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Markets and the public interest

by John Dittrich, policy analyst for the American Corn Growers Association
202.835.0330, http://www.acga.org

(March 22, 2002 -- CropChoice news) -- Adam Smith is considered by many economists, political scientists and even among the general public to be the father of modern capitalism and free market economics. Yet some of his writings reveal an intellect interested in reigning in those who would profit mightily at the expense of society.

Smith was born in Scotland in 1723, and studied at Glasgow University, followed by six years at Oxford. He was appointed professor of logic at Glasgow University in 1751. His classic book," The Wealth of Nations", was published in 1776. It is often quoted - many times by those arguing for less or no regulation of the markets by government.

However, in his conclusions summarizing Chapter XI, titled "Of the Rent of Land", Adam Smith made some interesting observations.

Adam Smith concluded that there are "three great, original and constituent orders of every civilized society, from whose revenues every other order is ultimately derived".

He described the first order as those who live by rent (or indirectly from the production) from the land. He described the second order as those who live by wages. He described the third order as those who are the employers of the wage earners, and who live by profit.

He concluded that the interests of the first two orders were "strictly and inseparably connected with the general interest of the society", and described in detail why this was so.

He then went on to describe in detail the interests of the third order, saying, "The interest of this third order, therefore, has not the same connexion with the general interest of the society as that of the other two". While stating that the third order "puts into motion the greater part of the useful labor of every society", Adam Smith went on to describe why their interests were often at odds with the interests of the general public.

These descriptions, made over 200 years ago, the year of the U.S. Declaration of Independence, are quite interesting. Following are some of his quotes concluding Chapter XI, and in the final two pages of that chapter.

"Merchants and master manufacturers are in this order, the two classes of people who commonly employ the largest capitals, and who by their wealth draw to themselves the greatest share of the public consideration."

"Their superiority over the country gentleman is, not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest than he has of his. "

"The interests of the dealers, however, in any particular branch of trade or manufacturers, is always in some respects different from, and even opposite to, that of the public. To widen the market and narrow the competition, is always the interest of the dealers."

"The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after long and carefully examined, not only with the most scrupulous, but with the most suspicious attention".

"It comes from an order of men, whose interest is never exactly the same as that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it."

Adam Smith, "The Wealth of Nations", 1776.