For starters, I'd say we obviously don't have a perfectly competitive economy, given the degree of corporate conglomeration and control, not only over physical production, but over media, advertising and ideas.

Brainwashing through corporate inundation, and surreptitious tipping of global trade rules to favor corporate profit, I think were NOT Smith's idea of an "invisible hand."

He would have detested the power that corporations weal to dictate public policy specifically to obtain tax breaks, trade patents, secure intellectual property rights: "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."

He would likely opposed the centralisation of economic power in large multinationals at the expense of locally based small producers.

[ 26 September 2005: Message edited by: B.L. Zeebub LLD ]

As for Smith, I think he was seeing the end of mercantilism. He had no idea the extent of what industrialism was about to become. I suspect he probably would have changed his mind the way John S Mill did later on.(One who did see what industrialism was becoming). He might not have been so ideological as his followers today. He'd probably slap them cross the head and say move on already.

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Equal quantities of labour must at all times and in all places have the same value for the labourer. In his normal state of health, strength and activity, and with the average degree of skill that he may possess, he must always give up the same portion of his rest, his freedom and his happiness.
Adam Smith, "Wealth of Nations", b.I ch V.

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Adam Smith would be astonished by the ease of travel and communication in the modern world.

Polanyi wrote,

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While laissez-faire economy was the product of deliberate state action, subsequent restrictions on laissez-faire started in a spontaneous way. Laissez-faire was planned - planning was not.

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Adam Smith's naturalness of fit wasn't to be found so much in "the free market" as it was in the reactions by common people against it.

And I think that the digger movement more or less continues today. The world wars and cold war were a continuation of the struggle between pro-market forces and those who believe in common rights. The 1960's was a decade of protest around the world. Protests at Seattle and Quebec City are evidence that people still find something inherently flawed about "the free market." With regard to the attempts at privatizing water markets in their country, Bolivian's have asked, "Who can own the rain?."

[ 04 October 2005: Message edited by: Fidel ]

He wrote at length that the corporation was doomed to be the weakest type of a commercial firm because the wage-labourers at the store front would be insulated from incentives such as producer surplus. For that reason, they wouldn't conduct the affairs of the firm in the most lucrative way, because, hey, the wage you get is the wage you get regardless of whether:

-you make the sale or not
-you negotiate with the consumer
-you leave the store open for an extra 15 minutes after closing time to let the customers shop

Entry-level workers are expected to follow corporate policy and not to make decisions that could affect the firm's productivity in a very postive way.

Smith always thought that corporations were doomed to fail because of this very fact. The people in management are those who benefit directly from profits, and yet executives are not be the ones who make the transactions and interact with consumers directly.

Edited to add: Boy, was he mistaken...

[ 04 October 2005: Message edited by: Serendipity ]

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Originally posted by blooryonge1:
favoritism, corruption, bribery and thievery

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Add "obfuscating trickery" and it sounds a lot like the WTO.

[ 05 October 2005: Message edited by: mimsy ]

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Originally posted by arborman:
SMith was actually vehemently opposed to corporations, because he saw the interest of the investor as being too far separated from the interest of the firm, manager or employees. He saw a potential for major abuse. He was right (about that).

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Originally posted by Serendipity:

He did write (at length) that he thought they were to be an unviable and therefore doomed institution, a speculation where history proved him wrong, probably because he couldn't predict the advent of mass production.

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Originally posted by Serendipity:

Could you source that arborman? I never read anything suggesting that he was personally opposed to corporations as a matter of personal preference....He did write (at length) that he thought they were to be an unviable and therefore doomed institution, a speculation where history proved him wrong, probably because he couldn't predict the advent of mass production. But where does he say that he opposes them?

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Hmm, can't do it directly, but how about some indirect stuff from David Korten:

"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.

(this part is Smith)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 company?

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."

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People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is im-possible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and jus-tice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

A regulation which obliges all those of the same trade in a particular town to enter their names and places of abode in a public register, facilitates such assemblies...

A regulation which enables those of the same trade to tax themselves in order to provide for their poor, their sick, their widows, and orphans, by giving them a common interest to manage, renders such assemblies necessary.

An incorporation not only renders them necessary, but makes the act of the majority binding upon the whole. - The Wealth of Nations, Book I, Chapter X

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Homo economicus is this one-dimensional character that doesn't really define all of us. Perhaps it bears some semblance to Conrad Black, or the Thomson family or super-wealthy Walton family. But it's not me. Not really. Smith's homo economicus is a total fraud, and we can thank Smith's followers for distorting human nature, our economic goals and grotesque results. Smith's Wealth of Nations has become a bible for a handful of people born with genetic predispositions for greed.