Adam Smith was Right

Adam Smith was right. Ronald Reagan was right when he said ‘government is the problem’.

Government and the economy

At first, I was for government intervention. I thought maybe the president was a bright, strong leader and will solve many of the problems of the US economy. But it is very clear to me that the government does not know what he is doing. This is just not a statement. He really does not know what he is doing. He is a smooth talker but understands nothing about economics and the way markets work. Nor do his academic ivory tower advisers understand the natural forces of the market. Government has not worked in the private sector as you and I, nor has been ever started his own entrepreneur firm from nothing. The government could really destroy the economy with this experiment of rewarding inefficient companies with the taxes (your productive energy) and debt (future taxes). Maybe the US will be strong enough not to be destroyed by the government but he really does not know what he is doing.

The government will hurt the economy

Forget the idea of government helping the economy. There is something called the crowding-out effect. The government will hurt the economy because people who want to start businesses and invest in the US Economy and help the economy reorganize to a more effective equilibrium will have less money and have to compete with the government for free capital. Further, the government will be spending your hard-earned dollars rather than you. So the ‘warm fuzzies’ that government’s economic policies will give you will hurt those who want to create change by trying to start a new business or reorganizes their lives. Go into any government office and ask yourself if this government organization cutting edge and ready to compete with the world? Then go into any mom and pop business and see the owner’s working until midnight and saving every penny. What is better in the long run for the economy? An army of government office workers paid your sweat or a country of entrepreneurs? For sure the government will hurt the economy.

Economy and government’s government spending

Anything the government does – you can do more efficiently. This is why the government will hurt the economy. The New Deal in the 1930s made the crisis long and drawn out. Did you ever wonder why the depression was so long? The government took away or crowded out opportunities for those who want to initiate real businesses. government’s new deal II will do the same this is why the government will hurt the economy. This “same kind of good intentions – shifted the country’s cash flow away from productive businesses to government make-work projects, which most likely prolonged the Great Depression.” States the president of Fidelity Investments.

Government’s New Deal II will hurt the economy and you

The bottom line is anytime the government expands there will be a waste. It is again the idea that the government knows how to spend your money better than you. Haha. You will work, then taxed and this money will go to someone else, for example, to pay for someone else’s credit mess. So in a very real sense, you will be working for another man’s wife. How do you feel about that? This is one of the many reasons the government will hurt the economy.

Why Adam Smith’s Economics is still valid

The idea that the government should reach into your house and take control of and manage your business, life, etc. is what Adam Smith was against. In a free society, people act on their own ‘enlightened self-interest’ and society as a whole benefit in ways that can not be imagined. Adam Smith was a moral thinker and a pious man. He was not promoting selfishness; rather, his economics was about helping the world.

This central idea that people know how to run their lives better than the government is still valid in Economics. In fact, government intervention will lead to a real problem in the future.

Many Economists are turning left

Economists are ‘jumping on the bandwagon’ and ‘go with the herd’, with the latest economic ideas. But the economics of Adam Smith is not a trend, it is the idea that you can run their lives better than the government can run your life.

This is why I do not agree with the water cooler crowd at work that Adam Smith’s economics is no more. If anything, his economics should be used to create a more peaceful, happier world.

If you disagree, let me know why, but Adam Smith was a genius and moral thinker. He was also understood how economics and the world works.