Adam Smith & My Supper

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages.

Adam Smith, An Inquiry into the Nature & Causes of the Wealth of Nations, Vol 1, 1776

Adam Smith was the father of modern economics and the first proponent of free market, laissez-faire capitalism. He promoted free trade as the world, then experiencing its first massive expansion in wealth as a result of global trade, began to move from mercantilism towards something approaching his vision. So what does that have to do with my supper?

I just had a quite filling repast -- fresh green beans and a bit of diced sweet onion cooked with a slice of bacon, marinated in the bacon fat, then spiced with cayenne pepper, paprika, salt, and black pepper, all washed down with a cup of tea flavored with lime juice and heather honey. Delicious, filling, and . . . only possible because of globalism, capitalism and trade.

The only thing local was the sweet onion. From whence did all else come?

Green beans - shipped fresh from somewhere in Central America

Bacon - probably Virginia

Cayenne Pepper - probably Mexico

Black Pepper - probably India

Paprika - probably south central Europe or perhaps Turkey

Salt - probably Minnesota, with its huge salt mines

Green Tea - China

Lime Juice - Florida

Heather Honey - Scotland

All of the above came in containers made variously of glass, plastic, cardboard and metals from all over the world.

All came to a store near me by transport using fossil fuels.

All of that allowed me to make a meal that probably cost me about $1.25 to make. And the thing of it is, the price could have been far cheaper were not our band of capitalism still stunted by cronyism, protectionism and over regulation.

All of the people involved in bringing the supper to my table tonight did so out of their own enlightened self interest. And I bought all of the things that went into my supper not out of any feeling of benevolence towards the sellers, but out of my own self interest and with trust in the quality of goods from each supplier / producer.

Aren't global trade and capitalism wonderful things? As Ayn Rand once wrote:

Capitalism has been called a system of greed — yet it is the system that raised the standard of living of its poorest citizens to heights no collectivist system has ever begun to equal, and no tribal gang can conceive of.

So tonight, as I enjoy a simple, cheap and fine supper, I wonder what the masses are having in the socialist bastion of Venezuela? Or for that matter, what the deeply misguided and hypocritical Occupy protest veterans are dining on?

For anyone who needs a refresher in capitalism, there is no finer reference than Thomas Sowell's Basic Economics. If you haven't read it, do yourself a favor and purchase a copy.

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Depressing (& Depression) News

The Great Depression began in June, 1929 and lasted until the early 1941. FDR didn't solve it with his "New Deal", WWII did. By 1933, unemployment had risen to 24.9%, average incomes contracted by 40%, global trade fell by half in volume, and millions lost their homes and farms. How do we compare to the Great Depression?

We are now running a budget deficit closing in on two trillion dollars. Unemployment is at 9.4% and seems headed only upward. Our bond rating is on the cusp of being downgraded - an occurrence that promises a whole host of problems. The fed is printing money as never before:



Even with no new deficit spending, new and heavy taxes seem inevitable to service this debt. Plus, with such an increase in the money supply, massive inflation and devaluation of the dollar seems inevitable.

But much more is waiting in the wings to hit, some sooner rather than later. Obama is doing nothing to rein in spending or to avoid taxation. Indeed, to the contrary, Obama has not even begun to tax and spend. In an Orwellian move, he is calling for institution of "pay as you go" legislation that will make future tax cuts next to impossible but will not apply to any of the massive new deficit spending he has planned in his pet projects.

Social Security - a massive ponzi scheme that the left utterly refused to attempt to reform during the Bush years, is now running in the red. Medicare isn't being fixed, its being subsumed in a plan that will only expand care to 1/3 of the uninsured, yet cost us trillions in extra dollars. Cap and Trade is another massive regressive tax.

We are on the cusp of an energy crisis that Obama is ignoring. The price of oil is set to skyrocket from a host of contributing causes. The green energy Obama has promised us is not even cost effective, nor can it possibly be scaled up as quickly as it would need to be to provide a realistic alternative to oil and coal.

Global trade, already under extreme stress, is set to experience far more stress. Some 80% of all goods traded internationally are shipped. David Smick, writing at the Washington Post, notes "[t]he U.N. agreement last October on sulfur-burning levels for ships . . . is expected to send shipping costs skyrocketing." Thus the price of the vast majority of goods traded internationally will be effected, all in the name of global warming.

Then to top it off, we have Obama, instead of fixing the issues that led to this global economic meltdown, proposing a massive new regulatory regime for our financial sector. This is precisely what the respected Harvard economist Niall Ferguson warned against a few weeks ago.

Could this news get any more dire? Well, . . . yes. We now have sufficient data to make a reasonable comparison of where we are as compared to the same time frame after the start of the Great Depression. And the news is depressing indeed. Even without this next round of price increases, massive spending and high taxation, we are at or below the same economic indicators in the same time frame as existed during the Great Depression. This from the Financial Times:

Green shoots are bursting out. Or so we are told. But before concluding that the recession will soon be over, we must ask what history tells us. It is one of the guides we have to our present predicament. Fortunately, we do have the data. Unfortunately, the story they tell is an unhappy one.

Two economic historians, Barry Eichengreen of the University of California at Berkeley . . . [document] that this recession fully matches the early part of the Great Depression. . . .

First, global industrial output tracks the decline in industrial output during the Great Depression horrifyingly closely. Within Europe, the decline in the industrial output of France and Italy has been worse than at this point in the 1930s, while that of the UK and Germany is much the same. The declines in the US and Canada are also close to those in the 1930s. But Japan’s industrial collapse has been far worse than in the 1930s, despite a very recent recovery.

Second, the collapse in the volume of world trade has been far worse than during the first year of the Great Depression. Indeed, the decline in world trade in the first year is equal to that in the first two years of the Great Depression. This is not because of protection, but because of collapsing demand for manufactures.

Third, despite the recent bounce, the decline in world stock markets is far bigger than in the corresponding period of the Great Depression.

The two authors sum up starkly: “Globally we are tracking or doing even worse than the Great Depression ... This is a Depression-sized event.” . . .

You can read the rest of the article here. The authors go on to discuss the fact that Obama is attempting to rely on both Keynes and Friedman to guide his acts. Keynes theorized that massive public spending could be used to stimulate an economy while Friedman concentrated on monetary supply. The authors conclude hopefully that this will stop the full spiral into depression.

What gives me great pause is that these authors give no consideration to all of the additional taxes and the rising costs that we are about to have imposed upon us, plus what looks like new draconian regulation of our financial sector. Fed Chairman Ben Bernanke warned a few weeks ago that we needed to taking steps now to rein in spending and borrowing or we face severe problems in the foreseeable future. Obama is doing anything but that. I have never been so pessimistic about America's future. This could easilly go from bad to castrophically bad.

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