-Rise and Fall-
Adam Smith is the patron saint of our Corporate-dominated New World Order. He was an eighteenth century British economist and the author of the much-revered "free trade" bible, The Wealth of Nations. His basic premise was that if people were simply allowed to freely pursue their own self-interest (profit) without any government or other interference, then the "invisible hand," meaning Adam Smith's magical and omnipotent market forces, would miraculously act to guide and expand the economy, stabilize fair prices and inevitably lead to a perfect society free from want and poverty.
The character played by Michael Douglas, in Oliver Stone's 1987 film Wall Street, summed up the fundamental conclusion that is inevitably drawn from the economic theories of Adam Smith, when he declared...
“The point is, ladies and gentlemen, that greed, for lack of a better word, is good. Greed is right. Greed works.”
Adam Smith said that if business was just left alone to pursue profit then everything would work itself out perfectly and fairly. According to Adam Smith, the love of money is the key to a fair and just society and to all human happiness. The Apostle Paul shows that this fantasy is not just delusional, but also evil. Inspired by the Holy Spirit he had this to say about the "love of money,"
"But they that will be rich fall into temptation and a snare, and into many foolish and hurtful lusts, which drown men in destruction and perdition. For the love of money is the root of all evil." (1 Timothy 6:9-10)
The truth is that the laissez-faire (French for "leave alone") economic theory of Adam Smith is an extreme system that has never been the foundation or source of any nation's economic progress. It is a system that only succeeds in enriching the rich at the expense of the poor, and it helped to create the injustice that prompted the emergence of Communism. These two opposing systems, both evil, both extreme, (and both created in Britain within the influence of the British East India Company), have been used to divide and conquer humanity, and to create the bogus left/right paradigm that so many of our politicians, intellectuals and academics have accepted and perpetuated. People are led to believe that they can only choose between either unrestricted Adam Smith "greed-is-good" capitalism, or totally restricted and atheistic Karl Marx Communism. Is there not any rational middle ground between these two wicked extremes!?
The Wealth of Nations was published in 1776, the same year in which the United States of America declared independence from Great Britain. In his book Smith commented on the prosperity of the American colonies and offered some economic advice for their future. He wrote,
It has been the principal cause of the rapid progress of our American colonies towards wealth and greatness, that almost their whole capitals have hitherto been employed in agriculture. They have no manufactures, those household and coarser manufactures excepted, which necessarily accompany the progress of agriculture, and which are the work of the women and children in every private family. The greater part, both of the exportation and coastal trade of America, is carried on by the capital of merchants who reside in Great Britain...
Were the Americans, either by combination or by any other sort of violence, to stop the importation of European manufactures, and, by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they would retard instead of accelerating the further increase in the value of their annual produce, and would obstruct instead of promote the progress of their country towards real wealth and greatness.
History shows that America's founding fathers ignored Adam Smith's advice, and built America into a great power by doing the very opposite of what he suggested. What became known as the American System of Economics was designed in part by Benjamin Franklin, George Washington, and most importantly, Alexander Hamilton, the far-sighted thinker who Washington appointed as the first Secretary of the Treasury at the age of thirty-two.
Hamilton's energies were focused first and foremost on the area of the economy that Smith argued should be left alone. Hamilton commissioned a comprehensive study on industry and manufacturing as it existed in the new nation, he fought for federal support for the emerging industries, and he also pushed through a policy of high tariffs on British imports, aimed at the very British merchants that Adam Smith worked so hard his whole life to protect. Hamilton's policies helped the United States declare financial independence from Great Britain, after the military battle was won. Tariffs and subsidies, as well as the National Bank and the National Mint, both established under Hamilton, were some of the key components of the American economy that helped build the nation and set her on a path to greatness.
The American System continued after Hamilton's death through the Whig Party and through patriots like Henry Clay, Mathew Carey, John Quincy Adams, and later Henry Carey and Abraham Lincoln. However, by the end of the nineteenth century, with the rise of the British-allied financial/political/media powerhouses of Morgan and Rockefeller, the American System of Economics began to be pushed aside in favor of Adam Smith's "free trade" policies.
The economic system created by America's founders was meant to work with the basic moral principles that they lived by. The Declaration of Independence puts forth the Biblical truth that mankind is one continuous brotherhood, created in the image of God, and equal under God, divinely endowed with the unalienable rights to Life, Liberty and the Pursuit of Happiness. In other words, the founders understood that man is created with a divine purpose and a positive potential, and they understood man's responsibility to rule over all the creatures of the earth and over all the earth itself. God commanded man to "fill the earth and subdue it," and this is fulfilled through the American System of Economics by its faith in human creativity and ingenuity, and in its dedication to human progress over the many hurdles that nature presents.
On the other hand, Adam Smith, influenced as he was by thinkers such as John Locke (See Leibniz, not Locke, Inspired the Declaration of Independence) and Bernard de Mandeville (who argued that a sinful citizenry is good for a nation) showed no such faith, and offered no such dedication. Adam Smith thought that progress would occur despite what he called "the slow and uncertain determinations of our reasons," and then only by leaving the merchants alone to pursue their profits. This is one of many basic philosophical and moral differences between the American System and the "free trade" system originated by Adam Smith that became the dominant system of Empire, in either its Anglo or later American form.
The single most important principle of the American System of Economics is its dedication to the "General Welfare." This is first explicitly mentioned in the preamble to the United States Constitution:
"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."
Later it is mentioned again in Article 1, Section 8:
"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States..."
The concept of a government that has a duty to provide for the "General Welfare" of its citizens was a concept that was naturally arrived at by men who had a great respect and admiration for the teachings of Jesus Christ. The great patriot Patrick Henry once commented on the foundation of the new United States,
"It cannot be emphasized too strongly or too often that this great nation was founded, not by religionists, but by Christians; not on religions, but on the gospel of Jesus Christ!"
When the French aristocrat Alexis de Tocqueville toured America in the 1830s he wrote that "the religious aspect of the country was the first thing that struck my attention; and the longer I stayed there, the more I perceived the great political consequences resulting from this new state of things... In France I had almost always seen the spirit of religion and the spirit of freedom marching in opposite directions. But in America I found they were intimately united and that they reigned in common over the same country."
Jesus Christ clearly showed, through His teachings and His actions, that we have a responsibility, guided by our God-given sense of compassion, to do our best to help our fellow man in his basic material needs. Therefore America's Founding Father's knew that a government that was formed of the people, by the people, and for the people - a Christian people guided by Christian morals - had a duty to care for the basic needs of its citizens, and a mission to focus on maintaining and improving the general welfare of all.
Unfortunately, since the end of World War II any attempt by any government to actively promote the general welfare of its citizens has run the risk of being falsely denounced by American conservatives and their Establishment controllers as "socialist" or even "communist." Very quickly the distinction between controlled capitalism and human progress dedicated to an improvement of the general welfare, as opposed to the rigid socialist or communist "welfare state," became purposely clouded. Controlled capitalism that helped to build nations was shoved aside in favor of unrestricted capitalism that helped to build the bank accounts of the Anglo-American Elite and their few fortunate business partners.
Friedrich List was a German economist who studied the American System and contrasted it with the British "free-trade" system of Adam Smith. After receiving an economic education in America in the 1830's he returned to Germany and his endorsement of the American System of national economy became the basis for Germany's massive economic expansion in the second half of the 19th Century. Here is one of his comments on Adam Smith,
However this teacher of national economy [Smith] is esteemed in other respects, all of his merits can not compensate for the immeasurable damage which the fable of so-called free trade, which he has implanted in the ears of our theoreticians, has caused. Smith's basic error consists in the fact, that he ascribes a productive power to capital, although only labor produces, with the assistance of a greater or lesser capital.
List also spoke out brazenly against Adam Smith in a speech in Philadelphia in 1827, saying,
His system, considered as a whole, is so confused and distracted, as if the principal aim of his books were not to enlighten nations, but to confuse them for the benefit of his own country.
Great Britain was the richest country in the world at the time and Adam Smith's views were promoted as a means for her merchants to get even richer. In Boston and New York the descendents of the Tory merchant families who had fought on the British side in the Revolutionary War also agitated constantly for "free-trade" in America. The fact is that Adam Smith's laissez faire economic theory has always been the favorite of merchants, the fat cats in the middle who buy and sell, but rarely consume or produce. In this passage from List (quotes taken from "Friedrich List and the American System"), he comments first on the principle of the "general welfare," and lastly on the merchant interests in Smith's system,
An individual, in promoting his own interest, may injure the public interest; a nation, in promoting the general welfare, may check the interest of a part of its members. But the general welfare must restrict and regulate the exertions of the individuals, as the individuals must derive a supply of their strength from social power... It is bad policy to regulate everything and to promote everything, by employing social powers, where things may better regulate themselves and can be better promoted by private exertions; but it is no less bad policy to let those things alone which can only be promoted by interfering social power... Look around, and you see everywhere the exertions and acts of individuals restricted, regulated, or promoted, on the principle of the common welfare. The commonplace of laissez faire et laissez passer, invented by a merchant, can therefore only be alleged sincerely by these merchants.
The United States of America became a great nation precisely because the government interfered in the private sector, regulated the economy, promoted industry and infrastructure, and fulfilled its Constitutional duty to promote the general welfare. List wrote,
Without interference of national power there is no security, no faith in coined money, in measures and weights, no security for the health of seaports, no security for the commerce at sea by the aid of a navy, no interference for the citizens in foreign seaports and countries by Consuls and Ministers, no titles to land, no patents, no copyright, no canals and railroads, no national road. Industry entirely left to itself, would soon fall to ruin, and a nation letting everything alone [laissez faire!] would commit suicide.
The battle for the American System of Economics was fought successfully throughout the nineteenth century. Its defenders were true patriots who sought to uphold the U.S. Constitution and Christian principles of morality. Its attackers who pushed "free trade" were the Northern merchants and elitist families that later became known as the East Coast Establishment, and the Southern plantation owners, later of the Confederacy, that were allied economically with Great Britain as simply another colony offering the Empire a cheap raw material harvested by slaves.
In 1852 Senator Thaddeus Stevens added his voice to the debate over "free trade" in a Congressional debate,
It is not my intention to discuss at much length the doctrine of free trade. That has been so amply done of late, both orally and in writing, as to become tedious.
But although the theory has been much discussed, it has never been reduced to practice, except among barbarian tribes. I think gentlemen cannot point to a single highly-civilized commercial and manufacturing nation capable of producing the raw material, that has ever adopted it. Every highly-cultivated nation has made the protection of domestic industry the special care of Government. It has been found by the experience of more than twenty centuries that the protection of domestic manufactures by prohibitions, discriminating duties, and commercial regulations, has been, and is, the true, natural, and wise policy of nations, or all history is a lie...
England has acquired all this power, wealth, and grandeur through her protective policy alone. And now she preaches "free trade" to others--to young nations! And there are found shallow dupes who swallow the bait! It is often objected to a protective tariff, that it is for the benefit of the rich capitalists. This argument, I know, is never used by statesmen, or writers on political economy; but often by demagogues, who fancy themselves statesmen... [David Rockefeller, Reagan/Thatcher, George Soros, Clinton/Bush, Rush Limbaugh, etc.]
It is a question of serious import, whether this country will ever become sufficiently manufacturing to produce enough for her own consumption, and furnish for exportation. It is very certain that under the free-trade system she never will.
Another vigorous defender of the American System was Henry Carey, the economic advisor of Abraham Lincoln. A devout Christian, Carey clearly understood the evils of British colonialism and the oppressive anti-Christian nature of their economic system. In his writings he saw that slavery was the key component of "free trade,"
Hence it is that we see the slave trade prevail to so great an extent in all the countries subject to the British system.... The system to which the world is indebted for these results is called "free trade''; but there can be no freedom of trade where there is no freedom of man, for the first of all commodities to be exchanged is labour, and the freedom of man consists only in the exercise of the right to determine for himself in what manner his labour shall be employed, and how he will dispose of its products.... It [the British System] is the most gigantic system of slavery the world has yet seen, and therefore it is that freedom gradually disappears from every country over which England is enabled to obtain control....
The system commonly called free trade tends to produce the former results [the cheapening of labour and land everywhere, the perpetuation of slavery, and the extension of its domain]; and where man is enslaved there can be no real freedom of trade. That one which looks to protection against this extraordinary system of taxation, tends to enable men to determine for themselves whether they will make their exchanges abroad or at home; and it is in this power of choice that consists the freedom of trade and of man. By adopting the 'free trade,' or British, system we place ourselves side by side with the men who have ruined Ireland and India, and are now poisoning and enslaving the Chinese people. By adopting the other, we place ourselves by the side of those whose measures tend not only to the improvement of their own subjects, but to the emancipation of the slave everywhere, whether in the British Islands, India, Italy, or America...
The modern school of political economy [the British school] says, ‘Be not fruitful; do not multiply. Population tends to increase faster than food.’ It prescribes disobedience to the earliest of God’s commands. Obedience thereto, in those who are poor, is denounced as improvidence… To have children to develop all the kindly and provident feelings of the parents, is a crime worthy of punishment. Charity is denounced as tending to promote the growth of population… Southey denounced the Byronian school of poetry as ‘satanic’ and so may we fairly do with the political economy that has grown out of the colonial system… It teaches every thing but Christianity…
The fundamental difference between the American System of Economics and the satanic British "Free Trade" System of Adam Smith is explained very simply by journalist James Fallows in his essential article, "How the World Works." In it Fallows comments on the economic history of Britain and how Britain became great by protectionist policies that were contrary to Adam Smith's laissez faire system. Only after she achieved industrial preeminence did she begin to advocate free trade to the world as a means of opening up markets for her manufactured goods. And then Britain's long-term economic decline began at the very moment that she began adopting laissez faire policies, so much so that the vast and mighty Empire, upon which the sun never set, was forced to depend on American economic might to rescue it from both world wars. Britain's merchants, bankers and upper class families became rich through laissez faire policies, but the British government, the national economy, and the people as a whole suffered. After commenting on Britain Fallows turns to America,
America's economic history follows the same pattern. While American industry was developing, the country had no time for laissez-faire. After it had grown strong, the United States began preaching laissez-faire to the rest of the world -- and began to kid itself about its own history, believing its slogans about laissez-faire as the secret of its success.
The "traditional" American support for worldwide free trade is quite a recent phenomenon. It started only at the end of the Second World War. This period dominates the memory of most Americans now alive but does not cover the years of America's most rapid industrial expansion. As the business historian Thomas McCraw, of the Harvard Business School, has pointed out, the United States, which was born in the same year as The Wealth of Nations, never practiced an out-and-out mercantilist policy, as did Spain in the colonial days. But "it did exhibit for 150 years after the Revolution a pronounced tendency toward protectionism, mostly through the device of the tariff."
Fallows quotes from President William McKinley (1897-1901), who remarked on American achievements by saying,
We lead all nations in agriculture; we lead all nations in mining; we lead all nations in manufacturing. These are the trophies which we bring after twenty-nine years of a protective tariff.
When Adam Smith concluded that "the wealth of a state consists in the cheapness of provisions and all other necessaries and conveniences of life," he created a system that primarily looks out for the interests of the merchants by cleverly appealing to the short-term interests of consumers ("We want cheap goods!"). On the other hand, the American System looks out for the interests of the nation as a whole, and for the general welfare of its citizens, which is done by promoting the producers of the nation, rather than the merchants or the consumers (most of whom are producers to begin with). James Fallows summarizes List's American System argument, and then makes a perceptive analogy:
"a society's well-being and its overall wealth are determined not by what the society can buy but by what it can make. This is the corollary of the familiar argument about foreign aid: Give a man a fish and you feed him for a day. Teach him how to fish and you feed him for his life."
Fallows also notes Abraham Lincoln's common-sense observation regarding the battle over "Free Trade" when he said, "I don't know much about the tariff, but I know this much: When we buy manufactured goods abroad we get the goods and the foreigner gets the money. When we buy the manufactured goods at home, we get both the goods and the money."
When confronted with the work of Alexander Hamilton, Friedrich List, Henry Carey, and other promoters of the American System of Economics, Adam Smith's laissez faire economic system put forth in The Wealth of Nations shows itself to be fatally flawed in its understanding of the true nature of wealth, and of how wealth is best used to serve the people. The theories of Adam Smith, then, can be justly blamed for the economic catastrophe that exists in the Third World today, because his theories have been steadily forced upon those nations since the end of World War II. To put the Third World's main problem in Lincoln's terms: The foreigner got the money.
The next few sections will explain how the United States Government became the main henchman for the international merchants as the primary enforcer of the laissez faire "Free Trade" system during this time.