arizona’s state economy could “shrink that state economy by $48.8 billion.” The economic aftershocks have been down played because of fear. Again, the immigration crises is: economic, economic, economic. The lack of low paying unskilled workers has rotted crops sitting in the fields and our prices for tomatoes and grapes are climbing at the supermarkets. How is it that we cannot understand this connection? We are left with minimal choices at higher cost.
One promising piece of legislation is to encourage foreign investment by supplying U.S. Visas to those immigrants who bring capital into the U.S. for the sole purposes of creating a new business that will create jobs. This is a win 3 proposition, the country wins, the market wins, and the foreign investor immigrant wins.
The 2012 election needs to be about jobs. Wall Street has been hesitant to invest trillions of dollars due to the market uncertainty. Combined with all the other market threats this has been a near perfect storm for the economy.
Aspiring presidential and congressional candidates should have a convincing strategy for how they plan to create jobs by stimulating and deregulating the ailing market. Can it be that simple? Yes. As Adam Smith postulated, government needs to stay out of the marketplace and let the market do what it knows to do fuel consumer demand.
My invitation to you our reader is this: reclaim the hope grounded in the principles of free market capitalism as envisioned by our founding fathers. It’s time we elevate the discourse above the noise of cable news and headline news sound bites. Participate in our democracy. Vote.