RURAL FREE DELIVERY - The Unseen Hand

(12/14/2012)

By Mack Samples
www.macksamples.com

Adam Smith wrote the Wealth of Nations back in 1776 in an attempt to explain the Free Enterprise System, or that word which modern liberal intellectuals call a dirty word, Capitalism.

According to Smith, if markets are allowed to run free, the economy will function and correct itself by what he called “an unseen hand.” If an item gets oversupplied in the economy the price will drop and the producers of the item will cut down the supply. As the item becomes more scarce, the price will rise. Of course, the reverse of that is also true. If an item gets scarce, the price will go up and producers will produce more of it, bringing the price down.

If demand for an item is strong, and the producer learns to mass produce it, i.e. modern electronic gadgets, the price will really drop. Do you recall how much a big screen HD television cost when they first hit the market? But as the goods become more affordable, more people buy them, and the producers still make more money. I think Henry Ford figured that out. The government didn’t tell him how to do it.

According to Smith, there was no need for the government to regulate the production and sale of goods. Production and consumption will regulate itself and the result will be, everyone will be better served, and nations will create wealth. Wealth will be created because producers of goods will be motivated to make more money if the government does not lean on them and try to take their profits. That is, of course, an oversimplification. But it gets to the point.

More than two centuries have passed since Smith wrote his influential book, some say one of the most important books ever written. During the course of those centuries it has become evident a time or two that if the economy is left completely unbridled, ruthless folks with brilliant minds will take unfair advantage of that system and garner too much of the “wealth of a nation.” It happened in the late 1800s in America. The result was the government stepped in and harnessed the economy. Teddy Roosevelt, a Republican by the way, stepped in and busted up the big super companies. Since that time the American government has attempted to fine tune the economy both by restricting the activities of big businesses, adjusting the tax base, and attempting to redistribute the wealth. So America has lived a good part of its existence in regulated capitalism.

The trick is to not let the pendulum swing too far one way or another. If the government leans too heavily on the sector of the economy that produces the goods, puts too many restrictions on the way they do business, and taxes to the point where the government takes too much of their money, the incentive to produce goes away. If the government isn’t careful it will destroy the “wealth of a nation”.

Old TR was probably right when he busted up the big trusts. Big business was out of control and the “wealth of the nation” was getting confined to a few families.

Some worry that the pendulum may be swinging too far the other way, to the point where we would have total government control. If you look at the history of the modern world, that generally doesn’t work. If you will recall what happened in Russia and Cuba, or what is currently happening in Venezuela, or, heaven forbid, North Korea, you sort of get the picture. Those nations destroyed, or are destroying, the wealthy classes, and by so doing, destroyed the “wealth of their nations”. The result was they did not really help the poor, they just created a wealthy leisure class of bureaucrats.

Old Adam Smith wasn’t totally right. But perhaps he wasn’t totally wrong either.


Hur Herald ®from Sunny Cal
The information on these pages, to the extent the law allows, remains the exclusive property of Bob Weaver and The Hur Herald. information cannot be not be used in any type of commercial endeavor, or used on a web site without the express permission of the owner. ©Hur Herald Publishing, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017