McMurtry on the Mis-Appropriation
of Adam Smith by Globalists
In 1998, the Guelph
John McMurtry published his Unequal
Freedoms: The Global Market as an Ethical System, a clearly-written
book in which he critiques the dominant ideology of the powerful in our
time: global free-market advocacy. This book is strongly recommended to
all who'd like to know what's up. I've selected here a few observations
directly relevant to the reading you've done: from 46-8, then 132-3.
The doctrine of the "free market"
has its classical moral-theological foundations in John Locke's
Treatise of Government, published over three centuries ago, in 1690,
the year after the English Revolution deposing King James II. Locke's work
opposed the divine right of kings with the absolute right of private property,
which Locke believed was conferred by God. Locke's epochal argument conceived
of the laws of property as inviolable and as sanctified and protected by
"He who has given mankind the world in common."
Locke's declaration of the God-given right of private
property was then developed into the fully fledged market theory in the
founding classic of the faith, a monumental treatise by Adam Smith....
Smith was a scientific deist and professor of logic and moral philosophy
at the University of Glasgow. He published his great work in 1776, the
year of the American Revolution. His treatise is, with Locke's work as
its property-theory ground, the theoretical foundation upon which the scholastic
and popular edifice of the entire free market theory rests. The discussion
had two central ideas: first, the advantages of production and exchange
free of royal charter and government interference; and second, the revolutionary
idea that the self-interested pursuit of profit promotes the social good.
These are two of the three great pillars of the market doctrine's general
system of value and justification. The other, or first, principle is
the "sacred and inviolable right of private property" advanced by Locke
and later appropriated as a basic premise by Smith and all his successors.
Smith's classic formulation of the first principles of the "free market"
as a dynamic system have continued as the received doctrine for over two
hundred years to the present ideology of the "global economy", although
with radical changes in meaning which have been overlooked by "neo-classical"
and current advocates of the theory.
Those profound deviations from Smith's theory include
1. the "marginalist
revolution," which grounds market value in "utility" or buyers' willingness
to pay, a subjectivization of value that replaced Smith's, Ricardo's,
and Marx's "labour theory of value," which understood the value of a good
in terms of the human labour required to produce it;
and other formalist devices, which increasingly substitute mathematical
symbols and equations for observed facts and social relations in economic
3. the "monetarist
economics" made famous by Milton Friedman, whose regulating social objective
is to preserve the value of owned money in place of Smith's overriding
emphasis on "funds destined for the employment of productive labour";
4. "political economy"
becoming depoliticized as a subject category by the claim of value-free
economics, which falsely claims to have removed all political or value
judgement from its analysis.
None of these theory-cleansing operations on market
doctrine, which, in effect, remove its human content, results in direct
disavowal of Smith's fundamental principles of the market as a value system.
Smith's first principles are, together, the enduring framework of an underlying
theory of ultimate, universal, and axiomatic value that persists through
all the theory's formalized abstractions of methodology and application.
Professional economists since Smith have, however, strangely declared or
assumed their "value neutrality," despite their grounding in the principles
of Smith's and Locke's openly moral philosophy. This is one of the interesting
mysteries of the doctrine, although it has, as we shall see, a quite mundane
explanation. If you pretend to be strictly neutral and scientific, others
are more likely to accept your value assertions as objective laws.
In practice, though, professional economists merely
assume Smith's moral principles as givens and work from them as regulating
premises of all their analyses. For example, the positions of a "value-free"
or positivist economics still presuppose as given and self-evident the
value system of private property rights, the pursuit of self-interest and
profit, and the monetized production and exchange of needed goods as the
foundational, regulating norms of their analyses. Indeed, no mainstream
economist ever rejects, criticizes, or in any way questions these general
principles of decision, conduct, or social distribution. To contest any
of these value absolutes is taboo....
To this day, "the invisible hand" is the foundational
idea of economic theory in general....
list of readings
Smith's concept of acquisitive self-seeking in capital
investment is limited in at least three ways in which the current market
doctrine of self-maximization is not.
First, he is referring to self-interested investment
of money-capital only, not of other types of self-maximizing behaviour,
such as seeking "a larger share" of what's already there.
Second, he is referring to self-interested investment
in domestic production, not to "flight capital" investment in foreign countries.
Third, he is referring to capital investment in
the long-term employment of productive labour, not speculation in land,
currencies, bonds, or any other investment or capital expenditure that
"diminishes the funds destined for the employment of productive labour."
Smith's original principle of the pursuit of self-interest
to promote the public interest has been so stripped of its limiting conditions
as to now imply the opposite. The principle of self-serving for money accumulation
in all conditions, with no constraining obligation to one's own society
or to use-value production, has become the overriding, abstract imperative
of market doctrine. The promotion of the public interest, on the other
hand, has become a token mantra with no demonstrated connection to money
In his different historical context, Smith could
not conceive of such deformations. In the 1990's, over fifty times more
dollars in stockmarket trade turnover are devoted to currency speculation
than to the real economy's production of use-values (that is, goods and
services). Only a very small fraction of the volume of investment in the
current global marketplace can still be justified by Smith's criterion
of "the real wealth and revenue of a country -- the value of its annual
Second, even profit-seeking investment in real wealth
can now conveniently and securely flow to the other side of the world in
a nano-second by computer via satellite. It does not remain at home to
increase domestic wealth, but moves to wherever it can maximize money-returns,
to lower-cost conditions of wages, worker safety, environmental protection,
or taxes. Thus Smith's expectation that capital investment would stay in
the society where it was earned no longer holds. Smith assumed that the
inconvenience, the inaccessibility to surveillance, the lack of long-distance
communications, the insecurities of a foreign society, and the loyalty
to one's own country would together discourage the flight of capital from
its home society as long as returns were "ordinary or not a great deal
less than the ordinary profits of stock." Smith's assumed conditions for
the pursuit of profit no longer apply.
Third, Smith's principle of self-interested profit-seeking
by "capital investment in productive enterprises" is much more limited
than the principle of pure self- or profit-maximization as such. For one
can self-interestedly seek a money profit in one's investment without seeking
to maximize it.