As Noam Chomsky once said. “Adam Smith’s A Wealth of Nations is one of those books you are supposed to worship, but not read.”
I don’t understand. Ever since I was small I was told that Adam Smith’s idea of everyone looking out for their best interests lead to the best long term good. Man is rational according to economists, and no one is more rational than the captains of industry. That bankers and real estate people knew best. Now that 1/3 of Vegas is in foreclosure where is that idea in terms of credibility?
The M. Hudson article listed here is very illuminating.
http://www.insurgentamerican.net/download/MichaelHudson/Hudson_ RoadToSerfdom.pdf
It explained explicitly how much the US subsidizes as a policy the FIRE (finance, insurance, real estate) industry. That is why for years MBAs wanted to work in high finance. Not because it ads very much value, but because it is essentially a government subsidized job. The person on welfare only consumes a small amount of money. However, the person in high finance both consumes a large amount of money, and then creates negative externalities that froth over into the rest of the economy. This welfare program has been going on for over a hundred years (but accelerated greatly after Reagan), moving the country away from manufacturing and servicing manufactured items, and into financial and real estate speculation. The subsidies in the form of tax incentives (reduced taxes for hedge funds, the mortgage interest tax deduction, real estate depreciation) has always been there and have to be combined with periodic bail outs such as the S&L bailout of the 1980s, the bailout of Long Term Capital Management along with many others, as well as the mother of all bailouts, the current one.
How FIRE People Differ from Welfare Queens
A welfare queen can not hide from the fact that she (or “he” there are welfare kings as well although they don’t get the same play in the national consciousness for some reason) depends entirely on the government, so its very hard for her to be anti-government. However a person on Wall Street, or real estate developer depends very heavily on government largess, but then works their jaw up and down talking about the evils of socialism, the benefits of free markets and entrepreneurial-ism (defined by real estate developers as hiring illegal aliens to do shoddy work, paying off building inspectors, and hiding all profits in endless depreciation cycles). At the end of the exquisite meal, the banker, Wall Streeter, or real estate developer complains about unions and welfare queens…..as he picks little pieces of steak tar tar from his teeth.
Addendum
As also pointed out by Noam Chomsky, Adam Smith is greatly misrepresented by corporations and their mouthpieces. Adam Smith did not promote greed and total self interest. He wrote a separate book discussing explicitly the importance of good and moral behavior. This book, The Theory of Moral Sentiments, is of course either never quoted, or never read by economists and Wall Street bankers. However, it is most important to understand both books as they relate to Adam Smith’s view. This is described by a reviewer at Amazon.com
“To truly understand Adam Smith’s economic masterpiece “The Wealth of Nations”, one must understand its moral foundation. Without Smith’s essential prequel, “The Theory of Moral Sentiments”, the more famous “Wealth of Nations” can easily be misunderstood, twisted, or dismissed. Smith rightly lays the premise of his economics in a seedbed of moral philosophy — the rights and wrongs, the whys and why-nots of human conduct. Smith’s capitalism is far from a callous, insensitive, greed-motivated, love-of-profits-at-any-cost approach to the marketplace, when seen in the context of his “Moral Sentiments.” [Note: This book is a "page for page reproduction" of a two volume edition published in 1817, which is reflected in my pagination references.]“
References
The Wealth of Nations can be downloaded in PDF format here.
http://www2.hn.psu.edu/faculty/jmanis/adam-smith/Wealth-Nations.pdf
