By Alec Hogg
Among my favourite pursuits when time allows, is reading about the great old economists, especially the father of them all, Scotsman Adam Smith. It was his book, The Wealth of Nations, which got leaders in business and government to start understanding economic realities. It was published in 1776, the same year Americans signed the equally revolutionary Declaration of Independence. Both changed the world.
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Smith’s thesis is best remembered for a description of what he called “the invisible hand”. The way he saw it, every human being is born with an in-built desire to improve their own circumstances, a trait which never leaves them. Economies work best when people are given the freedom to achieve their aspirations. When circumstances allow this, it’s as though an “invisible hand” guides each person to contribute in their own self-interested way, but to the betterment of all.
Those Founding Fathers who gathered in Philadelphia to sign the other great document of 1776 were the forebears of a nation which, better than any other, proved Adam Smith right. Leaders of what became the United States of America have always deferred to the “invisible hand” – the unseen force unleashed in a market economy. By getting Government out of the way, they created mankind’s most efficient way of delivering goods and services. In the process, they transformed a backwater with literally zero percent of the global economy into the locomotive that creates more than a quarter of the world’s wealth with only 5% of its population.
With such a compelling success story, you’d have thought people elsewhere would have demanded the same. No human has a remote chance of calculating what is best for any nation’s economy; there are simply too many moving parts.
Unfortunately, most of humanity has been cursed with political systems designed to feed man’s dark side – arrogance combined with a thirst for power that corrupts sane thinking. To a point where a leader may actually believe they have the right to plunder common resources for personal benefit. Like you-know-who in SA.
Smith’s “invisible hand” is the most solid of any possible cornerstone in a true democracy. It is the obvious enemy of those who believe they know better than the market; those with a preference for idealistic but the ruinous economic systems of communism and socialism.
All man actually requires is a foot in the door, a toehold in a system where progress follows effort and application. Block that and you consciously stop Smith’s mysterious force from working its magic. Doing this is like releasing a virus into the economic system. If you thought education was expensive, try ignorance.
