Two Timeless Economic Truths From Wealth of Nations

Adam Smith in Wealth of Nations made significant points about labor and money that we desperately need to remember today.

First, Smith differentiated between labor that produces a good or commodity of some sort versus labor that does not. He said that an economy is in trouble when it relies more on "unproductive" (meaning not producing goods) versus productive labor. Productive labor creates tools, refrigerators, software, anything of value that can be sold in the market place, sometimes more than once. Unproductive labor includes lawyers, doctors, bureaucrats, domestic servants, and others. It is not that he has no respect for their work, but his point is that once that work is done, it disappears into thin air and cannot be resold in the marketplace. There is a place for these laborers, but your economy should not rely too heavily upon them or it risks having a bad foundation.

Federal environmental policies, union contracts, and other issues have created a significant competitive disadvantage for this country when it comes to expanding what Smith would call the "productive" labor force. He would argue that this puts our economy in peril.

Second, Smith argues about assets and money. If your economy has most economic assets tied up in capital, it has a strong foundation. Capital is money in your savings account, CDs, stocks, etc. Capital is improvements you make on your home or business to increase its value. An economy based upon spending is weak and vulnerable. We have relied way too heavily on the consumer sector for way too long as an economic jolt. In the past few years, public spending has increased considerably with an eye towards stimulating the economy. Adam Smith explains that an economy cannot thrive on spending. Public spending is even worse because it confiscates capital.

So according to Adam Smith we are headed in the wrong direction. It will take a fundamental shift in policy and prioities to get us back on track. Do we have the courage to set things right again?

The Great Myth of the Capitalist Rape of West Virginia

The Democratic Party has gotten a great deal of mileage out of a myth.

West Virginians have a predisposition, due to their brand of Democratic thinking dating back to Andrew Jackson, to mistrust both Big Government and Big Business. They generally vote for whichever ideology seems least threatening to their liberties at the time. Republican opposition to Big Government makes sense nationally while Democratic opposition to Big Business helps Democrats locally.

Democrats in West Virginia look back to history to build their case against those that support capitalism. They cite corporate manipulations of law and culture to purchase millions of acres of land for timber, railroads, and coal, leaving the people with a pittance as a result. THIS, they say, proves the evil of capitalism!

Not so fast. All capitalists are businessmen, but not all businessmen are capitalists. Ronald Lewis, former West Virginia University professor and dean of regional economic historians, wrote in Transforming the Appalachian Countryside that many businessmen involved in industrial and extractive industries sought out the prestide of state sanction for their operations. In the 1870s and 80s Democratic party leaders such as Henry Gassaway Davis and Johnson Camden dominated the business and political affairs of the state.

A famous economist wrote harshly about the business monopolies assisted by the state, talking about "the mean rapacity, the monopolizing spirit of merchants and manufacturers, who neither are, nor ought to be, the rulers of mankind." Was this Karl Marx? No. Frederick Engels? No. Some other vile Communist? No. This was Adam Smith, the first articulator of capitalism, who warned against the alliance of business and government.

Once again we have met the enemy and it is government. All West Virginians have to do is look back in their history, read Wealth of Nations and understand that the problems that occured had nothing to do with the capitalism that Democrats and Michael Moore attack. It has to do with lurking mercantilism, the alliance of some businessmen with the power of government. Build the same kind of wall between capital and business that the ACLU wants between church and state. That would have prevented so many of the economic ills faced now and a hundred years ago.