Common sense is in short supply when it comes to economics these days. When conservatives advocate laissez-faire economics, liberals accuse us of “being for big business.” Somehow, when you check out the lineup of panhandlers in Washington it becomes patently obvious that Big Business is no fan of Adam Smith’s ‘invisible hand’.

In the very year of our nation’s birth, Smith, a Scottish economist, first published “An Inquiry into the Nature and Causes of the Wealth of Nations.” An enormous undertaking, it was celebrated for its comprehensive comparisons of the various economic practices in current and previous societies and most importantly the widely disparate results of those policies for everyone from kings to serfs.

While Smith only used the phrase once, the ‘invisible hand’ of market forces has become an easily recognizable concept for most anyone familiar with capitalism. The idea is that a free and open market will allow competition for profits. Without any third party constraints imposed, competitors seeking only to enrich themselves will necessarily enrich the entire society and therefore each member of the society. This generally happens because it has been observed that people buy more at a lower price, but may be willing to pay a higher price for a better product. That gives merchants in competition with one another very limited options in enriching themselves. They can convince customers to purchase from them by offering something as good as their competition at a lower price or they can offer a greater value to the customer. Either way the customer wins. Laissez-faire, which literally means, “to leave be” is used to describe a system in which the market regulates itself, allowing prices to become lower and products available to more and more people as Smith’s invisible hand pressures competitors whose very greed for profits causes them to better serve their customers.

When looked at in individual terms, it is easy to dismiss this concept. I can certainly deny that the fast food joint down the street is working hard to please me. However, when examining as Smith did entire nations and the results of their economic policies, the invisible hand becomes the undeniable hand. 

In 1936 there were only 200 televisions operating worldwide, and the richest man on the planet could not go to a Blockbuster and rent a VHS tape. Cars were a luxury item. The rich sweat all summer long with no air conditioning. Dishes were washed by hand and no one could nuke a Hot Pocket.

In the United States in 2006 eighty percent of the poor had air conditioned homes. Three-quarters owned a car and over thirty percent owned two. Ninety-seven percent had a color television while over half owned two or more. Seventy-eight percent had a VCR or DVD player. Eighty-nine percent owned a microwave and more than a third had dishwashers.

Fifty years ago, the first commercial quality VCR was priced at $50,000.00. Thirteen years ago, the first DVD player was marketed and today, you can buy one for just $50.00. The question that matters is why are they cheaper? Have the businesses that market these technologies simply become less greedy? Has the government ordered them to make DVD players affordable for poor people? Or have they lowered their prices to take advantage of a larger market than that which can afford a $50,000.00 toy?

The invisible hand has been responsible for the greatest increase in overall wealth of any society in history. The people of our country living in poverty have homes that rival those of middle class Parisians. The hand of government has been responsible for making a simple recession into the Great Depression, turning the land of the roaring twenties into a third-world joke. The hand of government treated us to gas shortages, long lines and unnecessary consumption due to artificially low prices. The hand of government is responsible for spending millions of dollars it confiscated from its people to encourage other people to live in unsafe hurricane-prone regions. Now the hand of government will crush our economy with excessive debt, trade protectionism, artificially high prices, unnecessary bureaucracy, fascist regulations of the business community, and the utter destruction of the free market.

Did the Community Reinvestment Act help by encouraging, even legislating bad loans? Yes. Did Bush and Paulson help by bailing out the first failing banks? Yes. Has this new round of stimulus added to the melee? Absolutely. Nevertheless, the real issue is not what government intervention would be best. The issue is whether there should be any intervention at all. Those who decry the failure of the free market do not recognize that we have not had a genuinely free market for years, and that returns us to the big businessmen, hats in hands, begging for a handout at the public trough.

Every economy, Socialist, Communist, Capitalist deals with the same problem: How to best ration limited resources that have alternative uses. Centrally planned economies operate under the belief that a small cohort of people can best decide where those resources are most valuable to the entire society. Free markets operate under the assumption that resources will be directed to where they are most needed based on the millions of independent decisions made by customers and merchants as they search for the best deal for both sides of a transaction. If big business really loved the free market, they would celebrate the collapse of their own failing corporations as the market does its job and signals that they are not worth the prices they are asking the people to pay. Instead, they ask the government to coerce us into paying prices we elect not to in the free market by confiscating our income and giving it to these corporate welfare queens. 

We the people can only vote every so many years for a politician. We can vote every day with our wallets. The votes of the people have told Ford and GM to lower their prices or make a more worthwhile product. They have refused. Maybe they cannot because of union labor costs, but it should be the decision of individual citizens whether they are willing to buy a car or not. Now GM cannot break down your door, hold a gun to your head and force you to give them some money to offset their cost of doing business. They can however, get the government to commit the same robbery legally through the tax code. Big Business does not like the free market. They like government bureaucrats to tie down the invisible hand with regulations that effectively monopolize the market for them. There are 75,000 pages of regulations for business in this country now. What little upstart can compete with that burden around their necks? None – and that is just the way Big Business likes it. 

All the way back at the turn of the century, when Upton Sinclair, a socialist, published “The Jungle,” Big Business saw the benefit of government regulation.  The popular myth that Sinclair dealt a blow to business with his largely false diatribe against the meatpacking industry has prevailed in spite of the historical record. This record shows that the largest of the meat-packers encouraged Congress to pass regulations that they were confident would stifle the ability of smaller companies to compete against them. Sinclair himself bemoaned the results, as he too recognized the boon to Big Business.  

The fact is that monopolies in a free market have been notoriously unsuccessful. It takes only one innovative person to provide a substitute for a high priced item and break the hold of a monopoly. Even when there was only one Aluminum manufacturer in the entire U.S., the prices stayed reasonable to prevent consumers from switching to other metals or even wood. Only the government can easily maintain a monopoly as only the government can legally force you to support an undesirable product, whether by legislating away competition or by confiscating your money to ‘subsidize’ the products a business cannot convince you to buy in a fair and free market.

Incidentally, Adam Smith himself was no fan of Big Business. Thomas Sowell offers an A to any student who can find a single favorable comment about businessmen in “Wealth of Nations.” No student has ever claimed this prize. Adam Smith recognized that businessmen were motivated by greed, but he also saw that very self-interest at work in improving the lives of others. This nation is at a turning point and the question we need to ask ourselves is, “What do we want more?” Do we want to punish the rich for their success, cutting off our nose to spite our face, or do we want the rich to continue enriching all of society as they have done for two hundred years?