re: "the writings of Adam Smith … but Smith emerges as a protectionist when one reads the following quote from his book: 'Every individual endeavors to employ his capital as near home as he can, and consequently as much as he can in support of domestic industry.' "
Today's Most Mischievous Misquotation:
theatlantic.com
<SNIP> ...This makes Smith sound as if he thought that the invisible hand
always leads individuals who are pursuing their own interests to
promote the good of society. He did not. He saw the interests of
large capitalists as conflicting with those of the public: capitalists
seek high profits, which corrupt and impoverish society. In
another example the famous division of labor increases factory
output but erodes the intelligence, enterprise, and character of
workers. Smith's passage on the invisible hand says only that it
operates "in this as in many other cases" -- not always, not even
mostly.
The "case" that Samuelson and Nordhaus edited out is about trade,
and on this Smith said something indeed strange to modern
economists' ears. Before the passage that Samuelson and Nordhaus
excerpted, Smith had argued that investment at home produces
more "revenue and employment" than investment in foreign trade.
In the key sentence about the invisible hand, which Samuelson and
Nordhaus reworked into the italicized portion of the quotation,
Smith further argued that self-interest does lead the entrepreneur
to invest at home rather than in foreign trade.
By preferring the support of domestic to that of
foreign industry, he intends only his own security;
and by directing that industry in such a manner as
its produce may be of the greatest value, he intends
only his own gain, and he is in this, as in many
other cases, led by an invisible hand to promote an
end which was no part of his intention.
The invisible hand promotes the good of society by leading
entrepreneurs to invest at home rather than abroad.
Was Adam Smith not a free-trader after all? That is the wrong
question. We tend to lump trade policies into either of two
categories: free trade or protectionism. Smith was concerned with
a third category: mercantilism, a system and ideology, fostered by
merchants, that both promotes and manages trade. The Wealth of
Nations is an extended polemic against mercantilism...</SNIP> |
