Posts Tagged ‘economics’

Adam Smith meets Occupy Wall Street

Wednesday, October 19th, 2011

Some 235 years ago Adam Smith wrote about what we call “the invisible hand”. Smith said that as each individual works to improve his or her own personal situation this results in an improvement for the economy as a whole, and thus improves everyone’s welfare. This principle has become recognized as one of the key drivers of the enormous wealth created over the last 200 years, and the consequent improvement in living standards for all who live in societies so guided.

This improvement in living conditions is sometimes hard to grasp. I was at a history lecture a few years ago where the lecturing Professor was asked “Did wealthy people 100 years ago live as well as wealthy people do today?” His response was that “100 years ago no one in our country lived as well as the poorest of us today”. We forget that a bath was a bi annual affair. Inside plumbing was just coming into use, as were cars, airplanes, and electricity. Radio, TV and things such as cell phones were a distant dream.

So what does Adam Smith have to do with the Occupy Wall Street protests? The protesters have varied objectives, but it seems that one recurring theme is to get rid of “corporate greed”. A corporation is, of course, a legal person allowed by law for the purpose of aggregating wealth for use in pursuing expensive ventures. Corporate greed? The invisible hand? Sounds like the same thing to me.

Do the Occupy Wall Street protestors want to throw out this approach to creating national wealth, and the consequent benefits it has accrued in recent centuries? People like Karl Marx also wanted to throw out this approach, but he offered an alternative. Unfortunately for his adherents, his alternative was a colossal failure in countries that tried it. But the question remains, what do these protestors want as an alternative?

One adage we hear a lot these days is not to quit your job until you have another one lined up. Shouldn’t we say the same thing about replacing economic system that lies at the base of our long term growth in prosperity?