- According to Adam Smith in his The Wealth of Nations: ‘When a businessman has greater profits than he needs to maintain his own family he uses the surplus to employ more assistants to further increase his profits -and the more profits he has, the more assistants he can employ – thus an increase in profits leads to an increase in collective wealth and prosperity’
- In other words:
- The selfish human urge to increase private profits is the basis for collective wealth
- Greed is good
- By becoming richer I benefit everybody, not just myself
- My profits are also your profits
- Not only can we both enjoy a bigger slice of pie at the same time but the increase in your slice depends on the increase in my slice
- People become rich by increasing the overall size of the pie, not at the expense of others overall
- When the pie grows, everyone benefits
- The rich are thus the most useful and benevolent people in society because they turn the wheels of growth for everyone’s advantage
- All this depends on the rich using their profits to open new factories and hire new employees rather than wasting them on non-productive activities
- Profits must be invested in even more production which brings about more and more profits and employment – leading to more and more
- But what of greed if one allows markets a completely free rein?
- What if employers seek to maximise profits by paying employees less and increasing their work hours?
- Surely employees would leave for employment elsewhere, and employers would go out of business – so employers would be compelled to treat their employees well, if only to survive
- Not so if they had built a monopoly or cartel where all employers acted the same way preventing employees from switching jobs to better themselves
- Or, worse still, if they made slaves of them
- When Europeans conquered America, they opened up new gold and silver mines and established sugar, tobacco and cotton plantations – all labour intensive businesses – which became the mainstay of American production and exports
- As European demand for their outputs increased, labour availability became a problem – few wanted to labour long hours in the hot sun – contract labourers would have been too expensive for the mass consumption – business owners, greedy for profits, thus switched to the use of slaves
- From the 16th to 19th centuries, the shameful slave trade thrived
- About 10 million African slaves were imported to America – about 70% working on the sugar plantations – all so Europeans could enjoy their sweet tea and candy – not through racial hatred – purely for more profits
- And the trade was not even controlled by any government – only by the free market and the laws of supply and demand
- Thus free markets are flawed – they cannot ensure profits are gained or distributed in a fair way – the craving to increase profits and production blinds people to anything that might stand in their way
- Governments have since made efforts to constrain many abuses with human rights legislation, monopoly commissions, minimum wages and the like – but massive inequality still remains today between rich and poor
- Why so, when the global economic pie keeps growing bigger and bigger?
- Because we’re a selfish lot, we humans – no matter how much we have, it’s never enough – many if not most of us usually want more
- Conveniently, we say ‘charity begins at home’ and proceed to fill our home(s) with stuff we don’t need whilst only a few offer relative crumbs from their tables to the poor and needy
- Why again?
- Because we can – because there’s no laws or social mores stopping us
- It’s the ugly face of capitalism writ large
Mar 19