“I always assumed …that the writers we were studying were always much smarter than I was. If they were not, why was I wasting my time…studying them? If I saw a mistake in their arguments, I supposed they [the philosophers] saw it too and must have dealt with it, but where? So I looked for their way out, not mine. Sometimes their way out was historical: in their day the question need not be raised; or wouldn’t arise or be fruitfully discussed. Or there was a part of the text I had overlooked, or hadn’t read.”

– John Rawls, “Some Remarks About My Teaching”

What does the great Sergio Leone’s brilliant “Dollars Trilogy” have in common with our idea of the so-called Free Market? Well, for a start the titles are enough to give most Capitalists a run for their money: A Fistful of Dollars, For a Few Dollars More and The Good, the Bad, and the Ugly. A careful look at these wildly entertaining films also reveal what most would agree the common idea of the Free Market brings – a great deal of competition to see who is the last man standing after as many Mexican standoffs as possible; who gets the cash at the end; how many bodies you must climb over to get to your cash heap; how much manipulation, lies and betrayal are necessary to make and keep you top dog; how to make as many enemies as possible; how to achieve a life of constant neurosis and paranoia, and a good deal of other niceties.

But there seems to be some whose idea of the Free Market may sheepishly try to avoid all that is described above. Unless you tell them they get to play Clint Eastwood, as that might change the equation somewhat.

This post will look at the common usages of the term the ‘Free Market’ to show that there is no consistent idea (in fact, no sensible one either) as to what this term means, as it is a free for all catch phrase to sum up an amorphous idea of a genuine misconception.

We will also take a look at the much maligned Scotsman Adam Smith and the crazily abused idea of the ‘Invisible Hand’. It will become apparent that Smith has little to do with what Capitalism and the ‘Free Market’ mean. That Smith was onto something else more subtle, accurate, and profound than the mumbo jumbo churned out through the ideological hijacking he has been sadly subjected to.

As the epigraph from Rawls suggests, this post will try to show in its own way that Smith was a far greater and consistent thinker than many have made him out to be.

To Market, to Market, to Buy a Fat Lie

So what does the hagiographical term ‘Free Market’ (FM) mean. The misuse and abuse of this term has led to so much of the world’s problems today. There are numerous definitions for FM but we will look at a rather all encompassing one.

According to the Wikipedia, the definition of FM includes:

A…market without economic intervention and regulation by government except to regulate against force or fraud. The terminology is used by economists and in popular culture. A free market requires protection of property rights, but no regulation, no subsidization, no single monetary system, and no governmental monopolies. It is the opposite of a controlled market, where the government regulates prices or how property is used

The theory holds that within the ideal free market, property rights are voluntarily exchanged at a price arranged solely by the mutual consent of sellers and buyers. By definition, buyers and sellers do not coerce each other, in the sense that they obtain each other's property rights without the use of physical force, threat of physical force, or fraud, nor are they coerced by a third party (such as by government via transfer payments) and they engage in trade simply because they both consent and believe that what they are getting is worth more than or as much as what they give up. Price is the result of buying and selling decisions en masse as described by the law of supply and demand.

Free markets contrast sharply with controlled markets or regulated markets, in which governments directly or indirectly regulate prices or supplies, which according to free market theory causes markets to be less efficient. Where government intervention exists, the market is a mixed economy.

In the marketplace the price of a good or service helps communicate consumer demand to producers and thus directs the allocation of resources toward consumer, as well as investor, satisfaction. In a free market, price is a result of a plethora of voluntary transactions, rather than political decree as in a controlled market. Through free competition between vendors for the provision of products and services, prices tend to decrease, and quality tends to increase. A free market is not to be confused with a perfect market where individuals have perfect information and there is perfect competition.

Free market economics is closely associated with laissez-faire economic philosophy, which advocates approximating this condition in the real world by mostly confining government intervention in economic matters to regulating against force and fraud among market participants. Some free market advocates oppose taxation as well, claiming that the market is more efficient at providing all valuable services of which defense and law are no exception, that such services can be provided without direct taxation and that consent would be the basis of political legitimacy making it a morally consistent system. Anarcho-capitalists, for example, would substitute arbitration agencies and private defense agencies.

In social philosophy, a free market economy is a system for allocating goods within a society: purchasing power mediated by supply and demand within the market determines who gets what and what is produced, rather than the state. Early proponents of a free-market economy in 18th century Europe contrasted it with the medieval, early modern, and mercantilist economies which preceded it.”

This sounds just about right. So what would be a summary of the key ideas here:

1. A FM is one in which there is no governmental intervention “except to regulate against force or fraud”. So no control by governments of any form of economic activity
2. A FM sees to it that the price mechanism operates within the law of demand and supply to ensure people get what they want. Trade is engaged in through consent and gain for everyone results from this
3. Any government intervention means lack of efficiency as opposed to the efficiency provided by the FM
4. The FM ensures the allocation of resources according to consumer satisfaction which is something political interference cannot do. The FM also makes certain that due to competition “between vendors for the provision of products and services, prices tend to decrease, and quality tends to increase”
5. The FM promotes the removal or minimization of taxation. It is also so efficient and brings about so much good that all sectors of a country can be left under the tutelage of FM forces including defence and the law
6. What is not mentioned in the above definition clearly is that many proponents of the FM believe that it is the subset of, if not the main cause for, personal freedom and liberty

Think about these ideas and see how they resonate with you.

And now take a look at what they mean under the scrutiny of common sense:

a. Take a look at (1). If the government is so useless and such a bore to the operation of the FM, why is it needed to “regulate against force or fraud”? If the FM is so effective and useful and powerful, how come it needs government help? For an entity to be able to ensure that the all powerful FM is protected against “force or fraud”, it must be more powerful than the FM in order to be able to so do.

But this is exactly what the FM is trying to avoid, but it needs its nemesis to ensure its survival because a genuine free for all system (which the FM implicitly seems to strive for) would ensure chaos and a cowboy town mentality that is not always conducive to consistent growth and wealth.

So an effective FM it seems always requires a powerful government. It is most unlikely that a powerful government would then sit by quietly and allow the FM to run things without ample kickbacks over and/or under the counter for itself. So (1) is patently absurd.

b. Take a look at (2). Price mechanisms work within the law of demand and supply. There is such a thing as pricing but ‘price mechanism’ is the infantile idea of neo-classical economists who have no idea what the world is about. And what on earth is the ‘law’ of demand and supply (DS)? There is a law of gravity to all intents and purposes, but demand and supply are completely arbitrary.

If demand and supply are a law then why is there always a mismatch between them because of either shortages or excess. The one thing you can be assured of is complete lack of consistency/regularity to this trumped up ‘law’. Pricing is also arbitrary depending on whether these are normal consumer items or luxury brands and goods. But unilateral price adjustments by suppliers and factors that influence them are regarded as interference in perfect market models of the neo-classical economists who claim that if it was not for branding, advertising, marketing, businessmen ascertaining prices, profiteering, people having irregular income flows, why, then you would see a ‘law’ for DS and this strange animal called ‘price mechanism’.

But, the proponents of the FM insist that their idea is different from the silly notion of a ‘perfect market’. But it is just as clear that the FM is based on some weak version of a ‘perfect market’ where apparently you can have the ridiculous situation of an all powerful government who decides to sit on its hands and protect the FM without daring to interfere in it (without considerable gain for itself from the situation).

People never get what they want from the FM because it constantly uses consumerism and all the unpleasantries supposedly avoided by a ‘perfect market’ like human egomania and delusionally driven advertising, marketing, media and banking hype to ensure that you are always dissatisfied with life and what you have. If, heaven forbid, you would actually find satisfaction and peace in life would you really want to be indebted and work for unreasonable bosses to get that X-box or I-pod?

Trade is not engaged for the benefit of everyone. What do these people claiming this know about colonialism and gunboat diplomacy or the so-called ‘free trade’ agreements of today which leave countries, governments and peoples indebted to corporatism and profit mongering?

If there is one New Year resolution for 2010, please recycle all your economic textbooks as they are written by the deluded using a lot of sound and fury signifying nothing.

c. Take a look at (3) and remember that if government interference causes inefficiency then why have the government try to protect the FM. Why not have the FM privatise government and then ensure the framework for the success of the FM. But does that make much sense? Why call it a Government if it has been privatised. In fact, why have any political entities at all, why not just have warring factions of corporations killing and robbing on another to see who survives the competition. (Yes, Leone has a visionary subtext in his “Dollars” films).

But would that really suit the FM? Best to have Government (under its influence and control as far as possible) to ensure that the killing and robbing is done within some form of stability and legitimacy thereby accentuating the ‘Free’ in FM, that is, allowing corporations and Capitalists to do whatever the hell it is they want. What kind of freedom is it if you’re not free to do harm to people around you and not have it legitimized thereby having the best of both worlds.

And how come the FM is more efficient than government? The FM as extolled by Capitalism and driven by the lust for profit has only resulted in massive waste of resources due to destructive competition, devastation to the environment and incalculable human misery. Look at the wastage of money, natural resources and human life that is needed to feed the Capitalistic drive for profits (whether it be the internationally renowned sweated labour of globalization, media hype promotion, inculcation of amorality and immorality, and dumping/destruction of excess goods to create high demand through artificial shortage so that high prices can be extorted).

In short, just look at the current economic and social mess the world is in and ask the proponents of the FM how much more Free Market-ness do they need?

The most remarkable thing is that they even give out a Nobel economics prize to ensure the further spread of economic instability.

d. Take a look at (4). Allocation of resources according to customer satisfaction is not always a good thing. Just think of all the negative products and issues societies have to deal with to realise that pleasing the customer in everything or giving in to unbridled human desire is not what we all need. That’s the kind of thing when advocated ensures the continued existence of laws, prisons, and the security services, not to mention Government -- which FM enthusiasts are supposedly wary of. In fact, it is this attempt to give in to as much as possible to untrammeled human wants that have led to so much of our problems and constant need for media and consumer watchdog agencies, that is, even more forms of monitoring and control (apparently to enhance freedom).

Common sense will show that competition may lead to some form of price decrease (at the expense of the welfare of people and the environment as wage cutting and environment bashing gets top billing), but that hardly correlates to an increase in quality of things. Often it is the case that quality runs short just as prices decrease. Bootleg/’pirated’ editions of things are a good example.

e. As for (5) what results are the unending attempts to avoid and minimize taxation so as to increase profits and satiate the greed of Capitalists/FM proponents. The consumer and the public are then left to carry all tax burdens through goods and services taxes/VATs, higher income taxes, higher interest rates, and/or the tax that comes in the form of inflation which erodes your earnings: just as Capitalists continue to fine tune every form of tax evasion. This has turned out more as an incentive for dishonesty and robbery of the populace than efficiency or effectiveness.

Part of (5) has also been responded to under (c). If defence and the law should be run by private interests then why bother with any government; however, that would result in a situation where no fixed entity with public backing can produce conditions which will allow the private enterprises to make their killings in the market.

f. Then we have (6), an important component of the FM myth. Let’s take a look again as to why this is an illusion. In some cases the only way to ensure the functioning of the FM as Capitalist fantasists have it is to have a powerful government in place. This is precisely why most FM fantasists and hard core Capitalists tend to support fascist regimes. A look at Nazi Germany and fascist Italy confirms the not so subtle role of Capitalists behind these regimes (not to forget global banking cartels owned by gangster bankers/banking mob, a.k.a. banksters).

One glance at the United Corporations of America (UCA) – formerly known as the USA or United States of America – shows how far gone the country is in the hands of Capitalist cabals and banksters (the UC/US Fed being a branch), and how much of the country has been subjected to near fascist control and fear mongering.

And at the end of the day all this so-called freedom of the FM creates a situation that is conducive to the creation of monopolies. These monopolies then grow larger and more powerful and then do their best to shut out all other competitors or gather together to form an oligopoly. All this is at the expense of the rest of society, but that’s the freedom of the FM to do whatever it wants at the expense of anyone whom it perceives stands in the way of profit.

We also need to look at this beast known as the Corporation as the key entity of the FM. If anything, the corporation exists because there is a legal and political framework that emanates from the government. This goes back to the points raised above that ironically the corporations under the auspices of the FM would be non-existent as such without a government to back it up, and a pretty strong one at that in order to protect corporate agendas and profit obsessions.

All this creates a perfect reductio ad absurdum where the FM and their beloved corporations cannot exist unless they put in place what they fear will interfere with their plans most. But as we know, one traditional way round this is for the FM and corporations to have fascist governments (or some form thereof) arise so that they can then have what they think is the best of both worlds: a guarantor of their interests as well as owning the governments it puts into place.

The only loser in all this is the people of a country and the rest of the planet from the shenanigans that arise from such a situation. It’s worth repeating: freedom to the FM and corporations means everything goes to hell except the satisfaction of their profit motive thereby removing the very stability and balance on the planet needed to allow the bad behaviour of the FM and corporations to take place in the first place.

Given the above situation created by the drive for have an apparent FM it is manifest that there is simply no such thing as a Free Market.

QED

It’s in the Way that You Use it

Dear Readers, contrary to popular mythology there is such a thing as a free lunch. It comes from people just being decent and charitable, or altruistic. But there are many who insist that they believe in a FM that is not typical of Capitalism and the negativity that goes with it. The term FM here is used in the most typical and common usage of the term.

Broadly, the main categories of the FM would include:

• The Generic Meaning

• The Capitalist Meaning

• The Right Wing Ideologue Meaning

• The Libertarian Meaning

• The Accurate Meaning

A. The Generic Meaning

This has been covered by the Wikipedia definition delineated above. Essentially it means the unfettered operation of the market through the presumed law of DS and minimal government interference. The absurdity of this definition has been made obvious.

B. The Capitalist Meaning

This would take off from the Generic Meaning but emphasise the right of corporations and businesses (one paragon of how this works is the UC of A) to do what they want, how they want, whenever they want without interference from any form of government, citizenry, non-corporate entities or interest groups, any sense of morality, fairness or human decency. What is right is what greed, selfishness, violence and the profit motive dictates. The exception is a government that is in its corporate controlled form interfering to help corporations/capitalists at the expense of all others.

C. The Right Wing Ideologue Meaning

Using elements from the above, this definition would include that while any form of government interference may be unpleasant, the government ought to somehow ensure its non-interference and allow for the ascendancy of Capitalism, the profit motive and maximum consumer satisfaction. Anything that vaguely opposes this is anathema or smacks of Socialism/Communism or (anything that could possibly be) worse. And state sponsored violence or any form of force instituted by private enterprise is justified if it allows this ‘way of life’ to carry on. Any form of corporate sponsored state violence to support corporate and corporate linked interests, is perfectly normal and should even be extolled. This tends to be consonant with extreme religious and/or racial prejudice. At times certain fanatical religious elements seem to align themselves to this belief or claim that it in turn allows for their zealotry to exist.

D. The Libertarian Meaning

This is usually consistent with the belief in a form of individualism and independence from authority structures that allow for people to do as they please while respecting the rights of others to lead their own way of life. Hence, business models as in certain small business types tend to gravitate towards this interpretation of being economically successful without being driven by monopolists and big businesses that are solely profit driven and which tend to be destructive to communities. There is the belief that the FM offers self regulation as opposed to interference from anyone and that the law of DS takes care of itself.

E. The Accurate Meaning

All of the meanings cited have some form of ideological viewpoint that is projected on the term FM and it always comes out in a way that is skewered and, when pushed to its logical conclusion, inconsistent and contradictory to say the least or has elements that tend to its own undermining and that of the society it operates in. An accurate way of looking at this with minimal distortion in the lens is to realize that the whole of notion of the FM is a fantasy as it is held by most.

All forces of DS are arbitrary. There is no law in economics similar to that of gravity (or as in physics). The idea of imposing man made laws as explanations for human behaviour and motivation is part of the misguided sense of all attempts to mechanistically control human beings who are wholly organic entities.

The space in which commodities are exchanged or are bought and sold can be called ‘the market’. But DS are quite arbitrary. Due to constant mismatching of DS and consumerism and the use of the media to create lust for things there is a constant state of disequilibrium and misallocation of resources. The deluded neo-classicists, of course, then claim that this is due to distortions to the idea of a prefect market (which would allow DS to operate the way it’s meant to!). But it is the silly idea of a ‘perfect market’ that is the distortion of reality or the world as it is.

The realities of the world when open to the arbitrary forces of DS and the profit motive cause the out of sync boom and bust nature of 'economic forces'. There is no FM but arbitrary forces trying to control things to their advantage. This selfishness and greed and amorality which are not only the key to Capitalism but are the empty core of all neo-classical utilitarian principled ideas that revolve around sense satisfaction alone. This is what the market and DS mean.

Left by itself, the FM simply degenerates into monopolies and the quest for dominance, violence and that which is empty of any human value. Greed and profit obsession is expressed through monetary units and status, it has nothing to do with human value which is immeasurable.

Market ‘corrections’ merely mean the unforgiving ruthless forces of selfishness, greed and amorality that ensure the ‘survival of the fittest’ or rather the survival of the most harmful or toxic of entities and activities. This is why the world is largely in the state it is in today. When we say the result of the FM leads to this, it is not the FM per se because the FM as we have seen is a myth. What is meant here are the driving forces of selfishness underlying the so-called ‘FM’ as it exists in our world channeled through its vicious ‘corrective’ and punishing ethos to create a world of endless suffering and environmental desecration.

The term FM has, alas, been nothing more than a place holder for so much that is reprehensible in humanity.

Enter: Adam Smith

Perhaps one of the most misunderstood thinkers of any time has been Adam Smith. What has been done in the name of that man is as shameful as what has been done in the name of Marx. While Marx’s great Capital was partly a response to The Wealth of Nations (WN), he had a much better appreciation of what Smith’s work was about than many after him. Marx insisted that most who promoted Capitalism in Smith’s name had misrepresented what the good Scotsman was saying. And Marx was right on the money.

The many who are FM fantasists and hard core Capitalists often thump WN as if it were holy writ and claim the kernel of their beliefs lie in that tome. To say that the FM, as has been discussed, was proposed by Smith is to genetically modify his ideas into a Frankenstein monster that is in the process of destroying its creators through the economic crisis of our time

It is important to know that prior to writing WN, Smith had written The Theory of Moral Sentiments (TMS). While the former is his best known work, the latter is perhaps his greatest work. Smith was not, thank heavens, an economist. He was a professor of moral philosophy. Think about that: a professor of moral philosophy. Hence, a work entitled TMS.

The key ideas in TMS are worth noting. They are even crucial to a proper understanding of WN. To Smith, human beings have sympathy with their fellow humans as in understanding what joy and pain mean in others because they have experienced it themselves. But there is much more to this. People have a moral conscience and know what is right and wrong. Smith says that no man who is himself at ease can see another on the rack and avoid sympathy with the sufferer’s plight.

But contrary to those who adulterate Smith’s ideas, he clearly believes in Divinity. He regularly refers to the Deity and God in TMS. He even mentions that God looks after the Universe which is benign, and while God’s will is beyond man’s comprehension, man is responsible for doing what is right on earth.

Here is an important passage from TMS, VI.II.49:

The administration of the great system of the universe, however, the care of the universal happiness of all rational and sensible beings, is the business of God and not of man. To man is allotted a much humbler department, but one much more suitable to the weakness of his powers, and to the narrowness of his comprehension; the care of his own happiness, of that of his family, his friends, his country: that he is occupied in contemplating the more sublime, can never be an excuse for his neglecting the more humble department; and he must not expose himself to the charge which Avidius Cassius is said to have brought, perhaps unjustly, against Marcus Antoninus; that while he employed himself in philosophical speculations, and contemplated the prosperity of the universe, he neglected that of the Roman empire. The most sublime speculation of the contemplative philosopher can scarce compensate the neglect of the smallest active duty.

This is one of the clearest indications Smith gives of a moral centre to the universe with God’s Order behind it; where man has his own sphere of responsibility in discharging his duty on earth together with his fellow humans in alignment with what is right. This is the grounded viewpoint of Smith that fills not just TMS but is the basis for WN.

It is clear that Smith believes that there is a difference between self interest and selfishness. He praises the former and denigrates the obvious. In no uncertain terms does Smith condemn unbridled greed, social injustice, anger, hatred and all things associated with negative human attitudes and behaviour.

Self interested man looks after his own welfare and is always trying to achieve his highest good in a decent, fair and reasonable manner; but by doing so he in turn automatically, irrespective as to whether he is conscious of it or not, serves the greater welfare and good of his society.

Lest there still be any doubts as to Smith’s theistic views and the role of providence in his social and economic ideas, these passages from TMS VI.II.44-45 (bold and italics mine) should be of use:

This universal benevolence, how noble and generous soever, can be the source of no solid happiness to any man who is not thoroughly convinced that all the inhabitants of the universe, the meanest as well as the greatest, are under the immediate care and protection of that great, benevolent, and all-wise Being, who directs all the movements of nature; and who is determined, by his own unalterable perfections, to maintain in it, at all times, the greatest possible quantity of happiness. To this universal benevolence, on the contrary, the very suspicion of a fatherless world, must be the most melancholy of all reflections; from the thought that all the unknown regions of infinite and incomprehensible space may be filled with nothing but endless misery and wretchedness. All the splendour of the highest prosperity can never enlighten the gloom with which so dreadful an idea must necessarily over-shadow the imagination; nor, in a wise and virtuous man, can all the sorrow of the most afflicting adversity ever dry up the joy which necessarily springs from the habitual and thorough conviction of the truth of the contrary system.

Smith goes on to further emphasise this view in TMS II.II.19:

In every part of the universe we observe means adjusted with the nicest artifice to the ends which they are intended to produce, and admire how everything is contrived for advancing the two great purposes of nature, the support of the individual and the propagation of the species…[and studying this leads us to admire] the wisdom of man, which in reality is the wisdom of God.

This pursuance of self interest is expected of man, that is his destiny to the way he leads his life on earth but this in turn seems to align his activity to the moral centre of the universe or God’s will. Smith explains this by trying to account for the way things tend to naturally fall into place through a sense of balance as in laws of nature. So behaving in the right manner for oneself which inadvertently or otherwise benefit others, tends to be in line with the natural moral law of the Universe. Smith uses the corollary of showing that if a person does not look after his own welfare and his highest good as in trying to be a responsible and reasonable member in an economy or society he is not looked upon favourably as he may not doing what is right.

Smith does believe in altruism but he prefers to justify it via a grounded pragmatic approach in which people do not have to be motivated to do good for its own sake. People would be more easily swayed to be good citizens when they realize that helping themselves and a sense of self reliance is how they best serve society, and that in turn creates a society that best serves their own interest.

When you now turn to WN written after the bedrock of Smith’s ideas had been established in TMS, his economic opus starts to make a lot more sense. WN in itself is a sprawling work with such variety of observations in it that it is easy to take any passage out of context and say this supports a general view of the world based on a peculiar view of Smith’s.

But what can hardly be doubted is that while Smith reiterates man’s drive for self interest, he contrasts it to the negative effects of selfishness repeatedly throughout the WN. Smith clearly condemns those who tend towards greed and exploitation, and insists on people being treated decently and fairly. He states how grabby monopolists try to undermine the interests of all others as in WN Book I.11.264 (bold and italics mine):

The interest of the dealers, however, in any particular branch of trade or manufactures,is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order, 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.

The passage speaks for itself despite the attempts of the ignorant and willful obfuscationists to present Smith as a creature from their own black lagoon.

Furthermore, in what may be one of the most memorable passages in WN, Smith describes the ghastly system of division of labour in a pin making industry. While there seems some form of efficiency in this mechanization of human beings as cogs in an industry, the dehumanization of the process is duly noted by Smith. No doubt a great deal of mechanical productivity ensues in a way, but the human cost of this so-called productivity is questioned.

While Marx and Engels went the extra miles and were more impassioned and dramatic in their portraiture of human exploitation and suffering during the industrial boom of their time, it is hard to deny that Smith’s insistence on human decency in economic growth may have urged them to outdo him in what was wrong with Capitalism.

The humane aspect of Smith is something hardcore capitalists hardly mention if they are even aware of it. After considering the moral sentiments in his work, it becomes clear that Smith does not support the belief by FM fantasists and hard core capitalists that he is their guru.

We will finally ‘put paid’ to the false claims of Smith being the promoter of the FM and Capitalism in what follows next.

That Invisible Thingamajig

Perhaps a key weapon of FM fantasists and hardcore capitalists has been the misuse and abuse of arguably the most famous term in economics: the “invisible hand”. It is an understatement to say that lots have been said and written about it. But so much of it has been to fit ideological obsessions of so many that an actual close look at what Smith was saying reveals something quite different altogether.

There are many takes on the Invisible Hand (IH). Four main types of interpretations will be looked at. The generic meaning of the IH is what is most cherished by the hard core fantasists: that the IH shows that an unregulated market, (yes, baby, the FM) in which there is minimal or non-interference from anyone (especially governments) provides a system of automatic equilibrium and matching of DS which not only satisfies everyone but is for the highest benefit of all with the greatest wealth creation possible.

And anytime anyone says “FM-Capitalism good, all else bad”: they follow it up with the chant “Adam Smith-IH”! When you mention the social consequences of Capitalism, the response is “don’t be a communist/socialist”, ‘greed is good’, human cost etc are just ‘externalities’. And then to round it up again, the all conclusive bang on the head or bullet between the eyes: “Adam Smith-IH”! -- and they blow the smoke from their pistols.

Sadly, this pathetic trite falsehood of what Smith meant with the IH has been handed down generations via irresponsible economic instructors to hapless students. Despite that, there have been a number of useful contributions as to what the IH is supposed to mean. But there are three other interpretations which are quite interesting and deserve closer notice.

For the record, the IH in Smith appears only thrice in his works first in The History of Astronomy (HA), next in TMS and finally, in WN. These days, there seems to be a growing trend in economists trying to distance themselves from overt FM fanaticism and capitalist trumpery. So the current view among some economists seems to be that Smith’s use of the IH is more a passing phenomena that is interesting at best, or a baubley trinket at worst.

On to the three interpretations of which Gavin Kennedy’s Adam Smith and the Invisible Hand: From Metaphor to Myth sits happily in the extremity of its claims that the IH, if not just an example of Smith’s wry humour, is but a random term given undue attention. Kennedy starts off promisingly on how the IH is merely a metaphor and shows that it is quite possible that Smith only intended the term to emphasise a system that operates well on its own without interference including any invisible assistance emanating from a mystical or religious source.

Kennedy almost pulls off his escapade except that claiming the IH is pure metaphor for the obvious actions of self regulating human behaviour does not quite work (as will examined later); and that he forgets, after admitting the distinction, that there is a clear difference for Smith between self interest and selfishness.

There is the even more interesting reply to Kennedy by Daniel Klein In Adam Smith’s Invisible Hands: Comment on Gavin Kennedy. He prefers to see the “mystery” in Smith and not give in to the prosaic justifications of Kennedy. But Klein believes that the IH is more to do with explaining the self regulating, cooperative activity that takes place between people and which occurs naturally when tending to one’s mutual interests.

Klein thinks that Smith’s ideas take place within a spontaneous order of natural liberty that is unknowable in its particulars (part of the delectable mystery). He insists that teachers of economics make clear to students the wonder to be found within economic principles (while implicitly making clear that there is no Divine Order behind any of this). We will look at this closer later.

Klein then becomes like Kennedy in misreading Smith by stating that the IH in TMS is “a terrible muddle”. He strangely goes on to say that the IH occurrence in WN is less muddled but “not without its mysteries”. Neither is he sure if the IH is “a tag for the comparative merit of freedom”.

The only mystery here is how muddled economists are on what Smith said and in particular what was meant by the IH.

But the most fascinating piece is by Paul Oslington called Divine Action, Providence and Adam Smith’s Invisible Hand . After having myself subscribed to ideas as absurd as what has generally been said of Smith, a rethink was caused by Oslington’s insightful view.

Osilington starts off with how Isaac Newton’s ideas affected Smith who even wrote his HA due to this influence. Newton, perhaps more than Einstein, believed that God does not play dice with the universe and that providence allowed for natural laws to keep the universe in order. But irregular events in the universe were also taken care of by special providence in that it allowed for Divine adjustments to take place and keep the natural order of things. It is this aspect of special providence that is said to have been adopted by Smith.

In his HA Smith mentions how the regularity of natural events like the sun rising and setting is hardly questioned by men during early polytheistic times, but only irregular events are noted like meteor sightings. The IH of Jupiter (king of the Roman gods) was not, says Smith, seen as the influence of regular events (as they were taken for granted); but some otherworldly influence comes into play in order to explain irregular events (e.g., eclipses).

To Oslington what this shows is that Smith was developing an idea to explain how man comes to understand that all events, irregular or otherwise in the cosmos, have divine order attached to it. This Smith then goes on to develop more fully in his later works.

In TMS, Smith talks about how a rich landowner cannot hoard everything he has for himself without ensuring that those who serve him have enough to live on as well, so that they can go on serving him. This leads to the rich man sharing, led by the IH, what he has to ensure everyone gains something, so that despite himself, he has helped the rest of society.

Oslington explains it well as:

The hand here is working against the rapacity of the rich, levelling out consumption, and maintaining the stability of the system. Smith understands that the stability [of] a market economy depends on a modicum of justice and not too obscenely unequal a distribution of consumption. This is why the hand intervening to restrain the consumption of the rich serves to maintain the stability of the market system. In Smith’s providential scheme it is special providence, balancing the general providential force of self interest in markets. (p 9).

But to me, the passage below in TMS is central to understanding Smith and his IH and how it is meant to be understood in its famous occurrence in WN. Here is the passage almost in full and in context -- part IV Section 1 paragraphs 10-11 (bold and italics are mine):

And it is well that nature imposes upon us in this manner. It is this deception which rouses and keeps in continual motion the industry of mankind. It is this which first prompted them to cultivate the ground, to build houses, to found cities and commonwealths, and to invent and improve all the sciences and arts, which ennoble and embellish human life; which have entirely changed the whole face of the globe, have turned the rude forests of nature into agreeable and fertile plains, and made the trackless and barren ocean a new fund of subsistence, and the great high road of communication to the different nations of the earth. The earth by these labours of mankind has been obliged to redouble her natural fertility, and to maintain a greater multitude of inhabitants. It is to no purpose, that the proud and unfeeling landlord views his extensive fields, and without a thought for the wants of his brethren, in imagination consumes himself the whole harvest that grows upon them. The homely and vulgar proverb, that the eye is larger than the belly, never was more fully verified than with regard to him. The capacity of his stomach bears no proportion to the immensity of his desires, and will receive no more than that of the meanest peasant. The rest he is obliged to distribute among those, who prepare, in the nicest manner, that little which he himself makes use of, among those who fit up the palace in which this little is to be consumed, among those who provide and keep in order all the different baubles and trinkets, which are employed in the oeconomy of greatness; all of whom thus derive from his luxury and caprice, that share of the necessaries of life, which they would in vain have expected from his humanity or his justice. The produce of the soil maintains at all times nearly that number of inhabitants which it is capable of maintaining. The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species. When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition. These last too enjoy their share of all that it produces. In what constitutes the real happiness of human life, they are in no respect inferior to those who would seem so much above them. In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar, who suns himself by the side of the highway, possesses that security which kings are fighting for.

IV.I.11

The same principle, the same love of system, the same regard to the beauty of order, of art and contrivance, frequently serves to recommend those institutions which tend to promote the public welfare. When a patriot exerts himself for the improvement of any part of the public police, his conduct does not always arise from pure sympathy with the happiness of those who are to reap the benefit of it. It is not commonly from a fellow-feeling with carriers and waggoners that a public-spirited man encourages the mending of high roads. When the legislature establishes premiums and other encouragements to advance the linen or woollen manufactures, its conduct seldom proceeds from pure sympathy with the wearer of cheap or fine cloth, and much less from that with the manufacturer or merchant. The perfection of police, the extension of trade and manufactures, are noble and magnificent objects. The contemplation of them pleases us, and we are interested in whatever can tend to advance them. They make part of the great system of government, and the wheels of the political machine seem to move with more harmony and ease by means of them. We take pleasure in beholding the perfection of so beautiful and grand a system, and we are uneasy till we remove any obstruction that can in the least disturb or encumber the regularity of its motions. All constitutions of government, however, are valued only in proportion as they tend to promote the happiness of those who live under them. This is their sole use and end. From a certain spirit of system, however, from a certain love of art and contrivance, we sometimes seem to value the means more than the end, and to be eager to promote the happiness of our fellow-creatures, rather from a view to perfect and improve a certain beautiful and orderly system, than from any immediate sense or feeling of what they either suffer or enjoy. There have been men of the greatest public spirit, who have shown themselves in other respects not very sensible to the feelings of humanity. And on the contrary, there have been men of the greatest humanity, who seem to have been entirely devoid of public spirit. Every man may find in the circle of his acquaintance instances both of the one kind and the other. Who had ever less humanity, or more public spirit, than the celebrated legislator of Muscovy? The social and well-natured James the First of Great Britain seems, on the contrary, to have had scarce any passion, either for the glory or the interest of his country. Would you awaken the industry of the man who seems almost dead to ambition, it will often be to no purpose to describe to him the happiness of the rich and the great; to tell him that they are generally sheltered from the sun and the rain, that they are seldom hungry, that they are seldom cold, and that they are rarely exposed to weariness, or to want of any kind. The most eloquent exhortation of this kind will have little effect upon him. If you would hope to succeed, you must describe to him the conveniency and arrangement of the different apartments in their palaces; you must explain to him the propriety of their equipages, and point out to him the number, the order, and the different offices of all their attendants. If any thing is capable of making impression upon him, this will. Yet all these things tend only to keep off the sun and the rain, to save them from hunger and cold, from want and weariness. In the same manner, if you would implant public virtue in the breast of him who seems heedless of the interest of his country, it will often be to no purpose to tell him, what superior advantages the subjects of a well-governed state enjoy; that they are better lodged, that they are better clothed, that they are better fed. These considerations will commonly make no great impression. You will be more likely to persuade, if you describe the great system of public police which procures these advantages, if you explain the connexions and dependencies of its several parts, their mutual subordination to one another, and their general subserviency to the happiness of the society; if you show how this system might be introduced into his own country, what it is that hinders it from taking place there at present, how those obstructions might be removed, and all the several wheels of the machine of government be made to move with more harmony and smoothness, without grating upon one another, or mutually retarding one another's motions. It is scarce possible that a man should listen to a discourse of this kind, and not feel himself animated to some degree of public spirit. He will, at least for the moment, feel some desire to remove those obstructions, and to put into motion so beautiful and so orderly a machine. Nothing tends so much to promote public spirit as the study of politics, of the several systems of civil government, their advantages and disadvantages, of the constitution of our own country, its situation, and interest with regard to foreign nations, its commerce, its defence, the disadvantages it labours under, the dangers to which it may be exposed, how to remove the one, and how to guard against the other. Upon this account political disquisitions, if just, and reasonable, and practicable, are of all the works of speculation the most useful. Even the weakest and the worst of them are not altogether without their utility. They serve at least to animate the public passions of men, and rouse them to seek out the means of promoting the happiness of the society.

What in summary does this important passage say:

• the rich and wealthy usually are more selfishly inclined than most and could hardly be bothered with the welfare of those less fortunate
• but in order to stay their course they need to let their serfs survive as well and so inadvertently or otherwise ensure their serfs’ survival thereby benefiting the welfare of others
• in making this distribution of things to those lower in the food chain, the rich are led into this by the IH
• man proposes (as in the selfishness of the rich) but providence disposes, as in the balance that ensures some form of fairness to the less well off
• all humans want happiness and all are equal in that respect of wanting peace and solace as well other than the illusory difference produced by status and the master-slave relationship thereof
• with a touch of irony, Smith says even a beggar sunning himself seems to have as much, if not more, peace of mind than kings (who constantly worry about who is about to do them in, etc)
• the balance and seemingly smooth operation of the IH behind the adjustments in society is the same kind of system that when it appears in the general governance of society appeals to a sense of order and artistry which humans have a bias for
• when someone supports the idea of good governance and commerce in his society it is not always out of sympathy for his fellow man
• people tend to be impressed with the smooth automatic functioning of a state and all that takes place within it as it resonates with a sense of balance, harmony and artistry in us
• while we acknowledge that the purpose of government is to ensure citizens’ happiness, we tend to be more appreciative of the well oiled functioning of things rather than whether all of society benefits from this
• a person is not so much concerned with what public policies etc are for the benefit of his fellow citizens as much as realizing the remarkable way his society functions and how it is something that is wondrous and (implicit in this) perhaps worthy of emulation by others: this makes him interested to ensure the well oiled functioning of his society
• if the proper and effective operation of a country can be justified via just, reasonable and practicable ways, people may be inspired to seek the means of seeking the happiness of their society

It is important to note that in TMS Smith seems to be saying four things:

First, that through sympathy with his fellow man and through serving one’s self interest a person tends to serve, often times inadvertently, the interests of society.

Second, the above tends to happen because it is aligned to a force of balance that resonates with the moral centre of the universe which ensures regularity in human affairs. We usually don’t question this but take it as a given, knowingly or otherwise.

Third, and importantly, even if an irregularity occurs such as man serving his own selfish interests as opposed to his self interest, there is an IH that rebalances accordingly to ensure that there is some form of redress and justice in distribution to ensure that those exploited still manage to subsist.

Fourth, that people seem to be caught up more with the artistry and smooth functioning of things (that is, regularity and order) than whether society actually gains from this. And if this mode of smooth operation can be justified in a manner of justice and fairness, then people will buy into it and thereby, against their will at times, end up benefiting society at large.

In many cases, we have experienced situations where people compare one society and economy with another over an excellent transportation system, well maintained public amenities, health and educational facilities that are people friendly, etc. In most instances, we also wonder why we can’t have what works smoothly and well in other countries in our own, and are willing to ask or push for, or work towards manifesting this in our own societies. In this, Smith has given an accurate description of things which resonates with many of us today.

It is clear to me, that Smith has ideas here that both Immanuel Kant and John Rawls would have been fascinated by. More will be said of this, especially of the influence Smith has on Rawls.

The third point on how the IH comes in to readjust seeming irregularity in the general balance of things is consonant with what Oslington claims it does in terms of special providence. But Oslington does not mention clearly enough how the irregularity occurs: it occurs because even selfishness vis-à-vis self interest gets the touch of natural re-balancing to even things out a little. In all this, it appears Smith is far more consistent in his thinking on the IH than many thought him to be.

When it comes to WN, Oslington mentions that special providence also comes in again to ensure that despite greater profits available through trade abroad, the merchant paradoxically keeps capital at home thereby benefiting the home front. But as a close reading of that particular passage in WN shows, Oslington and others are not quite right about thinking that is how the irregularity appears. The irregularity in WN in relation to the IH arises from the ambiguity in what Smith says (we will look at this).

But in case there is still some doubt as to the moral core and Divine Order spiralling through Smith’s work, this brilliant passage with its take on capital punishment must be looked at in TMS Book 2.II.19-III.27 (bold and italics mine). It also reiterates with consistency the idea running through TMS and WN in relation to special providence acting through irregularities in the world as in the case of the IH:

Upon some occasions, indeed, we both punish and approve of punishment, merely from a view to the general interest of society, which, we imagine, cannot otherwise be secured. Of this kind are all the punishments inflicted for breaches of what is called either civil police, or military discipline. Such crimes do not immediately or directly hurt any particular person; but their remote consequences, it is supposed, do produce, or might produce, either a considerable inconveniency, or a great disorder in the society. A centinel, for example, who falls asleep upon his watch, suffers death by the laws of war, because such carelessness might endanger the whole army. This severity may, upon many occasions, appear necessary, and, for that reason, just and proper. When the preservation of an individual is inconsistent with the safety of a multitude, nothing can be more just than that the many should be preferred to the one. Yet this punishment, how necessary soever, always appears to be excessively severe. The natural atrocity of the crime seems to be so little, and the punishment so great, that it is with great difficulty that our heart can reconcile itself to it. Though such carelessness appears very blamable, yet the thought of this crime does not naturally excite any such resentment, as would prompt us to take such dreadful revenge. A man of humanity must recollect himself, must make an effort, and exert his whole firmness and resolution, before he can bring himself either to inflict it, or to go along with it when it is inflicted by others. It is not, however, in this manner, that he looks upon the just punishment of an ungrateful murderer or parricide. His heart, in this case, applauds with ardour, and even with transport, the just retaliation which seems due to such detestable crimes, and which, if, by any accident, they should happen to escape, he would be highly enraged and disappointed. The very different sentiments with which the spectator views those different punishments, is a proof that his approbation of the one is far from being founded upon the same principles with that of the other. He looks upon the centinel as an unfortunate victim, who, indeed, must, and ought to be, devoted to the safety of numbers, but whom still, in his heart, he would be glad to save; and he is only sorry, that the interest of the many should oppose it. But if the murderer should escape from punishment, it would excite his highest indignation, and he would call upon God to avenge, in another world, that crime which the injustice of mankind had neglected to chastise upon earth.

For it well deserves to be taken notice of, that we are so far from imagining that injustice ought to be punished in this life, merely on account of the order of society, which cannot otherwise be maintained, that Nature teaches us to hope, and religion, we suppose, authorises us to expect, that it will be punished, even in a life to come. Our sense of its ill desert pursues it, if I may say so, even beyond the grave, though the example of its punishment there cannot serve to deter the rest of mankind, who see it not, who know it not, from being guilty of the like practices here. The justice of God, however, we think, still requires, that he should hereafter avenge the injuries of the widow and the fatherless, who are here so often insulted with impunity. In every religion, and in every superstition that the world has ever beheld, accordingly, there has been a Tartarus as well as an Elysium; a place provided for the punishment of the wicked, as well as one for the reward of the just.

Nature, however, when she implanted the seeds of this irregularity in the human breast, seems, as upon all other occasions, to have intended the happiness and perfection of the species. If the hurtfulness of the design, if the malevolence of the affection, were alone the causes which excited our resentment, we should feel all the furies of that passion against any person in whose breast we suspected or believed such designs or affections were harboured, though they had never broke out into any action. Sentiments, thoughts, intentions, would become the objects of punishment; and if the indignation of mankind run as high against them as against actions; if the baseness of the thought which had given birth to no action, seemed in the eyes of the world as much to call aloud for vengeance as the baseness of the action, every court of judicature would become a real inquisition. There would be no safety for the most innocent and circumspect conduct. Bad wishes, bad views, bad designs, might still be suspected; and while these excited the same indignation with bad conduct, while bad intentions were as much resented as bad actions, they would equally expose the person to punishment and resentment. Actions, therefore, which either produce actual evil, or attempt to produce it, and thereby put us in the immediate fear of it, are by the Author of nature rendered the only proper and approved objects of human punishment and resentment. Sentiments, designs, affections, though it is from these that according to cool reason human actions derive their whole merit or demerit, are placed by the great Judge of hearts beyond the limits of every human jurisdiction, and are reserved for the cognizance of his own unerring tribunal. That necessary rule of justice, therefore, that men in this life are liable to punishment for their actions only, not for their designs and intentions, is founded upon this salutary and useful irregularity in human sentiments concerning merit or demerit, which at first sight appears so absurd and unaccountable. But every part of nature, when attentively surveyed, equally demonstrates the providential care of its Author, and we may admire the wisdom and goodness of God even in the weakness and folly of man.

It is even of considerable importance, that the evil which is done without design should be regarded as a misfortune to the doer as well as to the sufferer. Man is thereby taught to reverence the happiness of his brethren, to tremble lest he should, even unknowingly, do any thing that can hurt them, and to dread that animal resentment which, he feels, is ready to burst out against him, if he should, without design, be the unhappy instrument of their calamity. As, in the ancient heathen religion, that holy ground which had been consecrated to some god, was not to be trod upon but upon solemn and necessary occasions, and the man who had even ignorantly violated it, became piacular from that moment, and, until proper atonement should be made, incurred the vengeance of that powerful and invisible being to whom it had been set apart; so, by the wisdom of Nature, the happiness of every innocent man is, in the same manner, rendered holy, consecrated, and hedged round against the approach of every other man; not to be wantonly trod upon, not even to be, in any respect, ignorantly and involuntarily violated, without requiring some expiation, some atonement in proportion to the greatness of such undesigned violation. A man of humanity, who accidentally, and without the smallest degree of blamable negligence, has been the cause of the death of another man, feels himself piacular, though not guilty. During his whole life he considers this accident as one of the greatest misfortunes that could have befallen him. If the family of the slain is poor, and he himself in tolerable circumstances, he immediately takes them under his protection, and, without any other merit, thinks them entitled to every degree of favour and kindness. If they are in better circumstances, he endeavours by every submission, by every expression of sorrow, by rendering them every good office which he can devise or they accept of, to atone for what has happened, and to propitiate, as much as possible, their, perhaps natural, though no doubt most unjust resentment, for the great, though involuntary, offence which he has given them.

What Smith in essence is saying here is that most people while understanding why capital punishment was meted out to the sentry who falls asleep at his post, would still see it as an extreme measure. The same people would have a sense of outrage that would support a capital sentence on someone who commits a heinous crime like parricide, and in our time, mass murder. People can be so enraged that they may also believe such punishment to go beyond mortal realms to punishment in the after life as some form of universal retribution.

But Smith says that this apparent inconsistency or irregularity in views of people as to who deserves punishment is something that should be determined not from their thoughts but by their actions. He believes that if people were to judge others based on their thoughts and potential for thinking evil as opposed to someone caught in the act of enacting the thought, then there would be no end to inquisitions throughout society. (This would be equivalent to a type of ‘thought crime’ in Orwell’s great Nineteen Eighty Four).

Judgment of what happens in the human heart is not for man to make as it is in the province of the Divine. Humans can look at actions and determine the nature of them thereby making judgments on that. We can judge on actions, but not on thoughts or we will want accounting for every negative human thought even when it doesn’t result in any harm to anyone. The sentry, though his intentions were not based on malice, is judged based on the fact that his lack of alertness could have dire consequences for all.

If there appears any irregularity in this aspect of human judgment and thinking as to how people react to punishment, it is a good thing which prevents ‘witch hunts’ and allows for some semblance of order in society. To Smith this falling into place of things naturally despite the irregularity in response to, for instance, capital punishment, is due to the special providential adjustment of Divinity.

Smith is not proposing here a system of legal justice and how a judiciary should work. He is commenting on the moral and social nature of man in relation to the Divine and how we operate in our daily lives.

Then as is typical of Smith, he provides a countervailing view to show that there are instances of intention in humans that must be considered as in the case of someone who did not have intent to cause suffering to others but does so as in accidentally causing someone’s death. There is atonement that is necessary though he is not culpable for what happened. The sanctity of a human being and his innocence cannot be infringed upon under any circumstances especially via some form of revenge.

In doing this, as he does in many instances, Smith does his best to explore the complexities in human affairs and tries to show that they are consistently taken care of via a kind of natural balance, harmony and adjustment that takes place in the universe, world, and society which is the underlying Divine Order for the good of all.

In using this approach, Smith seems to be allowing for the rationalisation of how we act and react to things in line with the greater architectonic of Divine Order.

All apparent irregularities are Divine ways of adjusting the seemingly imperfect into perfection. That is principally the phenomenon of the IH. There is hardly a coincidence in Smith using the phrase “as upon all other occasions” relating to irregularity above from TMS with the mention of “as in many other cases” together with the operation of the IH in WN – as in the passage below.

In both cases, the occurrence of the IH as special providence making adjustments for the good of all is a regular and natural phenomenon.

Now take a detailed look at the passage where perhaps the most famous term in economics finally appears in WN Book 4 chapter 2 (bold and italics are mine):

 

IV.2.1

By restraining, either by high duties or by absolute prohibitions, the importation of such goods from foreign countries as can be produced at home, the monopoly of the home market is more or less secured to the domestic industry employed in producing them. Thus the prohibition of importing either live cattle or salt provisions from foreign countries secures to the graziers of Great Britain the monopoly of the home market for butcher's meat. The high duties upon the importation of corn, which in times of moderate plenty amount to a prohibition, give a like advantage to the growers of that commodity. The prohibition of the importation of foreign woollens is equally favourable to the woollen manufacturers. The silk manufacture, though altogether employed upon foreign materials, has lately obtained the same advantage. The linen manufacture has not yet obtained it, but is making great strides towards it. Many other sorts of manufacturer have, in the same manner, obtained in Great Britain, either altogether or very nearly, a monopoly against their countrymen. The variety of goods of which the importation into Great Britain is prohibited, either absolutely, or under certain circumstances, greatly exceeds what can easily be suspected by those who are not well acquainted with the laws of the customs.

IV.2.2

That this monopoly of the home-market frequently gives great encouragement to that particular species of industry which enjoys it, and frequently turns towards that employment a greater share of both the labour and stock of the society than would otherwise have gone to it, cannot be doubted. But whether it tends either to increase the general industry of the society, or to give it the most advantageous direction, is not, perhaps, altogether so evident.

IV.2.3

The general industry of the society never can exceed what the capital of the society can employ. As the number of workmen that can be kept in employment by any particular person must bear a certain proportion to his capital, so the number of those that can be continually employed by all the members of a great society must bear a certain proportion to the whole capital of that society, and never can exceed that proportion. No regulation of commerce can increase the quantity of industry in any society beyond what its capital can maintain. It can only divert a part of it into a direction into which it might not otherwise have gone; and it is by no means certain that this artificial direction is likely to be more advantageous to the society than that into which it would have gone of its own accord.

IV.2.4

Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society.

IV.2.5

First, every individual endeavours to employ his capital as near home as he can, and consequently as much as he can in the support of domestic industry; provided always that he can thereby obtain the ordinary, or not a great deal less than the ordinary profits of stock.

IV.2.6

Thus, upon equal or nearly equal profits, every wholesale merchant naturally prefers the home-trade to the foreign trade of consumption, and the foreign trade of consumption to the carrying trade. In the home-trade his capital is never so long out of his sight as it frequently is in the foreign trade of consumption. He can know better the character and situation of the persons whom he trusts, and if he should happen to be deceived, he knows better the laws of the country from which he must seek redress. In the carrying trade, the capital of the merchant is, as it were, divided between two foreign countries, and no part of it is ever necessarily brought home, or placed under his own immediate view and command. The capital which an Amsterdam merchant employs in carrying corn from Konigsberg to Lisbon, and fruit and wine from Lisbon to Konigsberg, must generally be the one half of it at Konigsberg and the other half at Lisbon. No part of it need ever come to Amsterdam. The natural residence of such a merchant should either be at Konigsberg or Lisbon, and it can only be some very particular circumstances which can make him prefer the residence of Amsterdam. The uneasiness, however, which he feels at being separated so far from his capital generally determines him to bring part both of the Konigsberg goods which he destines for the market of Lisbon, and of the Lisbon goods which he destines for that of Konigsberg, to Amsterdam: and though this necessarily subjects him to a double charge of loading and unloading, as well as to the payment of some duties and customs, yet for the sake of having some part of his capital always under his own view and command, he willingly submits to this extraordinary charge; and it is in this manner that every country which has any considerable share of the carrying trade becomes always the emporium, or general market, for the goods of all the different countries whose trade it carries on. The merchant, in order to save a second loading and unloading, endeavours always to sell in the home-market as much of the goods of all those different countries as he can, and thus, so far as he can, to convert his carrying trade into a foreign trade of consumption. A merchant, in the same manner, who is engaged in the foreign trade of consumption, when he collects goods for foreign markets, will always be glad, upon equal or nearly equal profits, to sell as great a part of them at home as he can. He saves himself the risk and trouble of exportation, when, so far as he can, he thus converts his foreign trade of consumption into a home-trade. Home is in this manner the centre, if I may say so, round which the capitals of the inhabitants of every country are continually circulating, and towards which they are always tending, though by particular causes they may sometimes be driven off and repelled from it towards more distant employments. But a capital employed in the home-trade, it has already been shown, necessarily puts into motion a greater quantity of domestic industry, and gives revenue and employment to a greater number of the inhabitants of the country, than an equal capital employed in the foreign trade of consumption: and one employed in the foreign trade of consumption has the same advantage over an equal capital employed in the carrying trade. Upon equal, or only nearly equal profits, therefore, every individual naturally inclines to employ his capital in the manner in which it is likely to afford the greatest support to domestic industry, and to give revenue and employment to the greatest number of people of his own country.

IV.2.7

Secondly, every individual who employs his capital in the support of domestic industry, necessarily endeavours so to direct that industry that its produce may be of the greatest possible value.

IV.2.8

The produce of industry is what it adds to the subject or materials upon which it is employed. In proportion as the value of this produce is great or small, so will likewise be the profits of the employer. But it is only for the sake of profit that any man employs a capital in the support of industry; and he will always, therefore, endeavour to employ it in the support of that industry of which the produce is likely to be of the greatest value, or to exchange for the greatest quantity either of money or of other goods.

IV.2.9

But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.

What in essence does the passage say:

1. domestic industries can be protected by trade tariffs on imports


2. that domestic monopolies may result due to this but government may be in cahoots with local industries in doing so to the disadvantage of citizens


3. that this tendency to profit taking via monopoly tends to reallocate resources to serve monopolistic interests and the benefit of which, to the country, is ambiguous


4. some form of interference can see to the reallocation of capital away from monopolistic tendencies but it is uncertain as to the benefit that arises from such moves


5. individuals who seem to pursue self interest in the way they allocate their capital may, in effect, actually be benefiting society without their knowing


6. merchants would on the whole prefer to keep capital at home because they can monitor its progress and gains better that way


7. this results in the home country of a merchant engaged in export trade to also having a variety of that produce sold there as long as some form of profit taking can be managed in the process


8. since most gain seems to arise from deploying capital within the home country there is a tendency for capital to be kept home which results in industry and employment growing and revenues rising


9. those who adopt this strategy will want to see that the produce of such industries be of the greatest value


10. in such a deployment of capital the merchant intends to gain the maximum profit he can


11. through such moves of maximizing profit the revenue in a country is increased and the motivation behind this is not related to society’s benefitting consciously or otherwise


12. by supporting domestic industry in this manner over foreign ones the merchant is only pursuing his own interest


13. via this mode of operation he seems to be led by an IH to promote an end which was by no means his original intention


14. he ends up promoting society’s interests more than he would have if his intention was to serve mainly society’s interests


15. not much good arises from commercial transactions that are solely for society’s good

It would be hard to prove that Smith does not here advocate keeping capital at home as opposed to investing it overseas. But there is more in all this than just that. This passage is one of many that are ambiguous in WN. Yet within the ambiguity lies the special providence that accounts for the irregularity that accompanies the use of the IH. How does this ambiguity work?

From (1) – (3) we see that merchants are quite happy to exploit cornering the domestic market to set up some form of monopoly aided by government tariffs on imports. This is consistent with the reading of selfishness (as opposed to self interest) of those tending toward monopolies. There is no doubt that Smith is against the selfishness that stems from monopoly and greed as shown earlier with the quote on the critical clash of interests in Book I.

But with (4) the transition to ambiguity begins as Smith says interference to regulate some of this monopoly is not always advantages. In (5) the ambiguity comes full circle as Smith implies that even with monopolistic ambition allocation of capital may be for everyone’s good. This is the ambiguous merger of selfishness and self interest which can sometimes describe what does happen in reality. The rest of the passage shows how the tendency to maximize profits through favouring domestic to foreign industries leads to greater produce, labour and revenue for the home country.

So even if the merchant is driven by selfishness or a mixture of self interest and selfishness -- hence the irregularity -- the special providence of the IH steps in to adjust things such that society gains even when the intention of such societal good wasn’t there in the first place. This is consistent with the irregularity of selfishness in the TMS that also sees the IH adjust things such that everyone gains all round.

Not much good arises from commercial ventures that work consciously to solely benefit everyone as an end in itself. So it becomes clear that there is a kind of teleology to Smith and a natural order to things in a Divinely guided universe with a moral center: that while self interest ensures smooth functioning of things in a society, the imbalance of selfishness is also readjusted into a kind of balance that is in the end for the good of all.

This does not imply that overtly destructive activities like rampant monopolies and the ills of capitalism as we know through hindsight, and still live through today, will have the IH come in and rescue everyone. There will be consequences for bad actions and they are inescapable just as the consequences of war result in unimaginable human suffering.

Yet under Smith’s scheme of things, the broad architecture of the universe with its Divine Order and moral center will still see a balance come into play, as life does go on albeit sometimes on quite a different paradigm.

Sergio Leone Does Adam Smith

Before looking at the issue of markets again and how the so-called Free Market has no relation to what Smith was talking about, it is worth looking at the relevance and application of the IH notion of adjusting irregularities as special providence. So far, Smith’s examples as used here may seem a little abstract but his ideas are far more potent for reasons beyond the claims of FM fantasists and hard core Capitalists.

Take look at A Fistful of Dollars. When Eastwood, or the man with no name, pits one rival faction against the other in the nihilistic town he visits, he is only interested in earning money. He amorally and immorally manipulates and shoots his way into earning his coins. But he decides to help the wronged woman kept as a mistress by the villain of the piece (Gian Maria Volonte) and unites her with her son and husband. In the process he kills her captors and even gives all the money he has to help and her family.

As a result Eastwood pays a terrible price; but on the mend from his punishment he invokes a revenge that brings down total destruction on the rival clans. As Smith says, when Eastwood pursues his own interest (mixed up with greed and a trigger happy style) he ironically -- against his own intentions -- ends up helping the woman and her family, starts a chain of events that rids the town of its corruption thereby playing an unwitting balancing force that allows the town to start anew.

It is almost like there is an IH that sweeps through the drama to provide some form adjustment via the irregularity of self interest and selfishness of the Eastwood character. Just as in Kurosawa’s original masterpiece Yojimbo on which Leone based his film, Leone’s “Dollars Trilogy” and the ones that follow it have a moral centre.

The other fascinating instance is in a Leone film called A Fistful of Dynamite, but now in its fully restored version is known as Duck, You Sucker. James Coburn plays a weary Irish Republican Army man running from his past who ends up teaming up with a notorious bandit, played by Rod Steiger, in Mexico. Though each pursues their self interest and in the case of Steiger, his greed: they both despite trying to avoid getting caught up in the Mexican Revolution end up doing just that. In the process they help the revolutionists fight the fascists of their time through set pieces of violence.

Again, in the most unlikely manner a balance is restored as the characters follow their interests and destinies to the end under the Direction of a greater force, as if by an IH.

Also, on a more personal note, I have rarely (in the Smithian sense) managed to persuade someone to a cause by telling them that it is for the good of humanity. But on explaining to them how this would be in their interest to do so, and that of their close ones, have managed to get people involved in good causes. In that process they bring others onboard and before long a virtuous cycle is created of getting done that which, in the medium to long term, benefits the environment, society and/or the underprivileged. This process happens automatically and adjusts itself accordingly almost as if guided, as in most other cases, by an IH.

And Justice For All

Let us come back to the so-called markets. As can be seen Smith was not promoting Capitalism. Neither was he promoting a so-called Free Market. The idea of the FM is not only a contradiction in terms but does not allow any notion of balance and fairness to come into play. By now we can see that Smith was more concerned with a social-economic system that promoted balance and harmony rather than the free-wheeling framework of wildly shifting disequilibriums promulgated by Capitalism and neo-classical economics.

Back to another passage in TMS, where Smith writes in I.I.36 (bold and italics mine):

To see the emotions of their hearts, in every respect, beat time to his own, in the violent and disagreeable passions, constitutes his sole consolation. But he can only hope to obtain this by lowering his passion to that pitch, in which the spectators are capable of going along with him. He must flatten, if I may be allowed to say so, the sharpness of its natural tone, in order to reduce it to harmony and concord with the emotions of those who are about him. What they feel, will, indeed, always be, in some respects, different from what he feels, and compassion can never be exactly the same with original sorrow; because the secret consciousness that the change of situations, from which the sympathetic sentiment arises, is but imaginary, not only lowers it in degree, but, in some measure, varies it in kind, and gives it a quite different modification. These two sentiments, however, may, it is evident, have such a correspondence with one another, as is sufficient for the harmony of society. Though they will never be unisons, they may be concords, and this is all that is wanted or required.

What this passage encapsulates is the sympathetic vibrations of energy people tend to set up in relation to one another in functioning together as a group of people or society. Emotions and thoughts are adjusted through conscious or unconscious effort when collaboration and consensus is being built to move things forward. A strident tone, no matter how justified, tends to lose support, hence, the need to “flatten…the sharpness” to get some form of harmony among people. Consensus building is a good thing.

This is radically opposed to the rampant egoistic obsessions that many ideas of Capitalism and the FM tend to promote. Smith’s ideas have to do with people getting along not through compromising of values, but by consensus building. Which also means it eschews insistence of things through the barrel of a gun (and the ideologies that go with it).

Smith, in always trying to keep things real, makes it clear that the process of consensus building and cooperative ventures do not create unisons so much as concords and that, indeed, is as good as it gets. It is analogous, in a way, to unity in diversity, or vice versa. Individual identities and ideas are kept but they are adjusted to see what in common can get things working. This somehow resonates with most people’s idea of democracy.

This does not imply being able to suddenly propose revolutionary ideas that can shift paradigms to a new level, but on a closer look this paradigm shift may be achieved through the use of persuasion, and convincing others of how it benefits them individually etc that result in ideas for the good of all.

This contrasts with the jaded and predictable manner that extremists and hard core Capitalists do things. It always has the use of force underlying it or overlaying it or pointed at you in the form a gun. Apparently, that’s a sign of freedom and the way to keep it going. Naturally, when you rob others’ land, property, livelihoods, families, life blood and consciences for the sake of selfishness and blind capital accumulation you have to do it through force and keep it via domestic and international violence.

But as Smith says, even such irregularities from what can be seen as regular peaceable behaviour between peoples is given balance and readjustment which sees a reordering of society. Hence, the current economic crisis sweeping the world which while causing so much problems for us, is the cleansing process which will bring down the old, corrupt, violence drenched past that will get us to work together inevitably to issue in a new age of peace, harmony and prosperity which may also have existed in other times not subject to the ‘officially’ promulgated history of the world.

This process of building ideas up to principles that can be used or applied throughout a society is a process of social constructivism that in a way is in concord with that of the moral constructivism of Kant and, almost without doubt, the political constructivism of Rawls. Smith’s social constructivism allows his economic constructivism to take place. The IH as a function of Divine teleology allows for social processes to be generated thereby creating situations for economic practices to be in concordance with them. Economic ideas come forward for the good of the individual and society, and are balanced, fair and just for all.

A more detailed look at this can be found in Justice as Fairness Revisited and The Awakened Eco-nomy. In the end this post too is just a blog, like any other, and it is hoped that those with sharper minds and a more intense passion will develop things from here to see where it can go.

End of the Reign of the Magicists

So where does this leave those Nobel prize winning ideas for economics and all other dandy econometric models and stuff taught at universities to churn out more intellectually misguided people (having partially suffered from this, I know whereof I speak)?

Hey, what about those Laws or Demand and Supply (DS), Say’s Law, Taylor Rules, NAIRUs (non-accelerating interest rate of unemployment) and those of the sublime perfect market which talk about Pareto optimatlity curves, (false) equilibriums where everyone has to use cost-benefit analysis to fight for scare resources to maximize utility. Everything else outside of this is that inconvenient thing called an ‘externality’.

Milton Friedman delusionally described the difference between ‘good’ and ‘bad’ externalities where being charitable would be a ‘good’ thing but aiming for so-called corporate social responsibility (another contradiction in terms) is a ‘bad’ thing which bucks (no pun intended) econometric models because it could undermine the sole reason for corporations existing which is, of course, profit making while the world goes to hell.

What this means is that if you ask a corporation or a capitalist to factor in human decency and fairness into a ‘law’ of neo-classical economics or its profit taking model, you are talking ‘externality’, man.

But my friends, what is this so-called Law of DS or equilibrium? Let’s go against what our schools and many tertiary institutions teach you not to do, let’s actually think a little and try a bit of common sense (no certificates awarded for this). Apparently there are these kind of push and pull factors which seem to be observed when wants for commodities are met with a flow producing them that intersect at the right price. What are these forces that create such wants and flows and intersections and push and pull like the tide of the sea?

What is optimum growth and equilibrium? Are these points of description of the most suitable or desired or needed form of growth in given circumstances as decided by curves, governments, societies or people’s feedback? Or are they what economists claim they should be? What is this idea of balance, and rising and falling of forces that produce new forms of things and energies? You have nothing but economic and social theories and models to explain this.

If you ask what gravity is, well it’s this force that’s composed of gravitons. How did this come to be? Well these are natural forces, just like DS or equilibrium or optimum growth that are codified by professors in academic ‘disciplines’ and don’t need anything else to explain them. If you ask what is behind gravity or equilibrium you are told that is not necessary to ask because the current theories are borne out by empirical observations and that sufficiently explain things.

So is there a giant squid at the centre of the earth whose suction causes gravity? Sure, possibly, but why do you need that when you have a law of gravity? The latter is a sufficient explanation so the squid can be left to Captain Nemo and his like. Is economic ‘equilibrium’ a sign of the IH, yes, in so far as it describes ‘economic forces’ and any notion of some other elements behind the IH is mysticism and irrelevant (‘economic forces’ being sufficient to let us sleep soundly each night). It is not scientific or modern nor a reflection of ‘enlightened’ reasoning to go beyond a ‘satisfying’ set of theoretical explanations.

But all these explanations are circular at worst or question begging at best for each time you ask what causes these phenomena like equilibrium, they are ‘economic’ forces and what are these forces….these are theoretical constructs to explain this that and the other…what is the basis of these constructs…observations backed by hypotheses or vice versa as tested against the world….that show that these forces are indeed at work…ah ha…back to square one with stunning clarity.

When pressed as to why they do not go beyond such silliness in their theoretical reasoning -- it’s to avoid mysticism. So what we are offered in effect is this: there are mysterious forces at work, just at Klein describes the IH and other things in Smith in a manner that would make Agatha Christie proud, but we have some ‘explanations’ that should do the trick. Aren’t you impressed by our intellectual sleight-of-hand; see how clever we are; we are the smartest of the species coming up with all kinds of reasons to explain and make more things convoluted and complicated so that we can progress onwards in a civilized manner devoid of mysticism.

The illusional, delusional, tricks-of-academia and intellectual-do-it-with-mirrors is just that – magic. In place of the genuinely mysterious, the mystical, and the miraculous we have Magicism. Magicists, like many economists and scientists, believe that things just happen to be. These are natural forces which coincidentally are what they, well, are! There is no reason why the whole universe, solar system with its bodies moving around without crashing into one another, and sudden life that evolves with spectacular biodiversity cannot be explained away by theories and constructs as one massive coincidence. In other words, magic. It all happens to be there, presto! Just like that.

This Magicism has no bearing on what we use to describe an extraordinarily beautiful sunset or a special moment with a loved one: that kind of magic is an analogue of the miraculous and has an alignment with a moral centre and Divine Order.

Magicists also denigrate religious or spiritual experiences as purely personal ones peculiar to an individual or if shared then part of mass delusion. There are countless theories to explain this…why all this supposedly occurs and why life, the world and humanity is the way it is…meaning, it is what it is: abracadabra. You just explain away anything that’s greater than the human ego and its obsession with itself and excessive sensual indulgence by theories and magic.

So the IH and market forces happen as a result of magic. If you want a spiritual explanation to things then you have to rely on mysticism. Smith as a FM proponent and glorifier of Capitalism cannot simply be subscribing to that, now, can he? Notice the circularity as to how Smith has been appropriated? If you want only reason and scientism to show you the way forward solely through ‘hard’ facts and math etc, then you have Magicism.

Not that you cannot have theories balanced by the spiritual and a moral centre to the world and the universe (e.g., Newton, perhaps Einstein, Kant, Smith and Rawls – though the latter would prefer not to bring in the spiritual overtly). But to do that is to slide into mysticism. Why do that when you can be inaugurated as high priest in Magicism and be a Magicisit cum laude at an accredited Institution of Learning, or be called an Expert and win International Prizes?

Then you have philosophers who are Magicists. They will talk about a metaphysical basis to things and when pressed beyond that will tell you either what they say is sufficient, or that they cannot or don’t see why they have to say what exactly it is behind the Metaphysics. This is a metaphysical smoke screen to hide their ill concealed Magicism.

Those that have a metaphysics and believe there is Absolute Mind behind it like Hegel or the World as Will and Idea as Schopenhauer, are partial Magicists. There is an Absolute but it is devoid of love, compassion and the miraculous. Such ideas sadly get misappropriated by ignorant and rascally elements who then turn them into an excuse for totalitarian ideas or mind bogglingly self defeating pessimism. So partial Magicism has its dangers too.

Or, there will be thinkers, writers or philosophers, eminently talented too, who opine that there is some ‘centre of life’ which, well, is a centre of like, all that is, etc…doesn’t necessarily mean Divinity, but there’s something out there…Magicism bordering on the occult or vice versa. At best one can ascribe partial Magicism to them.

In fact, if you take the trouble to look closely at the ideas of full blown Magicists, you will find that they are inadvertently (or otherwise) occultists. They will tell you that the truth (if it can be known and to what extent it can be know, etc, etc) comes via their full blown or partial Magicism, the ‘clarity’ of academic jargon, econometric models, theories that are constantly outdated/replaced, and formulas of politically correct commonality by the self serving media or politicized hype to show you why you ought to remain disempowered and beholden to their incantations and…Occultism.

Where does life come from, what happens at death, why do people believe in Divine Order/God/Supreme Being…well, here are the theories, degrees, and career paths to sort that out, and a whole lot of magic and occultism to boot. Why? Because, the spiritual like all else that matters in life like justice, fairness, and compassion are externalities.

When you bring in externalities into academia, science, the workplace or the corporation you ruffle feathers because it gets in the way of ego, material grasping, profits and whatnot. Magicists and occultists do indulge in a quick mention that there ought to be a balance between being reasonable and ‘getting the job done’ (because apparently being unreasonable is the way to really professionally effectively get things done). But here again, where does the notion of balance come from…magic.

We have reached that point when all that defines existence and human decency and social and planetary responsibility are externalities that are the adjunct of mysticism, while all else like profit margins, banksters (gangster bankers), big bonus freaks and greed and perpetual war are at least theoretically explained as part of the reality of life…a.k.a magic: because it just happens, that’s the way it is. Things being the way they are without much to explain for them (beyond egocentric opinions and selfishness or endless theories) are just an unsubtle code for: yes, you guessed it, Magicism.

But we are now at long last on the path to seeing the end of the reign of the Magicists and Occultists. People are finally, after being led to near global bankruptcy using useless paper fiat currency backed by printing presses and endless war, starting to wake up and say enough is enough. That there is a moral centre to life, to the world and to the universe and that we are not going to take this violence and ignorance and nonsense anymore.

The Fair Market

There are indeed natural forces at work in the Universe that govern all life on earth as well. This must be the truism of the millennium. All life is part of a natural force. As Dylan Thomas wrote “the force that through the green fuse drives the flower Drives my green age”, and “Time held me green and dying Though I sang in my chains like the sea”.

The only externalities are the Magicists promoting their Magicism. But like all else in nature that has had its time, the Magicist structures and mechanisms are starting to decay, fall apart, and will eventually be reabsorbed into the world as part of the cycle of things guided by forces more powerful than egomania, celebrity cultism, media manipulation et al.

Contrary to the dying exhortations of FM fantasists and hard core Capitalists, freedom doesn’t guarantee fairness. The well worn adage that your freedom to swing your arm ends where the other person’s nose begins still rings true. There is simply no unbridled freedom to do as you please because we live in society and have a responsibility; and if we want things to go well for ourselves, to also see that things go well for others. There are limits to freedom. Try jumping off a skyscraper to show that you can do anything you want with impunity and you will discover the parameters imposed by what we call gravity.

As part of all natural forces in the universe and our planet, everything is subject to parameters. That’s why there’s life in the first place. Given the conjunction of conditions at the right time and place the synchronous and miraculous happens. There are indeed natural laws that affect us all as there are moral laws that affect us all which help us to maintain sanity and balance in our lives thereby allowing us to create the society we dream of living in, if we so choose.

What is this moral centre? Just look into the human heart: there is a sense of right and good there. The mystery is how it came to be there and why virtually everyone resonates with it. But there is no befuddled mystery, as Smith would say, if we recognize the Divine Architect behind things. What we need to do is concentrate on doing what is right for ourselves and thereby others which is fulfilling that part of the plan on Earth.

But the human ego gets in the way. It gets in the way to cut off that Light and enhance the Darkness, and from that shadow world comes fear, doubt, scarcity, greed, envy, anger, hatred and resentment. From that sense of Darkness comes fear that unless you can be free to do whatever you want irrespective of the consequences you -- your ego -- will be harmed. Speak to anyone who claims to believe you can be free to do anything you want and to hell with everything else and/or who are hardcore Capitalists and they will show you the obverse side of Fear.

Bring out cooperation, collaboration, justice, fairness, compassion and decency and those who live in Fear will tell you why something might happen that leaves them at the mercy of others whom they despise and want to lord over because they judge that everyone else is like them. Naturally, in that case, the only option is to fight tooth and nail to support ego based desires, wants, fantasies and Fear.

Fairness, however, does allow for freedom. As Rawls points out, in order to be fair you would have to have these basic principles of liberty of allowing as much freedom to others as you allow yourself, fair and equal opportunities for all, and look after the interests of the least advantaged and certainly those of the disadvantaged. A mature democratic society would also be based on overlapping consensus and through ground up working of self interest creating the principles by which your society should be governed. There is a moral centre for Rawls because people intuitively have a sense of what is good and fair.

Smith goes beyond Rawls in believing there is a Divine force behind the moral centre. And in doing so, and has been discussed, believes not in a so-called FM or Capitalist way of doing things but in a Fair Market. All the ideas of Smith and those that resonate with him (and in his own way this would include Marx) are proponents of a Fair Market. A system where when most things are carried out in a fair and reasonable manner and aligned to a moral centre, will ensure balance and harmony not just for the individual but everyone.

Market corrections are the realigning of things as if by an IH, to be in resonance with a moral centre (which we intuitively are aware of when we are open to Divinity and the fact that God does exist). This is about balance and harmony.

What are termed ‘market corrections’ today is within the heartless framework that treats compassion as an externality thereby promoting the notion of punishment to set things right. The market or FM of today is a blind godless unforgiving system of punishment for what ‘delivers’ and what doesn’t because it is based on Fear. In new ways of doing business and having a natural flow of a community based nature of running society (as discussed in more detail in The Awakened Eco-nomy) we move away from Fear and all its concomitant horrors.

There is freedom for all human beings as we have been given the gift of free will and choice. But this is choice with an understanding of the reality that there are always parameters to everything: free will means the ability to choose between aligning oneself to the moral centre of Divinity or choosing not to align to it. The consequences are obvious and all around us as we can see the choices made which have resulted in a collective consciousness in the world which largely chose Magicism and the Fear, destruction and suffering it brings.

Fortunately, more of us are slowly coming to realize that we can choose the Fair Market, which allows for all of us being able to fulfill our positive potential to the highest.

In his own way Smith is in good ancient company, he is in effect promulgating a Tao of Economics: Yin-Yang balance that is the expression of the Creator in a Universe and world whose physicality we seem to experience most of the time without always being conscious of that beyond the immediate perception of our limited senses.

But when you open your heart, your mind will follow it to the moral centre within and align everything to the Source where all life comes from. When Fear drops away and the veil is lifted, a re-visioning of the world takes place and you can actually see that the Invisible Hand has been visible all along.