JiscMail Logo
Email discussion lists for the UK Education and Research communities

Help for INDUSTRIAL-ECOLOGY Archives


INDUSTRIAL-ECOLOGY Archives

INDUSTRIAL-ECOLOGY Archives


INDUSTRIAL-ECOLOGY@JISCMAIL.AC.UK


View:

Message:

[

First

|

Previous

|

Next

|

Last

]

By Topic:

[

First

|

Previous

|

Next

|

Last

]

By Author:

[

First

|

Previous

|

Next

|

Last

]

Font:

Proportional Font

LISTSERV Archives

LISTSERV Archives

INDUSTRIAL-ECOLOGY Home

INDUSTRIAL-ECOLOGY Home

INDUSTRIAL-ECOLOGY  December 2001

INDUSTRIAL-ECOLOGY December 2001

Options

Subscribe or Unsubscribe

Subscribe or Unsubscribe

Log In

Log In

Get Password

Get Password

Subject:

fwd: Adam Smith

From:

Karl Fellenius <[log in to unmask]>

Reply-To:

Karl Fellenius <[log in to unmask]>

Date:

Fri, 21 Dec 2001 16:27:08 -0800

Content-Type:

text/plain

Parts/Attachments:

Parts/Attachments

text/plain (254 lines)

--for your info.--

http://iisd1.iisd.ca/pcdf/corprule/betrayal.htm

                     THE BETRAYAL OF ADAM SMITH

                                    Excerpt from
                 When Corporations Rule the World
                                     2nd Edition
                                 by David C. Korten

It is ironic that corporate libertarians regularly pay homage to Adam Smith as
their intellectual patron saint,
since it is obvious to even the most casual reader of his epic work The Wealth of
Nations that Smith would
have vigorously opposed most  of their claims and policy positions. For example,
corporate libertarians
fervently oppose any restraint on corporate size or power. Smith, on the other
hand, opposed any form of
economic concentration on the ground that it distorts the market's natural ability
to establish a price that
provides a fair return on land, labor, and capital; to produce a satisfactory
outcome for both buyers and
sellers; and to optimally allocate society's resources.

Through trade agreements, corporate libertarians press governments to provide
absolute protection for the intellectual
property rights of corporations. Smith was strongly opposed to trade secrets as
contrary to market principles and would
have vigorously opposed governments enforcing a person or corporation's claim to
the right to monopolize a lifesaving drug
or device and to charge whatever the market would bear.

Corporate libertarians maintain that the market turns unrestrained greed into
socially optimal outcomes. Smith would be
outraged by those who attribute this idea to him. He was talking about small
farmers and artisans trying to get the best price
for their products to provide for themselves and their families. That is
self-interest, not greed. Greed is a high-paid
corporate executive firing 10,000 employees and then rewarding himself with a
multimillion-dollar bonus for having saved
the company so much money. Greed is what the economic system being constructed by
the corporate libertarians encourages
and rewards. [See An Economic System Dangerously Out of Control .]

Smith strongly disliked both governments and corporations. He viewed government
primarily as an instrument for extracting
taxes to subsidize elites and intervening in the market to protect corporate
monopolies. In his words, "Civil government, so
far as it is instituted for the security of property, is in reality instituted for
the defense of the rich against the poor, or of those
who have some property against those who have none at all.'' Smith never suggested
that government should not intervene to
set and enforce minimum social, health, worker safety, and environmental standards
in the common interest or to protect the
poor and nature from the rich. Given that most governments of his day were
monarchies, the possibility probably never
occurred to him.

The theory of market economics, in contrast to free-market ideology, specifies a
number of basic conditions needed for a
market to set prices efficiently in the public interest. The greater the deviation
from these conditions, the less socially
efficient the market system becomes. Most basic is the condition that markets must
be competitive. I recall the professor in
my elementary economics course using the example of small wheat farmers selling to
small grain millers to illustrate the
idea of perfect market competition. Today, four companies--Conagra, ADM Milling,
Cargill, and Pillsbury--mill nearly 60
percent of all flour produced in the United States, and two of them--Conagra and
Cargill--control 50 percent of grain
exports.

In the real world of unregulated markets, successful players get larger and, in
many instances, use the resulting economic
power to drive or buy out weaker players to gain control of even larger shares of
the market. In other instances,
"competitors" collude through cartels or strategic alliances to increase profits
by setting market prices above the level of
optimal efficiency. The larger and more collusive individual market players
become, the more difficult it is for newcomers
and small independent firms to survive, the more monopolisitic and less
competitive the market becomes, and the more
political power the biggest firms can wield to demand concessions from governments
that allow them to externalize even
more of their costs to the community.

Given this reality, one might expect the neoliberal economists who claim Smith's
tradition as their own to be outspoken in
arguing for the need to restrict mergers and acquisitions and break up
monopolistic firms to restore market competition.
More often, they argue exactly the opposite position--that to "compete" in today's
global markets, firms must merge into
larger combinations. In other words, they use a theory that assumes small firms to
advocate policies that favor large firms.

Market theory also specifies that for a market to allocate efficiently, the full
costs of each product must be born by the
producer and be included in the selling price. Economists call it cost
internalization. Externalizing some part of a product's
cost to others not a party to the transaction is a form of subsidy that encourages
excessive production and use of the product
at the expense of others. When, for example, a forest products corporation is
allowed to clear-cut government lands at
giveaway prices, it lowers the cost of timber products, thus encouraging their
wasteful use and discouraging their recycling.
While profitable for the company and a bargain for consumers, the public is
forced, without its consent, to bear a host of
costs relating to water shed destruction, loss of natural habitat and recreational
areas, global warming, and diminished future
timber production.

The consequences are similar when a chemical corporation dumps wastes without
adequate treatment, thus passing the
resulting costs of air, water, and soil pollution to the community in the form of
health costs, genetic deformities, discomfort,
lost working days, a need to buy bottled water, and the cost of cleaning up
contamination. If the users of the resulting
chemical products were required to pay the full cost of their production and use,
there would be a lot less chemical
contamination in our environment, our food and water would be cleaner, there would
be fewer cancers and genetic
deformities, and we would have more frogs and songbirds. If the full cost of
producing and driving cars were passed on to
the consumer we would all benefit from a dramatic reduction in urban sprawl,
traffic congestion, the paving over of
productive lands, pollution, global warming, and depletion of finite petroleum
reserves.

There is good reason why cost internalization is one of the most basic principles
of market theory. Yet in the name of the
market, corporate libertarians actively advocate eliminating government regulation
and point to the private cost savings for
consumers while ignoring the social and environmental consequences for the broader
society. Indeed, in the name of being
internationally competitive, corporate libertarians urge nations and communities
to increase market distorting
subsidies--including resource giveaways, low wage labor, lax environmental
regulation, and tax breaks--to attract the jobs
of footloose corporations. An unregulated market invariably encourages the
externalization of costs because the resulting
public costs become private gains. In the end it seems that corporate libertarians
are more interested in increasing corporate
profits than in defending market principles.

The larger the corporation and the "freer" the market, the greater the
corporation's ability to force others to bear its costs and
thereby subsidize its profits. Some call this theft. Economists call it "economies
of scale."

Neva Goodwin, ecological economist, head of the Global Development and Environment
Institute at Tufts University, and an
advocate of cost internalization, puts it bluntly. "Power is largely what
externalities are about. What's the point of having
power, if you can't use it to externalize your costs--to make them fall on someone
else?"

Corporate libertarians tirelessly inform us of the benefits of trade based on the
theories of Adam Smith and David Ricardo.
What they don't mention is that the benefits the trade theories predict assume the
local or national ownership of capital by
persons directly engaged in its management. Indeed, these same conditions are
fundamental to Adam Smith's famous
assertion in The Wealth of Nations that the invisible hand of the market
translates the pursuit of self-interest into a public
benefit. Note that the following is the only mention of the famous invisible hand
in the entire 1,000 pages of The Wealth of
Nations.

       By preferring the support of domestic to that of foreign industry, he [the
entrepreneur] 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.

Smith assumed a natural preference on the part of the entrepreneur to invest at
home where he could keep a close eye on his
holdings. Of course, this was long before jet travel, telephones, fax machines,
and the Internet. Because local investment
provides local employment and produces local goods for local consumption using
local resources, the entrepreneur's natural
inclination contributes to the vitality of the local economy. And because the
owner and the enterprise are both local they are
more readily held to local standards. Even on pure business logic, Smith firmly
opposed the absentee ownership of
companies.

       The directors of such companies, however, being the managers rather of
other people's money than of
       their own, it cannot well be expected, that they should watch over it with
the same anxious vigilance
       with which the partners in a private copartnery frequently watch over their
own .... Negligence and
       profusion, therefore, must always prevail, more or less in the management
of the affairs of such a
       ompany?

Smith believed the efficient market is composed of small, owner-managed
enterprises located in the communities where the
owners reside. Such owners normally share in the community's values and have a
personal stake in the future of both the
community and the enterprise. In the global corporate economy, footloose money
moves across national borders at the speed
of light, society's assets are entrusted to massive corporations lacking any local
or national allegiance, and management is
removed from real owners by layers of investment institutions and holding
companies.

It seems a common practice for corporate libertarians to justify their actions
based on theories that apply only in the world
that by their actions they seek to dismantle. Economist Neva Goodwin suggests that
neoclassical economists have invited
this distortion and misuse of economic theory by drawing narrow boundaries around
their field that exclude most political
and institutional reality. She characterizes the neoclassical school of economics
as the political economy of Adam Smith
minus the political and institutional analysis of Karl Marx:

       The classical political economy of Adam Smith was a much broader, more
humane subject than the
       economics that is taught in universities today.... For at least a century
it has been virtually taboo to talk
       about economic power in the capitalist context; that was a communist
(Marxist) idea. The concept of
       class was similarly banned from discussion.

Adam Smith was as acutely aware of issues of power and class as he was of the
dynamics of competitive markets.
However, the neoclassical economists and the neo-Marxist economists bifurcated his
holistic perspective on the political
economy, one taking those portions of the analysis that favored the owners of
property, and the other taking those that
favored the sellers of labor. Thus, the neoclassical economists left out Smith's
considerations of the destructive role of
power and class, and the neo-Marxists left out the beneficial functions of the
market. Both advanced extremist social
experiments on a massive scale that embodied a partial vision of society, with
disastrous consequences.

If corporate libertarians had a serious allegiance to market principles and human
rights, they would be calling for policies
aimed at achieving the conditions under which markets function in a democratic
fashion in the public interest. They would be
calling for an end to corporate welfare, the breakup of corporate monopolies, the
equitable distribution of property
ownership, the internalization of social and environmental costs, local ownership,
a living wage for working people, rooted
capital, and a progressive tax system. Corporate libertarianism is not about
creating the conditions that market theory argues
will optimize the public interest, because its real concern is with private, not
public, interests.

Top of Message | Previous Page | Permalink

JiscMail Tools


RSS Feeds and Sharing


Advanced Options


Archives

March 2024
February 2024
January 2024
December 2023
November 2023
October 2023
September 2023
August 2023
July 2023
June 2023
May 2023
April 2023
March 2023
February 2023
January 2023
December 2022
November 2022
October 2022
September 2022
August 2022
July 2022
June 2022
May 2022
April 2022
March 2022
February 2022
October 2021
September 2021
August 2021
June 2021
April 2021
March 2021
February 2021
December 2020
November 2020
October 2020
September 2020
August 2020
July 2020
May 2020
April 2020
March 2020
February 2020
January 2020
December 2019
November 2019
October 2019
September 2019
August 2019
June 2019
April 2019
March 2019
January 2019
December 2018
November 2018
October 2018
September 2018
August 2018
July 2018
June 2018
May 2018
April 2018
March 2018
February 2018
January 2018
November 2017
October 2017
September 2017
July 2017
June 2017
May 2017
April 2017
March 2017
February 2017
January 2017
December 2016
November 2016
October 2016
September 2016
August 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
April 2014
February 2014
January 2014
November 2013
September 2013
August 2013
July 2013
March 2013
February 2013
December 2012
November 2012
September 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
September 2010
August 2010
July 2010
June 2010
May 2010
April 2010
March 2010
February 2010
January 2010
December 2009
November 2009
September 2009
August 2009
July 2009
May 2009
April 2009
March 2009
January 2009
December 2008
November 2008
October 2008
September 2008
July 2008
June 2008
May 2008
April 2008
February 2008
January 2008
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
January 2007
December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006
December 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005
April 2005
March 2005
February 2005
January 2005
December 2004
November 2004
October 2004
September 2004
August 2004
July 2004
June 2004
May 2004
April 2004
March 2004
February 2004
January 2004
December 2003
November 2003
October 2003
September 2003
August 2003
July 2003
June 2003
May 2003
April 2003
March 2003
February 2003
January 2003
December 2002
November 2002
October 2002
September 2002
August 2002
July 2002
June 2002
May 2002
April 2002
March 2002
February 2002
January 2002
December 2001
November 2001
October 2001
September 2001
August 2001
July 2001
June 2001
May 2001
April 2001
March 2001
February 2001
January 2001
December 2000
November 2000
October 2000
September 2000
August 2000
July 2000
June 2000
May 2000
April 2000
March 2000
February 2000
January 2000
December 1999
November 1999
October 1999
September 1999
August 1999
July 1999
June 1999
May 1999
April 1999
March 1999
February 1999
January 1999
December 1998
November 1998
October 1998
September 1998


JiscMail is a Jisc service.

View our service policies at https://www.jiscmail.ac.uk/policyandsecurity/ and Jisc's privacy policy at https://www.jisc.ac.uk/website/privacy-notice

For help and support help@jisc.ac.uk

Secured by F-Secure Anti-Virus CataList Email List Search Powered by the LISTSERV Email List Manager