By William K. Black
Quito: April 27, 2015
My citation of one of New Economic Perspectives’ distinguished academic readers from the field of economics, Michael Meeropol, prompted another distinguished academic reader from the same field to note that he had made the same point about the distortion of Adam Smith’s views on topics like “outsourcing” through foreign investment. The context was N. Gregory Mankiw’s distortion of Smith to try to support the Trans-Pacific Partnership. Here is how Jamie made the point in his classic book The Predator State.
“Yet Smith himself was conscious of the risks of foreign trade. His immortal phrase the ‘invisible hand’ is usually cited nowadays in support of an unfettered market, but in fact Smith coined it as part of an argument against gratuitous foreign trade. He wrote that it is a preference for one’s own security that leads one to purchase the products of one’s own country–and so, “as if led by an invisible hand,” to promote the interests of the community of which one forms a part. Something similar could be said for a ‘Buy America’ campaign. Smith was wary, in other words, of too much reliance on communities whose interests might not accord with one’s own, and essentially because distant foreigners could not necessarily be relied on to execute a fair contract. His anxieties have many counterparts in the modern world.”
so the “invisible hand” was actually to protect us from the drawbacks of free trade? Precious!
That was a great read, hard to believe it is 7 years old
I have to admit, I did try to read Wealth of Nations since I feel reading the actual source material is the best way to truly understand it, but I did fail. That is a laborious read.
That said, I will accept the work put in by others, and I have heard Smith’s famous book actually had lots of things that are abused and thrown around as straw man arguments for all types of hyper free market policies, when in reality, he supposedly made arguments in support of government (its traditional role to provide a level and fair playing field) taxation, and spoke about the dangers of cartels forming in the market, and the claim here he may not have been the die hard free trader he’s portrayed to be.
Fascinating and scary, since these false ideas are taught in class, and we of course are inclined to believe our professors, and few want to actually read Wealth of Nations to see for themselves, ha!