[Vision2020] Karl Marx and Adam Smith: A Tale of Two Economists

[nickgier at roadrunner.com]

Greetings:

This was my radio commentary/column for this week. 

Visionaries might ask why my dean thought I would be so keen on visiting Marx’s grave, but back home my faculty union, six years old at the time, had been accused of planning a Communist take over of the UI.  The campus was still in "safe" hands when I arrived home. Our faculty critics obviously weren't aware of the fact that the American Federation of Teachers supported the Vietnam war and its goal of pushing back those dirty Commies, and its affiliate unions in the AFL-CIO had a long history of anti-Communism.

The full version is attached as a PDF file.

Nick Gier

KARL MARX AND ADAM SMITH: A TALE OF TWO ECONOMISTS

In 1979, when I was coming home from my first sabbatical in Denmark, I stopped off in London at the invitation of my dean.  Very soon after my arrival, he and his wife took me to see Karl Marx’s grave, where we found fresh flowers and mementos decorating the site.

I have not yet had a chance to visit the grave of Adam Smith, author of The Wealth of Nations and the father of free market economics.  Smith wrote his famous book after he retired from teaching moral philosophy at the University of Glasgow.

As opposed to his libertarian descendants, Smith believed that governments should build and maintain roads, bridges, and canals. He also believed in public education (with state licensed teachers), state funded hospitals, government centers where clothing would be inspected for quality, and a state-run postal system.

Smith believed that there was more to life than just making money. For him a poor person with wisdom and virtue is far better than a rich man with neither.  Admiring the rich while despising the poor is, according to Smith, "the great and most universal cause of the corruption of our moral sentiments."

With regard to successful economic theory, Smith wins over Marx hands down: state ownership of the means of production plus a totalitarian government restricting basic freedoms have been an unmitigated disaster. 

Many 19th Century socialists saw these totalitarian possibilities in Marx's writings, and they countered the "First International" of 1864 with the "Second International" in 1889. In that same year the Swedish and German Social Democratic Parties were founded on the premise that Marx’s desire for social justice could be achieved by democratic means.

Over 100 political parties--known as Labor, Socialist, Social Democrat all over the world---are affiliated with the Socialist International, founded in 1951. These democratic parties can take great pride in creating some of the world’s most prosperous and humane societies. Recently many have lost power to center-right governments, but the extensive social safety nets built by their leftist predecessors still remain in place. 

European nations have weathered the recent financial crisis fairly well, but countries that followed more libertarian policies--Iceland, Ireland, and Greece--got into the most difficulty. For example, Goldman Sachs sold the center-right Greek government financial instruments that allowed it to hide its huge debt.

A 2006 study done by the Canadian Centre for Policy Alternative compared low tax countries such as the U.S. and the UK, influenced by Ronald Reagan and Margaret Thatcher in the last 30 years, and the Nordic countries with high taxes and substantial government regulation. 

The authors conclude that "of the 33 economic indicators examined, the Nordic countries lead on 19 indicators and the Anglo-American countries on 14." With regard to social and health issues the Nordic countries did much better on 43 of 50 indicators.

Some recent experiments have shown, contrary to Smith’s theory, that self-interest may not be as strong as we thought in economic exchanges.  In the "Ultimate Game," in which a player with a sum of money is told to share it with an anonymous partner, the monied players give on average 43-48 percent of the sum. 

After 120 years working and ruling in democratic institutions, Marxists-turned-Social Democrats have gradually moved towards the center, and more doctrinaire socialists criticize them from the left every day. 

Ironically, many American followers of Adam Smith stand to his right in a country that has the smallest Social Democratic party and the weakest and most conservative labor movement. 

American capitalism has produced the highest levels of economic inequality in the industrialized West, and as a result it has the worst scores on nine major health and social indicators. (See www.home.roadrunner.com/~nickgier/SpiritLevel.htm)

Adam Smith would never have supported the high levels of taxation and government regulation that exist today, but he could not have foreseen the incredible complexity of the world economy, the huge inequities of unfettered markets, and the dangers of unscrupulous financial dealings, which brought on the Great Recession and world financial markets to the brink. 

These events have convinced many people that the "third way" between capitalism and Communism has proved itself more than worthy of respect and application.

Nick Gier taught philosophy at the University of Idaho for 31 years.

-------------- next part --------------
A non-text attachment was scrubbed...
Name: MarxSmith1663.pdf
Type: application/pdf
Size: 35970 bytes
Desc: not available
Url : http://mailman.fsr.com/pipermail/vision2020/attachments/20100311/50563004/attachment-0001.pdf