The Visible Hand

I could have titled this post "There Is No Crony In Capitalism". Maybe I should have, but I really wanted to emphasize the notion of the "invisible hand" because belief in this undetectable entity or mechanism has driven so much of our modern history.

_{Image by Selena N. B. H. - source: Flickr}

Karl Marx shows that the closer you get to a true competitive free market capitalist system, the greater the level of inequality. This is one of the essential differences between him and Adam Smith, who argued the opposite; the more you organize society along the principles of a competitive free market system, the more that society would develop in a way that would benefit all. We now know Smith was wrong. We've lived through a period in which inequality has risen proportional to the amount of deregulation of the markets, and the commodification of literally everything that should be a basic human right, like education, healthcare and other life-essentials like gas, electricity, clean drinking water, public housing and so on. The more we relied on the "efficiency" of capitalism to allocate these essentials in an equitable manner, the more we saw the income gap between rich and poor grow. Marx was right: capitalism doesn't benefit all, it benefits the capitalist owner class exclusively. I might add that you don't have to be a socialist to admit to this very simple truth; capitalism is fundamentally flawed and always leads to disaster when left unchecked.

Defenders of capitalism will now raise their voices and shout: that's not capitalism, that's crony capitalism! Were the markets truly left unchecked, were we to all but eliminate the government and restrict it's function to just protect individual rights, individual property and the borders, then we'll see how right Smith was and how wrong Marx has always been... Really? I truly can't fathom that point of view at all. Every grain of empirical evidence we have points to the contrary, and even looking at the fundamentals of the free market ideology it's easy to see how there's literally no way on Earth this system could lead to anything even remotely resembling a just or equitable economical equilibrium. That is, unless you still believe in the existence of some vaguely defined mechanism that's often referred to as the "invisible hand" of the market. Well, that hand is invisible because it doesn't exist. And even if you do believe that it does, do you want to live in a world in which we're forever competing with each other? Animosity, envy and distrust between each other from cradle to grave, legal contracts the only way to negate that distrust and every human interaction reduced to a financial transaction; that's a future I don't want to be part of or responsible for. And we're almost there; we've commodified nature, education, health care, even ideas, culture and politics don't escape capitalism's ever grasping tentacles.

The invisible hand describes the unintended social benefits of an individual's self-interested actions, a concept that was first introduced by Adam Smith in The Theory of Moral Sentiments, written in 1759, invoking it in reference to income distribution. In this work, however, the idea of the market is not discussed, and the word "capitalism" is never used.

By the time he wrote The Wealth of Nations in 1776, Smith had studied the economic models of the French Physiocrats for many years, and in this work the invisible hand is more directly linked to production, to the employment of capital in support of domestic industry. The only use of "invisible hand" found in The Wealth of Nations is in Book IV, Chapter II, "Of Restraints upon the Importation from foreign Countries of such Goods as can be produced at Home." The exact phrase is used just three times in Smith's writings.

Smith may have come up with the two meanings of the phrase from Richard Cantillon who developed both economic applications in his model of the isolated estate.

The idea of trade and market exchange automatically channeling self-interest toward socially desirable ends is a central justification for the laissez-faire economic philosophy, which lies behind neoclassical economics. In this sense, the central disagreement between economic ideologies can be viewed as a disagreement about how powerful the "invisible hand" is. In alternative models, forces which were nascent during Smith's lifetime, such as large-scale industry, finance, and advertising, reduce its effectiveness.
_{source: Wikipedia}

_{The Essential Adam Smith: The Invisible Hand}

"Unintended social benefits" of acting self-centered. We're so lucky, aren't we? Greed really is good! I hope you see the nonsense. This supposed serendipity is one way Smith saw the invisible hand in action. The other was his belief in the rich men's urge to be seen as good men by the rest of society; he made a clear ethical case and it's no surprise that he first used the expression in his 1759 book "The Theory of Moral Sentiments". He argued that this inner drive to be seen as good individuals would motivate them to distribute the surpluses they couldn't consume by themselves to the less fortunate; this is where the "trickle down economy" originates. To give credit to Smith, he was half right about that argument: the billionaires of our time do have a deep wish to be seen as good people, which is why "charities" play such an important role in the painting of their public persona's. But we know that's just a way for them to score brownie points while enriching themselves even more. Also it has to be said that defenders of capitalism only point to Smith's idea that all exchanges in capitalism are voluntary as the main moral argument in favor of the free market system, never to Smith's arguments in "The Theory of Moral Sentiments"; the above linked video is your typical free market propaganda illustrating precisely that.

The supposedly freedom-restricting influences of the market which were nascent during Smith's lifetime, like finance and advertising, are all consequences of capitalism't fundamentals, bar the invisible hand: the individual search for profits scales up to a perpetual collective search for growth, which leads to the previously mentioned tendency to commodify everything, making money with money itself and using advertising to accelerate growth. It really comes down, every time, to capitalism's fundamental flaws. It's not that capitalism has a few minor bugs, or that it isn't left "free" enough; it's fundamentally broken. Capitalism has to end eventually if we want to survive and thrive as a species on this planet. Where many people believe there's no alternative, I believe there's no alternative to giving it up. Eventually. Right now there's only one viable alternative to Adam Smith's invisible hand, and it's called "government." Democracy actually. In capitalism's natural tendency to commodify everything it touches, it's maniacal urge to put a price-tag on all that constitutes human interaction and behavior, our democratic voice has been drowned by money in politics. Consequently, government has lost its power to act as capitalism's visible hand, and actually magnifies and accelerates capitalism's worst excesses.

So my advice to everyone is to drop the belief in the invisible hand, and to concentrate your efforts on recapturing control over the visible hand, government, and reclaim democracy by removing as much as possible the power of money in politics. If you're in America, you know there's only one candidate to realistically start that fight: Bernie Sanders. America is only just hanging on to its image as the world's shining beacon that sets the example for all others to follow; as long as this is still the case, it would be great to see Americans lead the way in this perpetual class struggle. I for one would gladly follow that lead ;-)

_{Even Adam Smith Didn’t Trust the Invisible Hand, with Thomas Piketty}

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