We live in a time of ferocious de-regulation as the Republican majority in both houses of government in the United States is in positive tizzy to rid the country of those nasty regulations that have been interfering with the increase of profits for the very few. But there are regulations and there are regulations. Some are in the spirit of “mercantilism” that is intended to increase a nation’s wealth by regulating all of the nation’s commercial interests. Those are the regulations people like Adam Smith and Edmund Burke had in mind when they argued for a system of “free enterprise” that would increase human liberty and contribute to the common good. That was in the eighteenth century, the age of Enlightenment.

But there are regulations today that are designed to protect citizens from the dangers following upon the blind pursuit of profit that threaten the health and well-being of us all. Smith fought against “mercantilism” because the government at that time was intent on decreasing wages and expanding the pool of needy workers that would then be available to the wealthy who owned the factories. Smith argued vociferously for raising the wages of the working classes. The attacks of Karl Marx were also against the same propertied class in the name of the “workers of the world.” Today’s regulations that are designed to protect citizens from corporate abuse, not to mention the destruction of the planet that sustains us all, are of a different order and would most certainly not have been opposed by Adam Smith. One wonders about Edmund Burke who, while a student of Adam Smith, was also a more ferocious defender of the rights of the propertied classes —  though he had some rough words for the “sophists, economists, and calculators” who pervert the true principles of economy by promoting policies that were inimical to the welfare of the country.

In any event, those who might refer to Smith or to Burke in pursuing the elimination of regulations might want to reflect on the intention of the two thinkers., Both were concerned about the liberty of all citizens, though Smith was primarily concerned about the liberty of the ordinary workers who were busily being exploited in his day by the mercantile classes, the owners of the means of production, as Marx would have it a century later. Smith was a compassionate thinker, a pillar of the British Enlightenment and firmly at the center of the Scottish Moral Sense School of philosophy who was convinced that men would, left to themselves, do the right thing. His famous comment, often invoked in defense of free-enterprise capitalism should be taken in the context of his entire thesis and in his earlier work in moral philosophy. When he says that

“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest”

we must pause and reflect that this is the man who regards human sympathy and benevolence as fundamental traits in the human soul. The pursuit of self-interest, in Smith’s view, would not conflict with benevolence or the well-being of others, because we are all, Smith thought, concerned not only about our own good but also the good of our fellow human beings. By pursuing self-interest we are at the same time pursuing the best interest of others. There is no conflict, in Smith’s view, because all humans want all other humans to be happy and well off. All, that is, but those who own the factories that employ humans at starvation levels. Smith fought hard to demand that the government, if it interfere at all, fund public education and work to promote policies that raise the wages of the working men and women rather than to reduce them as many would do in his name today. The mercantile system that Smith criticized sought to direct the economy in the interests of national wealth and power, not in the direction of the ordinary worker. Thus, when he advocates free enterprise it was because he was convinced that left to themselves workers would care for one another and help the economy at the same time. He was convinced, for example, that educating the workers and raising their wages would increase productivity, improve worker morale, and increase profits, while at the same time making it possible for the workers to live fuller, richer lives. This is the free-enterprise system he advocated.

Smith would not have fought against the sorts of regulations that protect citizens today against the abuses of the large corporations that would poison the air and water. Nor would he defend the supposed “right” of mega-corporations to be deregulated in the name of increased profits. Certainly not if those actions were undertaken at the cost of increasing poverty for increasing numbers of men and women and direct threats to their health and the preservation of the planet on which we all depend, which they most assuredly are. Smith would never condone, for example, the sort of attacks on the Environmental Protection Agency we have seen of late. So those who invoke his name in defense of their attacks on regulations might to do well to actually read Adam Smith’s book and pause to reflect on the long-term costs of their short-term thinking.  It’s not all about profits. It’s all about the common good. It was in Smith’s time and it still is in our’s.


6 thoughts on “Regulations

  1. Hugh, very thought provoking post. Here is one area where I would argue against Mr. Smith.

    Unfortunately, altruism is not as widespread as he would hope. I have personally witnessed the impact of greed in leadership that caused actions that were certainly not for the greater good. Also, in Jim Collins book, “Built to Last,” the companies that beat the pants off their best competitor had a key tenet of “be more than profits,” as a mantra to be good community citizens. This was not an inconsequential tenet and showed that companies that did this were more successful than those who did not.

    We do need regulations, but we must be vigilant against bureaucracy and ineffective regulations. We should constantly check them to see if they are efficacious, improving them or abolishing them. I am not a fan of broad brush comments that all regulations are bad. I have seen too much insider trading, backdating stock options, interlocking boards, collusion, pollution, cheating and just pure greed.

    As I write this I am thinking of a few CEOs who were some of the greediest SOBs I have come across in consulting or research. They could not be regulated enough. One of them was hearing about a proposed plan for employees and after a few minutes he stopped a former colleague of mine and asked “What’s in it for me?”

    So, I would sit Mr. Smith down and tell him a few stories and see what he would say about the need for regulation. Keith

    • I don’t agree with Smith, either. He strikes me as someone who didn’t get out much — wrote too many books, perhaps! But my point was that if you invoke Smith in defense of free enterprise capitalism you have to buy the whole package, not just the parts that suit your preconceived notions. In his view free enterprise works only because folks share a sense of fellow-feeling. If you deny fellow-feeling you really must also reject the notion of free enterprise if you want to insist that it morally justifiable. (And when I say “you” I mean those who lean on Adam Smith when he will prop up their pre-conceived notions about free enterprise!)

  2. It would seem that Smith was wearing rose-coloured glasses when he viewed the human race. However, I once wore those glasses. I once thought that all human beings were humane, that they cared for their fellow creatures and would always give others a leg up. I’m not sure when or where I lost my rose-coloured glasses, but they have been gone for at least a few decades now. The current economic philosophy, which mirrors Reagan’s ‘trickle-down’ economics, did not work in the 1980s and it will not likely work now, when corporate greed and the infamous 1% are ever more desirous of expanding their own coffers, though God only knows what they plan to do with all that wealth! Sigh. Good post, my friend.

    • I have found that many academics and others who read and write a lot of books tend to view the world through various colored glasses! Ironically, in Smith’s day there were hosts of people, including the Methodists, who shared Smith’s view. Were people more caring then? Or perhaps all those folks simply hoped they were!

      • I suspect that the core of humans has not changed much, but rather it was impolitic to show one’s colours back in the day, whereas now … a lack of humanity has been normalized.

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