The Wealth of Nations/Books I-III (Penguin Classics)

Rating:
Summary: An interesting, but hard read
Review: The Wealth of Nations handles a lot of economical phenomena in a concrete but sometimes complex way. On one hand the book is filled with ideas, some convincing, some out-dated, some fundamental to the current believe in free-markets. These ideas are combined with appealing (or appalling) examples of the injustice done to people by disturbing the free-market. On the other hand however, I find that certain sections of the book require a lot of concentration. The book is an interesting, but slow and at times difficult, read.

Essentially, it is a treatise on the power of individuals to maximise their own wealth and therefor a support for the natural liberty of men and an argument for free-markets. Not as a perfect system in which there will be no misery, but as a system that gives individuals the greatest (and most just) opportunity to gain happiness and which will be the quickest to respond to changes in supply and demand (and therefor decrease the misery which is created when governments ignore gaps between supply and demand).

It is not a book that believes in the pure goodness of companies (but explicitly states that companies have a interest which is directly opposite to that of society as a whole. I.e. the interest of companies is to create a supply shortage so they can ask prices above costprice), but says that the best way to break the power of these companies is the allow free competition. It also reveals that political decisions that at fist glance seems compassionate, might in fact be inhumane, cruel and the cause of much suffering (because on the long run they lead to a supply shortage). The examples given here, are still relevant to view the decisions made by politicians in today's so-called free market countries.

Rating:
Summary: A Classic Misinterpreted by Those Who Revere it Most
Review: This Book is a classic. I would not go so far as to add it to the western Canon, but it contains the foundations of modern Economics. Its explaination for how economies work is still unsurpassed. Division of Labour, the invisible hand of consumer demand and the uses and mis-uses of taxation are all here. It should be stressed however, that this edition does not include books IV and V which concern the proper role of govt. It is also the section most ideologues forget to read and contains all the rudiments for a minimal welfare state and and active role for govt. in planning FOR competition, NOT the planning OF competition --- a very important distinction and one lost on those who see no positive role for the state in the economy.

It is unfortunately most used as a classic for those seeking a rationale for exploitation. Smith did not intend it as such and to see it as that is indeed to read it very selectively. The invisible hand is a useful interpretation for demand economics, but it is, like all other things only a description of market forces as they operate. It is not always the best way to organise everything as modern day ideologues would presuppose. It is of course the basis of business --- and it should be --- but Smith also has lots to say about how other economic factors operate in society.

One thing to make clear is this: Smith is not anti-State, as some ideologues in the US would like to think. He is balanced in his view of the state --- it is best left out of economic planning --- but it does clearly have an important role to play. The role of the State is to

1) create the conditions for the smooth flow of capital and its allocation into its most efficient uses and not to erect barriers in the process.

2) It also must necessarily collect taxes since the smooth and efficient operation of the state and the benefits its provide is in the interest of the accumulation of Capital.

3) The State also directly participates in the economy when projects which are obvious to the public benefit, but "which to no one would accrue an economic profit" --- he offers such examples as lighthouses and some roads and defence --- areas where there is an obvious public good, but to which no one would make a profit. Lighthouses are good examples, but like everything else in today's economy an interpretation for this could be made for universal health care and, of course, education; the mere fact that people do not have to worry about providing for education or health allows them to carry on in amassing capital in other endevours. Of course there is a slippery logic here but such is the rationale for the limited, but much greater role, the state provides in most developed economies outside of the United States.

4) Taxation policy is here as well. In the last book, Book V (not included in this edition), Smith describes the foundation of taxation and where it works best. He starts with the idea that "those who benefit the most from the smooth functioning of the state, should also be the ones who pay more." While not a prescription for progressive taxation policies it is the right way to think about tax and certainly would never excuse preferential taxation policies for the rich (such as in the US) but could be used as a foundation for a universal flat tax.

Such a tax is perhaps the best, but as Smith points out, where and how to collect it is always the difficulty. He comes out more or less in favour of a consumption tax policy since it would approximate the wealth the people earn in the first place and would not, for example overburden companies or people with high income taxes when they may not have high earnings.

There is however little in here about social policy, but Smith does see it as the right of the State to, in his time, provide welfare in the guise of work houses (19th Century hell holes). But that was as good as public welfare got in those days so we can posit that Smith would have carried his logic somewhat forward and provided for some social programmes --- though the extent of them would be a subject of no doubt fierce debate.

Overall a book that every thinking person should have on their shelf. Like most things it has some warts over time, but it is still the logical Tome on which capitalism rests its bones. Not until Marx did someone really challenge its dictates --- Smith basically won the argument on most points. But willingness for those with an inability to think critically, to use this book as justification for the domination of the weak by the strong, has little to do with Smith --- it has everything to do with those who are looking for justification of Greed --- and Gordon Gecko and Adam Smith have little in common.

Rating:
Summary: The Tao of Economics
Review: This is one of the truly great books produced by the Western world. Although much has been written on economics since, it considerably broadened my perspective to read it in the original.

I can't help feeling that those who pan Wealth of Nations as an apology for exploitation simply haven't read it. That's simply not what the book is about. For if you really do care about the underpriveleged masses -- and it's imminently clear that he really does -- then you better consciously organize your state in such a manner that money will flow naturally where it's most needed.

I'd been told before I read it by several people that AS was, for example, apologizing for the East India Trading Company? Does his apology for EIT include the lengthy chapter which discuss in full detail how and why the East India Trading Company was responsible for an wide array of abuses in the Far East, and why no similar company would be legal if a society were fully moral and knew its own best interest?

Nor is it a blind apology for laissez faire economics, though it does recommend non-intervention by the government insofar as that is possible. Still he fully recognizes the need for social services, rightly understood and rightly executed.

In fact, I can't see how anyone who reads it could view it as an apology at all -- it's simply a statement of fact. Adam Smith is not the one carrying an ideology around on his shoulder. You may not like it that the world works this way -- that's another matter. But that IS the way it works... you are made to see that for yourself. It is not imposed on you as dogma.

And after reading AS, I'm left feeling very happy that that's the way the world works.

I think the most fundamental idea I am left with after reading all those pages, is that wealth is a verb, not a noun. Land and labor (i.e. food and farming) are the bottom line of economics. Treat your farmers well. Unjust practices in trading will ultimately backfire.

The dynamo which runs the machine that creates wealth lies within each individual - it is the individual's will to better his or her condition. To the degree that this aspect of human nature is given the power to express itself , the nation will be vitalized internally.

Rating:
Summary: The apology for exploitation
Review: Two hundred years ago capitalism was really beginning to take over as the dominant economic system. Capitalism was at the time a system allowing an economic and scientific growth, much faster than under the feudal systems, and played a progressive role. However capitalism led to a new kind of oppression of the working class. Adam Smith gave the bourgoise a theory stating that their oppression of the working class was for the common good of all mankind, thus serving as an apology for oppression.

This book is a lousy apology. Capitalism is an old-fashioned economic system, ready to become buried on the scrapyard of history. Workers of all countries, Unite!