Over at the New Yorker, Adam Gopnik assures us that Adam Smith would have had no trouble with Barack Obama’s recent remarks about how the existence of public roads nullifies the significance of individual accomplishment and justifies the administrative state.
Count me a skeptic. Gopnik is certainly right to say that Smith believed that markets were created and sustained by public policy, and that building infrastructure is an important public purpose which government should pursue. Everyone else believes that too. Obama’s assertion that his opponents disagree with that is preposterous. But as Gopnik also notes, Smith was an ardent critic of what we today would call crony capitalism. His case for the approach he lays out in The Wealth of Nations begins from a critique of the then-reigning economic approach known as mercantilism, under which each of the European powers set market rules that served the interests of a few large domestic manufacturers and trading companies that worked closely with the government—putting economic policy in the service of what they took to be the national interest, in order to advance the nation’s trading position. Smith argued that legislators should instead govern the market in the interest of the common consumer, and that the interest of that consumer would be best served by intense, open competition among producers that did not privilege large and well-connected businesses over smaller and newer rivals.
Crony capitalism—and a preference for a few large companies in each part of the economy that will function as agents of the government and be rewarded and protected accordingly—is the core of the Obama administration’s approach to the economy. It’s the essence of Obamacare and Dodd-Frank, for instance. And it is decidedly not about open competition in the service of the common consumer’s interest. You can name your new agencies consumer protection bureaus all you like, what they’re doing is making the economy more consolidated and easily manageable from the center, rejecting competitive enterprises in favor of public utilities. That’s basically the opposite of Smith’s vision.