There’s nothing simple in economics

In his recent column in the OBSERVER, Tom Kirkpatrick cited 18th century philosopher Adam Smith’s notion of an “Invisible Hand” — a metaphor in economics that describes the built-in, self-regulatory nature of the free market system. It served as context for the writer’s complaint, which had to do with the slow work of the Silver Creek street department in picking up his brush from the terrace. It also was a convenient way to advance his political agenda by touting the superiority of the private sector over the public.

Adam Smith’s ideas were essential during the advent of capitalism. The mantra among merchants and entrepreneurs who might have felt the need to justify their wealth became “Greed is Good” because competition benefits all. Sure, those merchants glut, or hoard more than their fair share, but high tides lift all ships, they say. They were all about Laissez-fare: the less government interference, the better the system works.

A cartoonish example to simplify this notion of competition: Greedy Merchant Greenberg brings a case full of shiny green fish eyes to a mountain village. These are rare items in this inland place. He senses the people’s desire for the gleaming beads, does some spectacular flim-flammery, then charges them 10 bucks an eyeball. Cunning Mr. Collins learns of this gouging, and so decides to harvest his own fish eyes, blue ones, which he brings to the village and sells for eight bucks a bauble. The people like it. Finally, the reasonable yet opportunistic Merchant Ottoman brings a wagon full of larger, multi-colored eyeballs and sells them for five bucks each. In the end, the greedy Greenberg has initiated a process that was an artful deal and a benefit to everyone.

This concept is also a core tenant of the Republican party. On one level, the concept illustrates the benefits of a man’s freedom to barter and market creatively, without an extra party trying to control him. On another, it calls up the spirit of the Revolutionary War and the fundaments of the Constitution that promote the inalienable rights of the individual in the face tyranny or collectivism. They subscribe to the Ayn Rand romanticized school-of-thought that extols artistic and entrepreneurial genius as exclusively the product of the individual. Thus they have fostered an affinity with corporate America and an aversion to government regulations.

It has been argued, however, that some of Smith’s ideas seem to run contrary to the conservative Republican platforms today. Like Karl Marx, he is keenly aware of the tendency for the rich to try to manipulate markets in their favor, potentially at the consumer’s expense, and understands the need for some kind of regulation. Critics of Smith see him as a chameleon who, if he were alive today, would play both sides of the political/economic fence.

Today, despite the fact that American consumers are able to buy lots of cheap stuff (at Walmart, and largely due to trade with China), there are some obvious downsides to the system. One is a consequence which Marx predicted: borrowing the phrase the “Iron Law of Wages,” Marx asserted that competition among businesses in a capitalistic society would ultimately drive down wages for employees, keeping them just above the subsistence level. This is the bottom line for businesses-the maximizing of profit at any expense.

Despite President Trump’s latest stab at trickle-down economics, wherein some wealthy corporations will use their tax breaks to take on a few new hires and pad the stat sheets for a little while before they go back to down-sizing (they can afford the technology), the gap between rich and poor continues to grow in America.

According to the non-profit Brookings Institution, since 1970, middle-class incomes have been stagnant, wages are declining, the prospects for children exceeding their parents’ income are decreasing, Blacks and Hispanics continue to earn $15,000 to $20,000 less than middle class whites, and more and more families rely on two full-time working parents.

It is arguable that another reason for the recent increase in new jobs in America has to do with the lifting environmental regulations, allowing corporations to spend more on new hires. Meanwhile we witness the Burning of the West, the baking of the Midwest, the flooding of the coasts, the pollution of the rivers, and the insidious growth of plastics and other chemical and biological pollutants now plaguing the planet.

These greatly troubling social and environmental issues in America and the world today are primarily our government’s responsibility. While the solutions certainly will involve help from the private sector and its ingenuity, the “bottom line” has nothing to do with the kind of profit defined by money. Here the competition has nothing to do with Wall Street and its artifice. The problems will not be solved by those clamoring for a bigger share in the market. Nor is this all an entertaining reality show where we sit on the edge of our seats mesmerized, wondering how the story will end.

No. It is about working together-our government agencies, our creative business enterprises, and our citizens who have the inalienable right in this democracy to participate in finding solutions.

While Mr. Kirkpatrick gets inspired to fight back over the brush that is browning on his terrace lawn, there may be some of us who want to let the firefighters in California know that we are thinking of them, that we are in awe of their courage and fortitude, and that we will gladly contribute what we can to the local, state, and federal government programs and the private businesses contracted by them in order to win the battles, putting out one fire at a time.

Pete Howard is a Dunkirk resident, writer, musician and teacher. FOCAL Point strives to make insightful social commentary through the integration of Facts, Observations, Compassion, Awareness, and Logic.

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