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To: Ann Corrigan who wrote (13)	10/29/2003 1:28:24 AM
From: LPS5	Read Replies (1) \| Respond to of 34

Smith emerges as a protectionist when one reads the following quote..."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." ROFL! How does that quote express a protectionist sentiment? LPS5

To: Ann Corrigan who wrote (13)	10/29/2003 6:52:24 AM
From: Bill Ulrich	Read Replies (1) \| Respond to of 34

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>