I recently took an internet quiz called “Iconochasms,” which challenges you to identify the surprising sources of controversial quotations. The purpose of the quiz was to “adjust the pedestals on which you placed some of your favourite icons,” i.e., show you that sometimes our heroes and heroines say things that we might find contrary to what we’d expect from them.
Some of these quotations probably wouldn’t surprise anyone who knew the authors well; for instance, Ghandi’s comment about the Holocaust in #42 is consistent with his total and almost absurdly suicidal commitment to non-violence. The one that surprised me least was #34:
Who urged suspicious attention to any proposed new law or regulation that comes from businessmen, because they “have generally an interest to deceive and even to oppress the public”?
A. Henry Ford
B. Bill Gates
C. Adam Smith
D. Milton Friedman
I think the desired effect (“What do you meeeeean, an icon of capitalism actually said that about businessmen?”) would have been greater if the three wrong answers had been, say, Karl Marx, Ralph Nader, and Pinky McRedcommie. But it turns out that the quotation comes from none other than… Adam Smith, the “father” of capitalism (whose baptism was 283 years ago today).
That Adam Smith would make such a claim about businessmen shouldn’t surprise anyone who knows him. After all, this was no deathbed retraction of capitalism; the quotation comes from the last sentence of Book One of The Wealth of Nations, the first great capitalist document.
To favor capitalism is not to favor businessmen. If anything, capitalism favors consumers by pitting businessmen against one another in competition for profits. Adam Smith recognized the simple truth that when businessmen propose economic legislation, even if it sounds well-intentioned, there’s a good chance that those proposals are meant to reduce competition–thus harming consumers via higher prices or inferior product selection.
For a quick example of what Adam Smith warned us about, look at subsidies for sugar or dairy products. Once upon a time, a long time ago, business from those industries proposed sugar and dairy subsidies in order to protect domestic farmers from foreign competition… which is a good thing, right? Besides, you probably don’t even notice those few extra pennies per pound of sugar or gallon of milk. But those pennies add up to a big welfare payment to domestic sugar producers and dairy farmers, who don’t want to have to engage in competition for your hard-earned money.
A truly capitalist policy would have no such subsidy, which would lead to cheaper sugar, cheaper dairy products, and a little extra money for you, the consumer, to spend or save as you wish.
It was not at all out of character for Adam Smith to announce his distrust of businessmen. For capitalism to work, we don’t need businessmen to be angels, but we do need to keep businessmen from writing laws that would make markets less competitive.