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November 28, 2008

The Wealth of Nations

P.J. O’Rourke – ISBN – 9780802143426

The cognoscenti will appreciate that the title of this historic book—the original treatise on the economic system we call Capitalism—was published in 1776 by a Scot named Smith. Its full title was: An Inquiry into the Nature and Causes of the Wealth of Nations. P.J. has undertaken to write The Inquiry into the inquiry into the nature and causes of the wealth of nations. Those of you who have read my site in depth, or know me personally, know that P.J. is one of my favorite authors. He is bright, knowledgeable, articulate, and funny as well. I have anxiously awaited the emergence of this little jewel in paperback so that I could read it. It does not disappoint. Few people have actually read the original tome in its entirety. It would be more correct to say (for those of us who have split the covers at all) that we have “read in ‘Wealth.’” Trust me, you will read--and reread--this entire little tome. One must caution himself not to overlook the essential profundity of this inquiry, since he surrounds it, as he always does, with his signature humor.

I recommend it highly to anyone who really wants to know about economics (along with Hazlitt’s Economics in one Lesson.) Especially so now, as our world is collapsing around us due to the ignorance, stupidity, cupidity, greed and sloth of ostensibly brilliant and perceptive minds. I was particularly curious to see how O’Rourke made this subject humorous. He succeeds.

Early on he discusses that Smith was explaining: (1) that money has no objective value; and (2) money is a notation of subjective worth, because when one person exchanges something with another they both get the best side of the deal. O’Rourke then opines: “It’s not that we who are getting this explained to us are stupid. But every overcompensated modern CEO has tried the first explanation on us. And every car dealer tries the second when we offer him a trade in.”

Smith didn’t think of man as innately good or rich; rather that man is endowed with the imaginative capacity to be both, given freedom to strive. The desire for power goads man “to the highest degree of arrogance . . . to erect his own judgment into the supreme standard of right and wrong . . . [and] to fancy himself the only wise and worthy man in the commonwealth.” P.J. then adds the caveat that “Smith managed to describe not only Barbra Streisand but everyone in the world of politics.”

Smith endeavored to determine and explain how systems of morality, economics and government arise, and how, using this information, people could better their ethical, material and political situations. He was an idealist, but one without the pretension to offer “a blueprint for society.” At the time Britain was at the apogee of its mercantilist period, and he was arguing for the restoration of a free trade environment. P.J. observes that “Smith chose his absurdity comparisons with an eye to the Newt Gingriches [of the era] and the too visionary visions that preceded the Enlightenment.”

Thomas More’s 16th century Utopia was, after all, a manufactured dream utterly detached from reality. Smith insisted the necessity of delegating to imagination the creation of methods to render “decent judgments on feelings,” and upon the actions that proceed from these feelings, and upon whether these feelings are right or wrong--moral or immoral. Selfishness is by no means the weak side of human nature; hence morality cannot be just a series of “good feelings.” Smith advises that we cannot enter into activities with a complete insensibility to honor and infamy, yet when encompassing morality there is the “apparatus of unintended benefit.” He described this as the “invisible hand” which harmonizes the disjointed phenomena of human nature.

Government and the law should further the “natural liberty which it is the proper business of law not to infringe upon, but to support.” That is, oppressive legislation and coercive direction is to be avoided. This is especially cogent now, since it is not so much the lack of oversight which has created our current conundrum, but the corruption of the capitalists and the misguided and immoral clamor of politicians for universal equality, despite inchoate disciplinary and economic differences.

One lesson of “Wealth” is the need to avoid greed. It is requisite to recall that amongst the avaricious are those who work for “the public good,” who seek trillions of dollars to make life better for everyone. Some old wag once observed that the problem with Socialism is Socialism, while the problem with Capitalism is Capitalists!

The responsibility of government planning is to better the condition of the populace. The inherent political problem is that there are always those who consider mass transit, bicycle paths, improved education, or whatever, to be a betterment within the province of government, and worthy regardless of cost or alternative uses of the same money—or provision by the private sector. Under indulging of these ideas is wasteful, at least, while overindulging bankrupts the economy. Private discipline, investment and frugality exhibited by individuals in the effort to better their own condition is most desirable. Since government is never parsimonious, entrusting it to drive the economy is “impertinent” (actually, it’s stupid!)

Smith abhorred the fact that the elemental British Empire was founded upon the pursuit of empire purely for the purpose of having subjects to purchase their manufacture. He disagreed, and strongly favored the American Revolution. Capitalism, not mercantilism!

Included in the coverage of subjects are checks and balances, wholesale and retail providers, the scheduling of life, management of money, etc. and he does so in scholarly fashion which is readable (he being O’Rourke’s exposition of Smith’s dissertation.) Interestingly, he reviews how restrictions on land conveyance at the time allowed nobility to make sure that everyone’s livelihood depended upon them, much same way as welfare politicians do today.

A final and I hope tantalizing quote (better understood in full context):
“Leftists critics of free markets assume that there is a fraudulent aspect to capitalism. They’re right. We tricked the feudal powers into setting us free, and we remained free by continuing to bamboozle them. We used chicanery and sharp dealing to found our cities, become rich bourgeoisie, and supply ourselves with creature comforts.
“We left the barbarian aristocracy in their drafty castles throwing chicken bones on the floor. And we are by no means finished with cheating the nobility. We did the worst that can be done to fools; we gave them what they wanted. The towns imported luxury goods and developed arts and crafts. Among these products the nobles discovered things that they’d rather spend their money on than feeding thugs [who abused their underlings.] Feast budgets were trimmed. Barbarian hospitality was curtailed.
“Adam Smith argued that the inclination of the feudal overlords to be selfish was so strong that it overwhelmed their instinct for self preservation. . . .
“Never complain that people in power are stupid. It is their best trait.”

No review of the subject will do it justice. No one can completely review the original 1000 pages of Smith’s dense dissertation, but O’Rourke manages quite well in fewer than 200 . . . and it is well worth the time to study his presentation.

Posted by respeto at November 28, 2008 1:07 PM