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On the Third Hand: The Convention

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Adam Smith, the author of the Wealth of Nations, the patron saint of capitalism, hated rich people.

Smith hated government interference in the economy because he assumed that business people, and rich people in general, usually would collude to oppress shopkeepers and laborers.

Smith supported the idea that governments should do things like supporting schools, to give children a chance to make something of themselves, and he seems to have been open to the idea that government, charities, society in general, or someone ought to provide for the elderly and the disabled. He regarded the idea of simply letting the elderly fend for themselves as being the kind of barbarous practice a primitive society might adopt, not the kind of policy that a modern country like 18th century England would think of as an ideal.

But Smith also argued that buyers and sellers communicated information about the price of goods, services and labor quickly, efficiently and honestly through prices.

He saw the free movement of prices in free markets as a way for ordinary people to maximize their income, the value of their purchases, and their overall prosperity.

Despite all of the private equity bashing, at Bain Capital, Mitt Romney probably did use the “invisible hands” of the free market to create, increase and preserve value at companies that would have done a lot worse and cut a lot more jobs if he hadn’t been around. 

It seems reasonable to wonder whether, if Romney could come up with a stripped-down alternative to the Patient Protection and Affordable Care Act (PPACA), that PPACA Light package might not work better than the PPACA we have.

But Romney seems to be tying the idea of capitalism to the idea that he can hide who knows what Caribbean transactions by keeping his tax returns tucked away in the shoebox in his closet.

Top Democrats — who mostly have high incomes themselves, and are getting plenty of their donations from well-heeled donors with finances that may not be all that much different from Mitt Romney’s — have been using the whiff of fat cat financial kitty litter that surrounds Romney to promote a vision of an America in which great green jobs seem to sprout spontaneously from piles of brochures explaining government training, loan and procurement programs.

President Obama did mention the term “free enterprise” during his speech, but I didn’t notice the terms “free market” or “market forces” during the Democratic convention speeches I watched.

One of the challenges facing a capitalist society is that the people who run the society and live in it have to have a reasonable level of interest in having a capitalist society.

On the one hand, if ordinary people see capitalism as a fig leaf to cover manipulation by the rich, and they try to regulate capitalism out of existence, a country will shift from orderly free-market capitalism to a system that combines rigid socialist programs with disorderly black markets. That kind of chaos can’t be good for health insurers.

On the other hand, if the rich see capitalism as a tool they can use to concentrate the wealth of the nation in their own Cayman Island private accounts, and they do so, then we’ll end up with a banana oligopoly. That kind of chaos can’t be good for health insurers, either. Banana republics aren’t known for their workers’ Cadillac benefit plans.

On the third hand, if the politicians yammer on about this long enough, maybe they’ll discredit both the ranting populist view of economics and piggy pig pig robber baron view of economics and inadvertently lead to a reaction that will make wholesome free-market capitalist economics popular again. Maybe the climate that grows out of the campaign poster mulch will be good for health insurers.


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