Democracy Vs. Capitalism, or, Not Always A Conflict, Part 3

In theory, communism was supposed to create a utopia. In practice, it produced authoritarian disaster states, and it's by those results that it's judged. Capitalism was also supposed to produce a utopia and hasn't. While it's done better by people than its ideological rival, it has left a string of market and ethical failures by which results it must also be judged, as they were in Michael Moore's, Capitalism: A Love Story.

But are we in the United States really practicing free market capitalism as Adam Smith originally suggested it should go in The Wealth of Nations? Not really. That shouldn't get capitalism a pass, but until someone comes up with a Social Theory of Everything that produces perfect harmony and happiness for all, we need to take good ideas where we can find them.

Looking at the historical context in which Adam Smith wrote the starting document of economics and free market capitalism, trade in cities was stifled by guilds, cartels of small businesses whose monopolies on certain industries were protected by the government. Smith's specific objections to this method of organizing an economy had many parallels with the problems caused today by companies that are 'too big to fail.'

The ideal in Wealth of Nations is presented as a marketplace where easy entry into, and exit from, commerce is protected over the interests of individual actors or groups of actors. More, a commercial environment where no individual market actor could secure a government-protected right to profit, nor be empowered to extract steep rents for necessary services.

Without having to agree with or defend every idea Smith put forward, those ideas make as much sense in our time as they did in his. And they're entirely contrary to the way the monopolistic corporations featured in Capitalism: A Love Story function within the United States.

Smith was opposed, fundamentally, to people being kept out of work or prevented from setting up cottage industries for no good reason. He was opposed to any group of economic actors with sufficient power to push the government to act against the public interest. He was opposed to the hoarding of productive resources, such as land, by the powerful. He spoke harshly about 'conspiracies of masters' to deprive workers of their fair share of profits from the enterprises they contributed to. He held labor, the work effort required to acquire or make something, to be the common denominator of value in the marketplace.

In short, if Adam Smith were alive today, he might have made a cameo appearance in Michael Moore's movie.

While Smith railed against a different cast of characters than we have today, guilds and city-state mercantilism, the principles of his criticism apply readily to today's plutocrats. Any differences between the Weaver's Guild being given the right by the Crown to destroy the cloth of independent weavers exist only in degree from a Treasury Secretary taking orders from Citigroup and Goldman Sachs, corporations that have benefitted from government largesse but are hoarding cash instead of loaning it throughout the economy to promote industry and employment.

That isn't a free market and it isn't democracy. Most importantly, it isn't serving the public good, which should be of greater concern to all of us than the name of the ideology in fashion at the time.

Views expressed on this page are those of the authors and not necessarily those of Campaign for America's Future or Institute for America's Future