Tag Archives: Adam Smith

The myths of laissez-faire capitalism

The Right likes to make bold claims about free trade and laissez faire capitalism but these claims rest entirely on false premises. Below are some of the frequently-used defences of laissez-faire capitalism.

Free markets create more wealth than any other system.  

This is one of the biggest myths of all. The simple truth is that wealth is concentrated in a small number of hands. I had one free marketeer tell me that workers in the 19th century were “richer” (that was the word he used) in the 1890’s than they were at the beginning of the century. What he was trying to prove by this statement is unclear and I don’t think he’d even thought about it for a moment. Rising costs meant that, in real terms, the working classes were no better off than they were in the 18th century. Working class people could not hope to move up the social ladder in the 19th century. They were stuck where they were. The idea was that wealth will ‘trickle down’ to those below. It didn’t work then and it doesn’t work now but the Right continue to repeat the lie.

The free exchange of goods between nation will lead to world peace

Classical liberals like Adam Smith and Richard Cobden believed that free trade would magically lead to the abolition of war. However in order for the British Empire and other similar free trade empires like the French Empire, there was a constant need to invade other countries, enslave their peoples and cart the resources (booty) back to the home country – without resources in the form of raw materials, they would have nothing to manufacture and therefore have nothing to trade. Local rebellions against colonial rule were crushed with extreme brutality and the colonizers divided the people according to ‘ethnicity’ and would  install one group as the political elite, often with dire consequences. This is what the Belgians did in Rwanda when it created artificial divisions between the Tutsis and the Hutus.  The tensions between these groups came to a head in the late 1990’s when Western news media reported it as a recent phenomenon. Belgium was a free trade nation.

Free trade nations don’t go to war with each other.

Another lie. Britain went to war against the US (a free market country) in 1812. It also went to war against Germany in 1914. German military power had been on the rise since the creation of the German Empire in 1871. This worried Britain who had been the pre-eminent military power in the world. The assassination of Archduke Franz Ferdinand in Sarajevo in 1914 provided the perfect pretext to challenge German power.

Things work best when the state doesn’t intervene.

Between 1845 and 1852, the Irish Potato Famine devastated the country. Lord John Russell’s  Whig government, which was committed to laissez-faire capitalism, refused to intervene to relieve the suffering. As a result over 1 million people lost their lives through starvation and disease. Many more emigrated. Ireland was part of Britain, it had been forced into union in 1801 and yet, it was left to its own devices when the famine struck. The Whigs further justified their inaction by using Biblical interpretations drawn from Deuteronomy. Laissez faire capitalism is barbarism.

It’s better for all of us when nations open up their markets

The First Opium War (1839 – 42) is instructive because this is how self-described free market nations behave when they don’t get what they want. Opium had been a social problem in China for a number of years and the Empress wanted to stamp it out. But the British wanted to pay for Chinese silk in opium rather than silver. The Chinese refused and destroyed the opium, so Britain attacked China on the pretext that it was seeking compensation for the opium that had been destroyed.

The Second Opium War  (1856 – 60) saw the British and French Empires uniting to attack China. With opium as a convenient pretext, the British and French sought to open up China’s markets through the use of military force.  The subsequent British and French victory over the Chinese opened the way for other nations to follow and soon, the US, Russia and even Germany moved in to China to claim their share of the country’s resources. This war also led in the indentured servitude of millions of Chinese (Coolies)who were carried in British ships to the US and elsewhere to work on the railroads and the plantations of the Caribbean.

Free trade is a the guarantor of liberty.

History tells us that it is only those who enjoy great economic power who will also enjoy greater liberty. All one has to do is examine the social history of Britain, the US and other so-called free trade nations to see this. Workers in the 19th century were often forced to buy their necessities from the company they worked for. If workers organized themselves into unions and took industrial action, they were set upon by the state’s thugs.

Free trade means freedom for the rich and powerful and servitude for the rest of us.

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Why right libertarians take semantic refuge in classical liberalism

Classical liberalism in action – Victorian workhouses were prisons for the poor

Recently, I’ve noticed the numbers of right libertarians who have suddenly started claiming that they’re really “classical liberals”. Like cockroaches when they’re exposed to the light, vigorous scrutiny of their soi-disant libertarianism sends them scurrying into the gap between the skirting board and the floor of discourse. There, in the darkness, they feel safe. There they can claim that they are “classical liberals”. But their new-found old position relies entirely on the mass ignorance of the term “classical liberalism” and the historical materialism of the 19th century when classical liberalism (then called liberalism) was first applied as an economic doctrine.

These born-again classical liberals will apply the same narratives that exponents of neoliberalism will use as a defence of their doctrine: that wealth can only be created for all  if the state is “smaller” and business is freed from “bureaucracy” and “red tape” and that wealth will consequently trickle down to those below. This, they argue, will bring forth ‘freedom’ but the freedom that they speak of only applies to a small section of the population: the factory owners and the rentier capitalists. Trickle down doesn’t work, yet these born again classical liberals will claim that it does – though none of them can point to examples of where trickle down has succeeded.

So what are the key defining features of classical liberalism and how does it differ, if at all, from right libertarianism?

Classical liberalism’s key features are

  • Individual liberty
  • smaller state/limited government
  • Laissez faire capitalism/free markets
  • Freedom of speech, religion, press and assembly
  • Disregard for the poor and the needy
  • Social Darwinism
  • Utilitarianism

Right libertarians

  • Individual liberty
  • Laissez faire capitalism/free markets
  • Smaller state/limited or no government
  • Freedom of speech. religion, press and assembly
  • Disregard for the poor and needy
  • Social Darwinism

As you can see, there isn’t much difference between either of them and when right libertarians suddenly proclaim that they are “classical liberals”, they are dishonest in making this largely artificial distinction. The real reason for declaring themselves as classical liberals has more to do with romanticism, nostalgia and outright dishonesty than anything else. They want to go back to a time when people knew their place and stayed there. Social mobility did not exist; the working class stayed in their place. They were denied access to higher education and were tied to their places of work. Knowledge was reserved for the privileged and the powerful. In the eyes of the dominant political hegemony, knowledge in the hands of the subaltern classes was considered dangerous (think of William Tyndale’s struggle to publish the Bible in English). Because with knowledge and ideas came the possibility that authority could be questioned, which could lead, in turn, to civil disobedience and insurrection…even though this happened anyway and was met with considerable force.

The neoliberals and those right libertarians who subscribe to the small state notion are actually the  descendants of classical liberals. They can no more return to the past, then I can become the King of Tonga. They have selectivized the past by appropriating certain memories of the classical liberal period, which always seem to orbit the sun-like narrative of the British Empire. When one puts the point to them that Adam Smith’s assertion that “free markets will lead to world peace” is fallacious proposition, they will respond by asking, “did free market states go to war against each other”? It’s a red herring. There were plenty of wars, many of them waged by free market states against other nations. Free trade relied on wars and the colonization of other countries. It also meant outdoing the competition from other free market nations. Presumably, for our apologists, the Opium Wars were not waged in the name of free trade but were waged to punish the Chinese for not accepting opium rather than silver as payment for silk? It’s a fatuous argument but it’s the sort of defence right libertarians would use.  In the 19th century, the British Empire was the biggest drug pusher on the planet- there is no getting away from it.  It was because of this idea of  “free trade” that countries like China were forced to “open” their markets and thus open themselves to decades of foreign domination.

Classical liberals denied the right of workers to organize. It was only when the last of the Combination Acts was repealed that workers were able to organize in any meaningful way.  Socially, classical liberals were very much against the idea of the relief of poverty and sought to contain it within the Poor Laws. The workhouse, which had been around since the 14th century, saw an expansion in the 19th century after the passing of the Poor Law of 1834. Today’s born again classical liberals have similar ideas with regards to the poor and the unemployed, for whom they have resurrected the artificial distinctions of “deserving” and “undeserving”. Any money spent on the relief of poverty was seen as another impediment to the freedoms of the rich and powerful. One ‘argument’ that I encountered was “The working class were richer (sic) in 1899 than they were in 1801”. But this is another red herring: the working class were never “rich” and lived in overcrowded rented accommodation. Few of them moved up the social ladder. Those that did became the petite bourgeoisie: the shopkeepers, market traders or were otherwise recruited as instruments of oppression, nor did they buy their own properties in leafy districts of the industrial cities nor did any of them become industrialists. There was a glass ceiling preventing those at the bottom from becoming say, MPs, because of the property qualification.

The right libertarian is a dishonest creature that substitutes myths and tropes for facts. They extrapolate their arguments from sets of numbers in the hope that no one will spot the flaws in their thesis – which always overlooks society in favour of cold economic statistics. This decontextualization of numbers from the societal whole is their only defence and it’s a weak one. But the worst offence is to claim that they are “classical liberals” when they are really right libertarians looking for a way to divert attention away from their very postmodern interpretations of  selfishness and greed by hiding in the darkness of the past.

The use of the phrase “classical liberalism” by right libertarians is therefore an exercise in semantic subterfuge and should be laughed off as such.

UPDATE 11/5/11 @ 1213

I found this interesting blog written by an anarchist. Right libertarians don’t live in the real world.

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Filed under 19th century, Economics, History, History & Memory, Ideologies, Labour history, Language, Society & culture, Trade Unions, workers rights

Vince Cable: Marxist? I think not

I have to laugh: the usual Tory talking heads are still foaming at the mouth over Vince Cable’s supposed ‘anti-capitalist’ rhetoric which all hinges on a single passage in his speech to conference. The section of the speech in which he proposes to “shine a harsh light into the murky world of corporate behaviour”  was joined to the line “capitalism kills competition [where it can]”. This was initially presented on the BBC as a sort of diatribe against capitalism. If only. Dream on…

The Economist has an article with the bizarre  headline “Karl Marx meets Adam Smith”.

Business leaders were duly outraged. Richard Lambert of the Confederation of British Industry, an employer’s body, called the extracts “emotional”, and questioned whether Mr Cable had an alternative to capitalism. Pat McFadden, Labour’s business spokesman, accused him of disparaging the private sector that the economic recovery depends on. Others speculated that Mr Cable was undermining Nick Clegg, the Lib Dems’ leader and deputy prime minister, or that he might be destined to quit.

Oh dear, the Director of the CBI was upset. That isn’t anything to lose sleep over. But Pat McFadden? It just goes to show how far the Labour Party has slid to the right. I fail to see how Cable was “disparaging the private sector” when it was pretty obvious he was talking about consumer choice.

Meanwhile the Torygraph goes loopy with this gem

Yesterday, the Adam Smith Institute dismissed Mr Cable as “wrong on capitalism and wrong on Adam Smith”, complaining that “we have a Business Secretary who doesn’t understand business and who misinterprets the founder of modern economics, too”

To tell truth, who cares what the Adam Smith Institute or any of the other creepy right wing think tanks says? Adam Smith would be spinning in his grave if he knew that the ASI had taken his name and distorted his ideas!

In his ‘attack’ on the banks he manages to get a pretty nasty, if ill-informed, dig in,

On banks, I make no apology for attacking spivs and gamblers who did more harm to the British economy than Bob Crow could achieve in his wildest Trotskyite fantasies, while paying themselves outrageous bonuses underwritten by the taxpayer. There is much public anger about banks and it is well deserved.

Bob Crow is a “Trotskyite”? That’s news to me, the last time I checked he was a Tanky.  That Vince Cable isn’t a very good Marxist if he doesn’t know the difference between a member of the SWP and the CPB (Marxist-Leninist)! But the worst thing about this swipe is that Crow is actively working on his members behalf. Why should he attract the ire of Cable who, after all, worked as an economist for Shell? My guess is that Cable needed a crowd-pleaser but the man hasn’t got a clue; it’s a cheap shot but this is what we have come to expect from the Lib Dems.  Crow has his critics and the only point his critics ever seem to make is in relation to his salary. But is Crow drawing down the same kind of salary as Fred Goodwin? No. To be perfectly frank, Bob Crow is worth every penny of his salary: he’s a hardworking union leader who gets the best deal for his members…unlike Dave Prentis of UNISON.

Cable is a signed up, fully-fledged and functioning member of the capitalist fraternity. He’s not a Marxist and he certainly isn’t a Trotskyite. He’s a slippery Lib Dem politician who was once a member of the Labour Party. He was on the right of that party; he was so far right that he joined the SDP. Remember them?

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