Sunday, June 9, 2019

Week-end Wrap - Political Economy - June 8, 2019

Week-end Wrap - Political Economy - June 8, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

You read it here first

The Green New Deal has forced into public discourse the fact that solving the crisis of climate change is going to require trillions of dollars of new investment. A recent example: 

Ocasio-Cortez: $10 trillion needed for effective climate plan
[The Hill, via Naked Capitalism 6-6-19]
Freshman Rep. Alexandria Ocasio-Cortez (D-N.Y.) said Wednesday that any plan to sufficiently address the climate crisis will need to cost at least $10 trillion. 
“I think we really need to get to $10 trillion to have a shot,” the progressive firebrand said in response to a question from The Hill in the Capitol. 
“I know it’s a ton," she added. "I don’t think anyone wants to spend that amount of money, it’s not a fun number to say, I’m not excited to say we need to spend $10 trillion on climate, but ... it’s just the fact of the scenario.”

If you had been reading this blog, Real Economics, in December 2014:
Dear Dems: Give me $100 trillion and I'll save your sorry ass
"$100 trillion to build a new economy" will be another test, but one that we need to impose over the coming two years. It can completely transform what issues are defined, and how, for the 2016 election. We need to get general public awareness of the need for "$100 trillion to build a new economy" - and how doable it actually is. Once we do that, it will be a relatively simple matter to determine if someone is serious about solving the problems we face. The next time we meet someone who is a leader in the Democratic Party, mention the fact that we need "$100 trillion to build a new economy" and watch carefully how they react. If they are hopeless neo-liberal water carriers for our would-be corporatist overlords, they will recoil in horror, or try to argue that such a huge amount is simply preposterous. Anyone who is stuck talking about programs of a few billion, or even a few hundred billion dollars, is simply completely uninformed about the problems we face - or just not willing to face reality - because reality is that we can no longer afford to let Wall Street play funny money games. We must figure out how to impose new laws and regulations that force banking and finance to serve the general welfare, not just private gain.
And about Trump and USA politics: if you had been reading this blog, Real Economics, in June 2014:
The best of times. The worst of times.
....what is needed to survive, we have already at hand. We have the science, and we have the technology. What we do not have is the political will to create crash programs to apply that science and technology, because that would require crushing our present rulers and leaders. Indeed, one half the formal political system in the USA has devoted itself to opposing science. And much of the other half has devoted itself to opposing technology. 
But what we lack most of all, is VISION. We do not have a coherent, plausible, positive vision. And without vision, the people will perish - another hard-learned lesson of human history the world's major religions warn us about. 
The 2008 Obama campaign showed us how powerful a vision of hope can be, no matter how much of a charade it might be. What do you think would be the electoral results if Democratic candidates starting telling people we are actually on the verge of a massive new economic boom? Because there is $100 trillion of work we need to do to solve the problem of climate change. This new boom will last for decades, just like the boom unleashed after World War 2 by meeting pent-up consumer demand and rebuilding Europe and Japan. I believe, in a few years or decades, the harshest and most important historical judgement of President Obama will be that he took office at a point where he could have led the nation and the world into a new golden age of capitalism, but instead chose to defend the status quo, and as a result the populist upsurge against the status quo veered right instead of left. (Bolding not in original 2014 posting.)

Tuesday, June 4, 2019

The possible routes to sustainability


Once in awhile, it's good to see what thoughtful grownups sound like when they discuss how exactly folks go about building a world that doesn't need to run on fossil fuels. Here Deutsche Welle follows some of the more promising strategies—e-mobility in Norway, the hydrogen strategy in Japan, etc. It's remarkably well done.


Sunday, June 2, 2019

Week-end Wrap - Political Economy - June 1, 2019

Week-end Wrap - Political Economy - June 1, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

[Valdai Discussion Club, via Naked Capitalism 5-26-19]
When analyzing the place that Russia and China occupy in each other’s bilateral trade, there is an imbalance arising from the difference in the size of the two economies. But it is hard to think of a way China could use it to blackmail or pressure Russia. Fuel and energy resources dominate Russia’s exports to China as well as Russian exports in general – fossil fuels accounted for 73 percent of its 2018 supplies. Russia is one of the main suppliers of oil to China, competing for first place with Saudi Arabia.
This does not speak well of the structure of the modern Russian economy. But, from a political standpoint, all prior experience tells us that trade in energy products creates a strong interdependence between supplier and buyer. Unlike other types of goods, any pressure on energy exporters is always associated with immediate and significant losses for the importing country, so it is only used as a last resort in rare cases. 

Tech cold war: how Trump’s assault on Huawei is forcing the world to contemplate a digital iron curtain
[South China Morning Post, via Naked Capitalism 5-26-19]
I distinctly remember 20 and more years ago repeatedly arguing with conservatives in AOL message boards that utilizing cheap Chinese labor for manufacturing was going to cause long-term strategic shifts and problems that would greatly afflict USA interests. Their responses were unequivocal and never varied: an ideological recitation of the benefits of free trade, most especially how trade with USA would sneakily introduce changes into China and force adoption of "democracy." The only variation from this line was the occasional addition of complaining that American workers were paid too much, and expected too much. 

[FifthDomain, via Naked Capitalism 5-26-19]

Mark Sumner, June 1, 2019 [DailyKos]

China’s Plan To Influence Global Commodity Pricing 
[SafeHaven, via Naked Capitalism 6-1-19]

The Electric Vehicle Revolution Will Come from China — not the US
by Lambert Strether [Naked Capitalism 5-26-19]

[Asia Times, via Naked Capitalism 5-27-19]

The Failure of Establishment Neoliberal Economics

After Neoliberalism
Joseph Stiglitz [Project Syndicate, via Naked Capitalism 5-31-19]
The neoliberal experiment – lower taxes on the rich, deregulation of labor and product markets, financialization, and globalization – has been a spectacular failure. Growth is lower than it was in the quarter-century after World War II, and most of it has accrued to the very top of the income scale. After decades of stagnant or even falling incomes for those below them, neoliberalism must be pronounced dead and buried.
Vying to succeed it are at least three major political alternatives: far-right nationalism, center-left reformism, and the progressive left (with the center-right representing the neoliberal failure). 
Three decades of neoliberal policies have decimated the middle class, our economy, and our democracy 
Joseph Stiglitz [MarketWatch, via Naked Capitalism 6-1-19]

Sunday, May 26, 2019

Week-end Wrap - Political Economy - May 25, 2019

Week-end Wrap - Political Economy - May 25, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

The radical plan to change how Harvard teaches economics
[Vox, via The Big Picture 5-25-19]Harvard finally has someone who is challenging Bush Dubya's economic guru Greg Mankiw in the teaching of introductory economics. Personally, I think Mankiw should be turned over to some impoverished country like Chad or Ecuador and tried for intellectual crimes against humanity. In the summer 2013 issue of Journal of Economic Perspectives, Mankiw published a paper entitled "Defending the One Percent."  (pdf)
Raj Chetty, a prominent faculty member whom Harvard recently poached back from Stanford, this spring unveiled “Economics 1152: Using Big Data to Solve Economic and Social Problems.” Taught with the help of lecturer Greg Bruich, the class garnered 375 students, including 363 undergrads, in its first term. That’s still behind the 461 in Ec 10 — but not by much. 
The courses could hardly be more different. Chetty has made his name as an empirical economist, working with a small army of colleagues and research assistants to try to get real-world findings with relevance to major political questions. And he’s focused on the roots and consequences of economic and racial inequality. He used huge amounts of IRS tax data to map inequality of opportunity in the US down to the neighborhood, and to show that black boys in particular enjoy less upward mobility than white boys. 
Ec 1152 is an introduction to that kind of economics. There’s little discussion of supply and demand curves, of producer or consumer surplus, or other elementary concepts introduced in classes like Ec 10.
Will China play rare earths card in clash with US?
[Asia Times, via Naked Capitalism 5-21-19]
“An American chemicals company and an Australian miner want to build a new supply chain for rare earths that bypasses China. The plan by Blue Line Corp. and Lynas Corp. is aimed at shoring up supplies of important commodities caught up in the U.S.-China trade conflict, … highlighting how companies are growing more worried about the Washington-Beijing showdown” [Wall Street Journal]. “Production of rare earths is dominated by China, and some of the world’s biggest buyers are U.S. technology companies that use rare earths in a wide range of electronics, including military equipment. The White House has been reluctant to impose tariffs on China’s rare-earths shipments, but China has slapped higher tariffs on American shipments of the unprocessed minerals. Lynas has become the largest producer of rare earths outside China and runs a unique supply chain shipping rare earths from Australia to Malaysia for processing.”

Sunday, May 19, 2019

Week-end Wrap - Political Economy - May 18, 2019

Week-end Wrap - Political Economy - May 18, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

[Machine Design Today 5-7-19]

Strategic Political Economy

The Pivot Point
[Craig Murray, via Naked Capitalism 5-17-19]
The massive economic shock following the banking collapse of 2007–8 is the direct cause of the crisis of confidence which is affecting almost all the institutions of western representative democracy. The banking collapse was not a natural event, like a tsunami. It was a direct result of man-made systems and artifices which permitted wealth to be generated and hoarded primarily through multiple financial transactions rather than by the actual production and sale of concrete goods, and which then disproportionately funnelled wealth to those engaged in the mechanics of the transactions. 
It was a rotten system, bound to collapse. But unfortunately, it was a system in which the political elite were so financially bound that the consequences of collapse threatened their place in the social order. So collapse was prevented, by the use of the systems of government to effect the largest ever single event transfer of wealth from the poor to the rich in the course of human history. Politicians bailed out the bankers by using the bankers’ own systems, and even permitted the bankers to charge the public for administering their own bailout, and charge massive interest on the money they were giving to themselves. This method meant that the ordinary people did not immediately feel all the pain, but they certainly felt it over the following decade of austerity as the massive burden of public debt that had been loaded on the populace and simply handed to the bankers, crippled the public finances. 
The mechanisms of state and corporate propaganda kicked in to ensure that the ordinary people were told that rather than having been robbed, they had been saved.
How Turkey Defied the U.S. and Became a Killer Drone Power
[Intercept, via Naked Capitalism 5-16-19]
Turkey now rivals the U.S. and the U.K. as the world’s most prolific user of killer drones, according to a review by The Intercept of reported lethal drone strikes worldwide. (Other countries that have reportedly killed people with drone-launched weapons include Israel, Iraq, and Iran.) The technology has been used by Turkey against ISIS in Syria and along Turkey’s border with Iraq and Iran, where ever-present Turkish drones have turned the tide in a decades-old counter-insurgency against the Kurdistan Workers’ Party, or PKK. 
While the U.S. was the foremost operator of armed, unmanned aerial vehicles (UAVs) in the world for more than a decade, launching the first drone attack in 2001, today more than a dozen countries possess this technology. The U.K., Israel, Pakistan, Saudi Arabia, the UAE, Egypt, Nigeria, and Turkey have all used armed UAVs to kill targets since 2015. Efforts by Washington to control proliferation through restrictions on drone exports have failed to slow down a global race to acquire the technology. Meanwhile, the U.S. has set a precedent of impunity by carrying out hundreds of strikes that have killed civilians over the last decade.
Turkey’s Anka drone showcased during a ceremony at Turkish Aerospace Space Industries Inc., near Ankara on July 16, 2010.

Sunday, May 12, 2019

Week-end Wrap - Political Economy - May 11, 2019

Week-end Wrap - Political Economy - May 11, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

[CommonDreams.com, via Avedon's Sideshow 4-28-19]
"The phrase is code for elites being pressured in ways they don't like, and is often a shield against legitimate criticism of corruption or dependence on corporate power."

Strategic Political Economy

[Ian Welsh, May 10, 2019]
You cannot have a good economy, where executives plan for the future, unless they need their companies to continue to do well. That means high progressive tax rates on income, on capital gains AND on unrealized capital and wealth, with no loops. 
Taxes on unrealized capital gains and wealth are necessary because if you don’t do that rich types don’t cash out capital, instead they use loans to pay their bills. When you’re worth 500 million or even just a 100 million, banks are happy to lend, at under 2%.
And this week, the perfect example of how a republic that does not throttle the rich has its economic policy severely distorted: 

“How the Koch Brothers Are Killing Public Transit Projects Around the Country” 
[New York Times, via Naked Capitalism 5-7-19]   
“At the heart of their effort is a network of activists who use a sophisticated data service built by the Kochs, called i360, that helps them identify and rally voters who are inclined to their worldview. It is a particularly powerful version of the technologies used by major political parties*. In places like Nashville, Koch-financed activists are finding tremendous success. Early polling here had suggested that the $5.4 billion transit plan would easily pass. It was backed by the city’s popular mayor and a coalition of businesses. Its supporters had outspent the opposition, and Nashville was choking on cars. But the outcome of the May 1 ballot stunned the city: a landslide victory for the anti-transit camp, which attacked the plan as a colossal waste of taxpayers’ money.”
High Speed Rail-- A Much Greener Way To Travel Than Airplane Or Auto... And Some Special Interests Opposing It
[DownWithTyranny, May 11, 2019]
Yesterday CNBC carried a very interesting piece on high peed rail-- and why the U.S. has fallen so woefully behind other nations. Jeniece Pettitt and Adam Isaak compared the U.S. to other countries: "China has the world's fastest and largest high-speed rail network-- more than 19,000 miles, the vast majority of which was built in the past decade. Japan's bullet trains can reach nearly 200 miles per hour and date to the 1960s. They have moved more than 9 billion people without a single passenger casualty. France began service of the high-speed TGV train in 1981 and the rest of Europe quickly followed... When the high speed rail between Madrid and Barcelona in Spain came into operation, air traffic just plummeted between those cities and everyone switched over to high speed rail which is very convenient. People were happy to do it; they weren't forced to switch. They did it because it was a nicer option to take high speed rail.

Friday, May 10, 2019

It's payback time, folks


There are moments when I simply cannot muster the energy to be a "good sport." Whenever I think about how this country just wasted 2+ years playing an ultra-corny version of spy vs. spy,  I literally want to see heads roll. It was not just the non-stop lying, it's that the lies were so stupidly unbelievable. And for extra fun, these lies were retailed by some of the writers I have read over the years on sites I once visited regularly—The Guardian, Smirking Chimp, Crooks and Liars...

Karma can be a bitch. Smirking Chimp is having trouble paying the bills. The Guardian will have serious problems recovering from Luke Harding's crazed book Collusion. Ms. Russiagate hoaxer, Rachael Madcow has taken a serious hit to her ratings.

I could be talked out of demanding the return of the guillotine, I guess, if we could all agree to stop listening to these partially developed minds stuck in their "tell me a story" phase of intellectual development. Personally, I am stunned that in a country of 315 million souls we cannot come up with the few thousand functioning adults necessary to organize a government.

Bob Mueller is 74. He probably won't be with us much longer. Writing his epitaph won't be easy. It difficult to say nice things about someone who knew his "investigation" was utter BS yet wasted the lives of the nation for years while he tried to come up with a reason to not tell us he had no case.

Robert Mueller Is in Serious Legal Trouble - Here's Why

James Howard Kunstler, 5/10/19

For the Progressive Democratic “Resistance” (PDR), post-Modernism is in full flower. They have ruled objective reality inadmissible. There are only stories — his story, her story, they’s story, zhe’s story, and you must believe them because they come out of lived experience — for instance the lived experience of having lost a sure-thing presidential election to a cartoon character with zero political experience, and then having lost the grand inquisition to oust him. For the PDRs, the metaphysical concept of reality refers to some land of dark make-believe over a distant horizon where numbers supposedly add up (ha!) and the actions of persons are said to entail a strange cosmic condition known as consequence.

Now that the Mueller Investigation has concluded empty of charges — despite two-plus-years of sedulous effort by fiercely dedicated antagonists of its target — everything about it, including the sacred Mueller Report, begins to emit odious vapors like unto a rump roast that has laid uncovered in a pantry for three weeks, attracting the attention of flies. The PDRs might think twice about a closer examination of all that festering material. What they’re liable to find is evidence of how slovenly and dishonest it was and how the revered legal maestro in charge of composing it may well be subject to charges himself of obstructing justice and malicious prosecution.

Information emerged over the weeks since the Mueller Report’s release that Mr. Mueller and his team knew unequivocally that the Special Counsel’s mission and the FBI operations that preceded it were based on concocted political bullshit supplied by Mrs. Clinton and her network of flunkies and fixers, ranging throughout the permanent DC bureacuracy (a.k.a. the Swamp), to outposts in foreign intel services and the political kitty-litter box known as Ukraine. Mr. Mueller must have suspected this from the outset, but knew for sure by the summer of 2017, and omitted to advise the American public that he had uncovered a fraud. Rather, he rode on the back of that fraud for two years, as if touring a political landfill on a donkey, leaving the public to stew in anxious hallucinations.

What else did Mr. Mueller do, or omit to do? He never engaged US government forensic computer analysts to examine the DNC servers at the heart of RussiaGate story. Rather, he allowed the conclusions to stand of a company called CrowdStrike, hired by the DNC itself to supposedly investigate the theft of emails, especially those of Clinton campaign chairman John Podesta. (See Craig Murray’s commentary on all this.) Mr. Mueller never bothered to interview the one person who might have known exactly who supplied the purloined emails to Wikileaks, namely Julian Assange. Mr. Mueller also did not bother to interview several dozen retired Intel Community computer experts, led by William Binney, former Technical Director of the NSA, who determined that the hack was accomplished by direct download by an insider onto a flash drive.

What could possibly be the explanation for these blunders. Well, we’re going to find out in the months ahead. The DPR chairs of various House committees have threatened to ask Mr. Mueller to testify. Bring it on, I say. He sure has some ‘splainin’ to do, if not in those venues, then in a more than a few grand juries that will be convened to assess the actions of his confederates-at-law from every hummock and gator pool in the Swamp. These various parties may also seek to understand why Mr. Mueller omitted to mention the now reeking Steele Dossier in his 444-page report, and why in his 20-plus page recounting of the oh-so-crucial Trump Tower meeting he never disclosed that the two Russians present were on the payroll of Hillary contractor FusionGPS, and met with its principal, Glenn Simpson before and after the meeting. It does give off a scent of “colluding with Russians,” except obviously the odor came from the wrong direction.

House Speaker Nancy Pelosi declared yesterday that we are in a constitutional crisis. You’re darn tootin’ we are, but it’s not coming from the flaccid threats of legal imbecile Jerrold Nadler (D-NY), who wants to prosecute the Attorney General, Mr. Barr, for refusing to make public grand jury records in the Mueller report — since the law requires Mr. Barr to not disclose the material. The crisis she mis-identifies is the coming indictment of so many supposedly untouchable and hallowed public figures, up to and including the former president, Mr. Obama, and the former heads of CIA, Mr. Brennan, and Director of National Security, Mr. Clapper, former Attorney General Loretta Lynch, the sainted Mr. Mueller, a whole posse of former Intel Community subalterns, and an unholy host of creeping, crawling, and flying swamp creatures from Glenn Simpson to the shyster lawyers at DNC law firm Perkins Coie, to the errand boys at the Cable News Networks, Wash-Po and The New York Times who trafficked in leaked perfidious documents — that the cumulative institutional damage will destroy public confidence in constitutional government per se.  more

Sunday, May 5, 2019

Week-end Wrap - Political Economy - May 4, 2019

Week-end Wrap - Political Economy - May 4, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

China’s population could peak in 2023, here’s why that matters
[CNBC, via Naked Capitalism 5-2-19]
China’s population is likely to peak in 2023, according to a study by online database company Global Demographics and analytics firm Complete Intelligence. The Chinese government had previously estimated that the country would hit its maximum population size in 2029.... The decline in births is driven by a “maternity cliff,” according to the report. The number of women of childbearing age in China — defined as aged 15 to 49 by the publishers — is set to fall from 346 million in 2018 to 318 million in 2023.
With fewer women of childbearing age and fewer births per 1,000 women, the total number of newborns will drop as well. The study predicts that 13.3 million babies will be born in 2023, down from 15.2 million last year.

The New Silk Roads reach the next level 
Asia Times, via Naked Capitalism 4-30-19]
....the West, as usual, ignored what was the absolutely key takeaway of the BRI forum: the deepening, on all fronts, of the Russia-China strategic partnership. It’s all here, in President Putin’s speech
Putin emphasized “harmonious and sustainable economic development and economic growth throughout the Eurasian space.” He noted how BRI “rhymes with Russia’s idea to establish a Greater Eurasian Partnership, a project designed to ‘integrate integration frameworks’, and therefore to promote a closer alignment of various bilateral and multilateral integration processes that are currently underway in Eurasia.”
Putin could not have been more specific. “The Eurasian Union…has already signed a free-trade agreement with Vietnam and a provisional agreement with Iran, paving the way to the creation of a free-trade area. The preparation of similar instruments with Singapore and Serbia is nearing completion, and talks are underway with Israel, Egypt and India. We cooperate actively with the Shanghai Cooperation Organization and the Association of Southeast Asian Nations.”

Addressing the forum, Putin added another enticing dimension, with the China-driven Maritime Silk Road possibly joining the Russia-driven Northern Sea Route, “a global and competitive route connecting northeastern, eastern and southeastern Asia with Europe” will emerge.

Disrupting mainstream economics

Economists Are Learning to Love the Minimum Wage
[City Lab, via The Big Picture 4-29-19]
....two new papers provide powerful evidence that higher minimum wages in fact boost the conditions of workers—especially the least skilled and lowest paid among them—without doing broad economic harm. 
The first paper is forthcoming in the prestigious Quarterly Journal of Economics and is currently available as a NBER working paper. (There is also a shorter, more reader-friendly research brief available.) It tracks the economic effects of more than 100 minimum-wage hikes across the country between 1979 and 2016.
Want to decrease suicide? Raise the minimum wage, researchers suggest 
[CBS News, via Naked Capitalism 5-1-19]

Sunday, April 28, 2019

Week-end Wrap - Political Economy - April 27, 2019

Week-end Wrap - Political Economy - April 27, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

Share of wealth held by the bottom 90% by country
[Real World Economics Review Blog, via Mike Norman Economics 4-24-19]


The Great Deformation: Why Income Inequality Has Become Intractable
Yves Smith, April 23, 2019 [Naked Capitalism]
Taylor’s talk last week focused on the drivers of the rise in inequality, which came about via a rise in profit share of GDP, something we first noted in 2005 in a Conference Board Review article. That has enabled the top 1% to pull away from everyone else. Investment as a proportion of GDP has also dropped while consumption has increased. The paper has more detail, but Taylor estimates it would take 40 years to reduce inequality to 1980 levels. He also warns that wealth concentration could increase from 40% held by the top 1% to 60%....
...advocates of workers have failed to take up the task of determining what a reasonable level of profit is. We’ve mentioned before that in the early 2000s, Warren Buffett deemed a profit share of 6% to be unsustainably high. Yet for the past three years, the profit share has been nearly twice this high. 
Oddly, the left and labor supporters have not engaged with the question of what a fair profit might be. Modern cultures have deeply internalized the idea that the result of market forces is somehow virtuous, when markets sit both in a legal system and in a set of societal norms that play a large role in what supply and demand looks like.

[Below via, via Naked Capitalism 4-23-19]
I'm reading 's new book, "People, Power, & Profits". Really appreciate this point about globalisation & wages:



Sunday, April 21, 2019

Week-end Wrap - Political Economy - April 20, 2019

Week-end Wrap - Political Economy - April 20, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

I have been looking at the work of Cornell University law professor Robert Hockett, who is serving as an economics adviser to Representative Alexandria Occasio-Cortez. I have been delighted to find that Hockett has been working the same angle I have: applying the classical republicanism that informed the creation of USA, to today's issues of political economy. Hockett's contribution is the development of the concept of what he calls "the producers' republic":
....the United States actually has a distinguished tradition of what I am calling “productive republican” finance. It is a tradition pursuant to which productive assets were deliberately spread broadly among diligent citizens ready to better the lives of themselves, their families, and ultimately their communities through thoughtful, hard work. 
Historically, the tradition is rooted in two complementary sources: first, an implicitly opportunity-egalitarian, “productive yeoman” colonial culture and subsequent national self-image, stemming in large measure from the Civic Republican and Classical Liberal ideological origins of the American republic; and second, an attendant suspicion of large aggregations of financial capital, stemming ultimately not only from the inconsistency of such aggregations with equal opportunity and productive yeomanry themselves, but also from many of the Founders’ and their forebears’ personal experiences, as agronomists, with exploitative absentee London banking concerns across the
Atlantic. 
This past January, Hockett was a participant in a small conference Money as a Democratic Medium, sponsored by Harvard University's Program on the Study of Capitalism, Institute for Global Law and Policy:
Money, governance, and public welfare are intimately connected in the modern world. More particularly, the way political communities make money and allocate credit is an essential element of governance. It critically shapes economic processes – channeling liquidity, fueling productivity, and influencing distribution. At the same time, those decisions about money and credit define key political structures, locating in particular hands the authority to mobilize resources, determining access to funds, and delegating power and privileges to private actors and organizations. 
Recognizing money and credit as public projects exposes issues of democratic purpose and possibility. In a novel focus, this conference makes those issues central. Scholars, policy makers, and students have often assumed that money and credit emerge from private exchange and entrepreneurial activity. Recent work, by contrast, emphasizes that modern currencies depend on collective orchestration. That approach resets the frame.
One of the participants was Jeffrey Sklansky, professor of history at the University of Illinois at Chicago and author of Sovereign of the Market: The Money Question in Early America (University of Chicago Press, 2017). Sklansky gave a brief but excellent overview of the career of Charles Macune, the head of the Southern Farmers' Alliance from 1886 to December 1889 and editor of its periodical, the National Economist, until 1892. Macune developed the Sub-Treasury idea to break the stranglehold the big banks and grain trading firms had on finance and credit for agriculture. There is precious little information available on Macune, and Sklansky has earned my deep respect for what he is doing.

Hockett's presentation is also in this video, as is that of Joseph R. Blasi of the Rutgers School of Management and Labor Relations, "The Citizen's Share: Reducing Inequality in the 21st Century"

This is only one of about a dozen YouTube videos of the Money as a Democratic Medium conference.

In Having a Stake: Evidence and Implications for Broad-based Employee Stock Ownership and
Profit Sharing, Blasi writes about the federally mandated profit sharing the administration of George Washington imposed on the cod fishery to rebuild it, after the British had nearly destroyed it because it trained so many of the officers and sailors in the American navy.
....Jefferson, Washington, and the Congress chose to help the industry get back on its feet by what was essentially a tax cut (in lieu of tariffs paid for supplies coming from outside the U.S.) to the owners and workers of the cod fishery on the condition that the ship owners share the tax credits with all the workers.... they rejected outright subsidies to the wealthy owners who controlled the boats and warehouses on the basis that any government tax credits had to include workers. The law was explicit in its sharing criterion: owners had to share five-eighths of the credit with the crew, and additionally have a signed agreement with the captain and crew for broad-based profit sharing on the entire catch throughout the voyage. The tax credits were administered by the Treasury Department headed by Alexander Hamilton through the port Customs’ Houses. The arrangement helped rejuvenate the industry. Congress continued it for many decades. See The Citizen’s Share: Reducing Inequality in the 21st Century, Joseph R. Blasi, Richard B. Freeman, and Douglas L. Kruse. (New Haven: Yale University Press, 2013), 1-8. See also the Report on the American Fisheries by Secretary of State Jefferson.
[Public Banling Institute 4-20-19]
Thomas Marois, Senior Lecturer in Development Studies at the University of London and recent guest on It’s Our Money with Ellen Brown, argues that until people regain control of money and credit, we will not be able to stop economic and ecological crises.
“There’s really no option. We can’t simply relegate the question of money and finance and credit … We can’t do anything until we have control of money. And to leave that to the private sector is a strategic mistake because then they control that agenda. They control credit. They control access to credit.”

Friday, April 19, 2019

Sandy Munro does a teardown analysis of Tesla


This YouTube interview of Sandy Monro is interesting to the point of being profound. Some background.

Monroe lives in Michigan and has a bunch of commercial ties to the car business. His specialty is tearing down cars to see how they were built and whether better production practices could make a better car. His company has about 100 employees, because cars are incredibly complex with dozens of systems so he needs a wide assortment of specialists.

The reason Monro has become a sensation is because he tore down an early Tesla Model 3. At first he was pretty critical but as time has gone on he has become convinced that most legacy automakers are now almost hopelessly behind. He has some wonderful stories about how institutional inertia works at a place like Ford Motor. His inside look at Teslas will probably sell well for at least a decade

And then he says some really enlightening things about China and their rapid industrialization plans. His observations may be skewed because he is probably meeting their best and brightest, but even taking a hefty discount for that, the story is still about as compelling a look at China as anything I have seen in a long time—maybe ever.

Wednesday, April 17, 2019

Greta Thunburg at the EU Parliament


I have a sign that says, "Do NOT question authority! They don't know either."

Now I really am impressed by young Thunberg and what she has accomplished. When you were 16, would anyone have asked you to speak in front of the EU Parliament? Would you have had anything to say worth listening to? Could you have delivered that speech flawlessly in a second language? She is truly amazing and has attracted a global following.

Unfortunately, she believes that the world's leaders are fully capable of fixing the climate problem if only they would put their minds to it. I only hope she will have her coping abilities in high gear when she discovers the worst truth of all—most of the adults—and certainly the adults she will meet at places like Davos, Strasbourg, or Katowice, don't have a freaking clue what to do either. I mean, Greta must be forgiven for believing that a good scolding should set thing right. She is only 16 and that probably is about the only behavioral modification she really understands. But for this problem, it is nowhere nearly enough. Of course, considering what she has already accomplished, she probably has a better chance of understanding this dilemma better than most.


Sunday, April 14, 2019

Week-end Wrap - Political Economy - April 13, 2019

Week-end Wrap - Political Economy - April 13, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

“Research is vital to the moral integrity of social movements” 
Rev. Dr. William J. Barber II [Economic Policy Institute, via Naked Capitalism 4-8-19]
A must-read.
One of the quickest ways for a movement to lose its integrity is to be loud and wrong. We’ve seen too many movements that have bumper sticker sayings but no stats and no depth. Researchers help to protect the moral integrity of a movement by providing sound analysis of the facts and issues at hand. Armed with this information, we’re able to pull back the cover and force society to see the hurt and the harm of the decisions that people are making....
...the prophet Isaiah said to those who were rich, powerful and presumed themselves to be morally superior. “Woe unto those who legislate evil and rob the poor of their rights and make women and children their prey.” Isaiah even went as far as saying that religious activity—worship and prayer—was not a cover for their failure to “loose the band of wickedness.” Wickedness in that text is specific to the issue of not paying people what they deserve and trying to cover it over with a lot of religiosity. He goes on to say that the nation will never be able to repair itself until it ends the wickedness of not paying people what they deserve. Because society’s policies had actually insulated destruction, injustice and inequality could never be resolved without a change of policy. 
These statements reflect more than just a difference of opinion concerning the legislation. Rather, such bold and specific statements suggest an analysis of the society which concluded that the legislation was evil in that it was robbing those who were most vulnerable. In other words, Isaiah’s moral authority to criticize policy could be confirmed and validated by research....
The 13 former Confederate states, which only have about 36 percent of this country’s population, decide 178 electoral votes, 26 United States Senate seats and 35 percent of the seats in the United States House of Representatives. That means all it takes to win control of both houses of Congress is 25 Senate seats and 16 percent of U.S. House of Representatives seats available from the other 37 states. 
100 million is the number of people that didn’t vote in the 2016 election. 40 million is the number of poor and low-wealth people in this country. The majority of them are in the South and are the key to the transformation of our politics. 
All of the close elections we witnessed in the 2018 midterms are a sign that we are right at the tipping point. If there’s ever been a time that we ought to go south and shift the political calculus in this nation for the next 20 to 40 years and beyond, it is in fact right now.
How corporate America invented 'Christian America' to fight the New Deal
[churchandstate.org.uk 3-23-16, via Avedon's Sideshow 4-4-19]
The 2016 annual meeting for the Organization of American Historians (OAH) will feature a session focusing upon the provocative book One Nation Under God by Princeton history professor Keven M. Kruse. In One Nation Under God, Kruse argues that the idea of the United States as a Christian nation does not find its origins with the founding of the United States or the writing of the Constitution. Rather, the notion of America as specifically consecrated by God to be a beacon for liberty was the work of corporate and religious figures opposed to New Deal statism and interference with free enterprise. The political conflict found in this concept of Christian libertarianism was modified by President Dwight Eisenhower who advocated a more civic religion of 'one nation under God' to which both liberals and conservatives might subscribe....

Arguing that public religion is a modern invention that has little to do with America’s origins, Kruse maintains that contemporary political discourse needs to better recognize the political ideology being perpetuated by the advocates of America as a Christian nation. Needless to say, Kruse’s arguments will antagonize many on the Christian right, as well as many on the left who have employed Christianity as the means through which to implement principles of equality and opportunity as extolled by Jesus of Nazareth, the working-class carpenter. 
Drawing upon extensive archival research, the first part of Kruse’s book documents the alliance between religious leaders such as Congregationalist minister James W. Fifield Jr. and businessman J. Howard Pew Jr., president of Sun Oil and a major figure with the National Association of Manufacturers. Working out of his affluent Los Angeles community and congregation, Fifield formed a national organization called Spiritual Mobilization that attracted the support of big business while embracing unfettered capitalist traditions threatened by Franklin Roosevelt’s New Deal policies. The fertile ground plowed by Spiritual Mobilization and Fifield prepared the way for the influential prayer breakfasts of Methodist minister Abraham Vereide and the crusades of evangelist Billy Graham.... 
Seeking to mount a conservative movement against the religious establishment, evangelists such as Billy Graham joined forces with the administration of Richard Nixon to promote a religious perspective that would divide rather than unify Americans. Holding White House religious services officiated by leading evangelical ministers and sponsoring events such as the 1970 Fourth of July “Honor America Day,” featuring a religious service at the Lincoln Memorial led by Graham, Nixon attempted to employ religious nationalism as a means through which to brand those opposing his administration or the war in Vietnam as attacks upon American Christian values. Although Kruse includes an epilogue offering an overview of religion and American politics from the 1980s to the Obama Presidency, he assigns Nixon, rather than Ronald Reagan, primary responsibility for using religion to divide rather than bring Americans together.

Friday, April 12, 2019

I want apologies from the Russia-bashers


In 1972, I went to Leningrad. This was the age of Brezhnev—scary, dark, humorless USSR. Just getting off the boat was about all I could muster. To make matters worse, the Israeli Olympic team was taken hostage the morning we were scheduled to go on our very first Intourist guided tour. I spent the morning going from fretful to scared shitless. Once the bus got underway, I began to notice things I thoroughly disapproved of. The trucks were ugly and belched thick black smoke. Consumer goods were an insult to the Instinct of Workmanship. Construction sites were a disaster. But beneath the seediness of 70s Leningrad was an undeniable reality—this was the Imperial Capital of Peter the Great. This is one of the most beautiful cities on earth—a city where over one million died of starvation during the Siege rather than surrender it to the Nazis.

It took most of the day, but I came to the conclusion that if they had better political and economic systems, this would easily be the richest country on earth. Considering USSR had to be built twice (Stalin's industrialization and then post WW II reconstruction) they weren't doing so badly even in 1972. Then came the Harvard boys to teach the Russians neoliberal "capitalism." Caused nearly as much damage as the Nazis.

Here's the mess the son of Leningrad / St. Petersburg Vladimir Putin inherited from Yeltsin in 1999:

    ▪    The country was deeply in debt to the scum like IMF and World Bank?
    ▪    The Harvard boys had created such an economic catastrophe that life expectancy was falling, whole industries lay in ruins, the former Russian middle class was reduced to selling heirlooms in the winter cold, their savings had been wiped out, the best and brightest had emigrated. (For what Jeffrey Sachs inflicted on Russia makes him a walking advertisement for bringing back crucifixions.)
    ▪    The oligarchs who had seized the best Russia had to steal escaped with their loot—mostly to London where they triggered a bubble the real estate speculators love so much.

Add to this list of great headaches, he has had to deal with: NATO encirclement, international slander, the Banderite-fascist coup in Ukraine. Of course he had to move on Crimea. The Red Army lost around a half-million folks trying to defend and then retake Sevastopol during WW II. Crimea is REALLY important for Russia and so he had to remake economic and foreign policy to deal with the fallout of keeping Crimea Russian.

In the meantime, Russian aerospace is back on its feet. The military fights with pride and professionalism. The things Russia has been good at, they are good at again—figure skating, ballet, etc. Putin is still wildly popular. He has rebuilt relationships with China. He has opened elite schools so Russian education is again world-class. Russia became the world's leading exporter of grains last year—all GMO-free.

The list is nearly endless. And why not. He has at least 40 IQ points on any politician we have in USA and was given one of those elite educations that the commies could do so well. He is so fluent in German he holds press conferences in Germany in German. He holds 3 hour press conferences for the international media without notes. He has done something that anyone examining the wreckage of 1999 would not have predicted—he has restored pride in a people who not long ago were just drinking themselves to death.

What I find so amazing is his willingness to brush off some of the most ridiculous slanders and provocations. I was raised around pacifists so am pretty conversant with the dilemmas and contradictions of this practice. I would give Putin a solid B+. Turns out it is pretty easy to be a pacifist when armed with nukes ;-) Or maybe it really is the Orthodox church. I don't know much about those folk beyond the fact they have incredibly ornate churches and their male glee clubs have amazing basses. Reportedly Putin's mother was very devout and baptized him as a baby. Whatever. It's just that under Putin, most of the damage those barbaric Bolsheviks inflicted on this element of Russian culture has been repaired or rebuilt—reportedly over 40,000 churches have been rehabbed since the end of Bolshevism.

I have not been thrilled by the mindless Russia-bashing we have had to endure these last 2.5 years. Most of it unbelievable lies. And while I detest the liars who have reintroduced the unholy practice of red-baiting, I am even more distressed by the endless stream of self-identified "progressives" who bought into the Russiagate hoax. Robert LaFollette was a real Progressive—was the party's presidential candidate in 1924. He tried to keep USA out of the insanity of WW I thereby ruining his career as a Senator. So no, anyone who was cheerleading a restart of the Cold War and McCarthyism is most certainly NOT a progressive.

Sunday, April 7, 2019

Week-end Wrap - Political Economy - April 6, 2019

Week-end Wrap - Political Economy - April 6, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus


Draining The Swamp In North Carolina Yields The Head Of The State Republican Party, The Party's Top Donor And 3 Others, Including A Far Right Member Of Congress
About a decade ago, mostly back in 2006 and 2008, we used to write a lot about a North Carolina multimillionaire congressman named Robin Hayes. The district he represented, NC-08, is now mostly NC-09, the one where a Trumpist candidate was caught rigging the ballots last year, causing the election to be voided.... Hayes was a freak. One of the reasons he lost so badly to Kissel in 2008 was because he accused then candidate Barack Obama of "inciting class warfare" and claiming that "liberals hate real Americans that work and accomplish and achieve and believe in God." That brought him a lot of attention and he not only denied that he ever said it, he also accused the media reporting his remarks "irresponsible journalism." Unfortunately for Rep. Hayes, someone made a tape. When that was released Hayes simple denied that he denied the statement. Kissel beat him by ten points. 
Instead of just letting him quietly slip away into obscurity, the North Carolina elected him chairman of the state party, a two year term. They elected him again in 2016. Today Hayes was in court, having been indicted by a federal grand jury on a variety of charges for funneling bribe money to the re-election campaign of North Carolina Insurance commissioner Mike Causey.
It was actually wealthy entrepreneur and Republican Party mega-donor Greg Lindberg who was being investigated when the FBI stumbled upon Hayes. Lindberg would write $40 checks to the DCCC on the same day he wrote $500,000 checks to the Republican Party of North Carolina. He's contributed million of dollars to the GOP in recent years and was the state party's biggest single donor and is the money-bags behind the state's crooked Lt. Govenor, Dan Forest, who is running for governor next year.

Strategic Political Economy

Taibbi: On Russiagate and Our Refusal to Face Why Trump Won
Matt Taibbi [Rolling Stone, via Naked Capitalism 3-31-19]
This is long, for Taibbi, but an absolute must-read.
The 2016 campaign season brought to the surface awesome levels of political discontent. After the election, instead of wondering where that anger came from, most of the press quickly pivoted to a new tale about a Russian plot to attack our Democracy. This conveyed the impression that the election season we’d just lived through had been an aberration, thrown off the rails by an extraordinary espionage conspiracy between Trump and a cabal of evil foreigners. 
This narrative contradicted everything I’d seen traveling across America in my two years of covering the campaign. The overwhelming theme of that race, long before anyone even thought about Russia, was voter rage at the entire political system. 
The anger wasn’t just on the Republican side, where Trump humiliated the Republicans’ chosen $150 million contender, Jeb Bush (who got three delegates, or $50 million per delegate). It was also evident on the Democratic side, where a self-proclaimed “Democratic Socialist” with little money and close to no institutional support became a surprise contender.
How the Media Got it Wrong on Trump and Russia 
[The National Interest, via Naked Capitalism 3-31-19] 
The headline erases the intelligence community from the story. The article does not.

Friday, April 5, 2019

Veblen's idea of business versus industry

I had wanted to reply to comments in the thread of Economics as Cultural Warfare: The Case of Adam Smith, over at Ian Welsh's blog, where bruce wilder makes an important correction to my view of Smith: "Smith’s central argument rather famously is that the division of labor is the primary source of wealth!" Which of course is perfectly true, given that one of Smith's most famous passages is that describing the impressive productivity of the machines Smith found in a pin making factory. 

But my design is to utter annihilate any respect for Adam Smith by showing he is little more than an apologist for the imperial looting, immiseration, and devastation the British empire exacted on its colonial subject populations. In my world view, there is nothing about any apologist for the British empire that is worth salvaging. Was it possible that here was an anomaly for which I would have to bend my rules?

As I pondered this over the past week, I realized that tossing Smith's division of labor argument into the trash bin of history is more easily accomplished by referencing the arguments made by Thorstein Veblen regarding the differences between business and industry. I was not very surprised to find that I could find nothing on the internet about Veblen's argument that was worth linking to. Veblen has always been  persona non grata in the mainstream economics profession -- which means that he probably has gored one or more of the profession's sacred cows. Which of course makes Veblen all the more attractive in our day, when the intellectual rot among economic academicians has reached an overpowering level of stench. Modern Monetary Theory may have some weaknesses and faults, but I would rather have it blowing through the academy to dispel as much of the bad air as it can, than leaving the brain dead body to continue rotting and fouling the air.

Researching my attack on Smith, I had taken off my bookshelf Joseph Dorfman's The Economic Mind in American Civilization. I now opened Dorfman's book again to see what he had written about Veblen. I was surprised but delighted to find the best summary I had yet read of Veblen's ideas. In case readers don't know it, Dorfman wrote a book in 1935 entitled Thorstein Veblen and His America. And what readers certainly do not know is that the descendants of Veblen loathed the book, and spent years trying to persuade, then force, Dorfman to change the book, mostly the parts in which he described Veblen's personal traits and peccadilloes, including the controversies Veblen stirred up at every university that ever hired him. Veblen’s  descendants were unsuccessful. The source for this is Jon Larson, who worked with Veblen’s descendants in the restoration of the Veblen farm.

Despite this sad history, Dorfman's explanation of Veblen's ideas on the differences between business and industry are extremely useful today. I hope to see in comments someone expressing their "eureka" moment -- yes, let us bury Adam Smith once and for all, and never hear of him again.

Sunday, March 31, 2019

Week-end Wrap - Political Economy - March 30, 2019

Week-end Wrap - Political Economy - March 30, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

[Vox, via Naked Capitalism 3-29-19]
The most puzzling critiques have come not from Republicans, but from the center left, broadly speaking. They urge policies to reduce greenhouse gases that are perfectly commensurate with the GND framework ... but present them as alternatives to the GND framework. (We’ll look at some examples later.) 
The connecting theme, the message, sometimes implicit and sometimes explicit, is this: move more slowly. Accept piecemeal progress rather than a big thing. Don’t push beyond strict carbon policy into social or economic policy.... 
The only way Democrats can hope to pass any legislation — not big legislation, any legislation — is by radically shaking up the status quo balance of powers. That would mean getting rid of the filibuster, possibly granting statehood to Washington, DC, and Puerto Rico, reforming the electoral college and voting laws, and possibly expanding the Supreme Court. 
Every piece of that reform agenda is big, risky, and unlikely to succeed, and at the end of it there would still be an enormous struggle over climate legislation (even getting 51 Democratic senators to be bold is a challenge). If you were in Vegas, you’d bet against any of this happening. 
But let’s be clear: The alternative is not small, sensible, bipartisan steps, as so many pundits and pols are promising. The alternative is nothing. And on climate change, nothing means disaster. Those who would ask us to resign ourselves to disaster should, at the very least, frankly acknowledge the implications. 
Incrementalism only works with willing partners on the other side, and there are none. (Emphasis in original)
This last is exactly what Brad DeLong said in an interview at the end of February: A Clinton-era centrist Democrat explains why it’s time to give democratic socialists a chance:
We were certainly wrong, 100 percent, on the politics. Barack Obama rolls into office with Mitt Romney’s health care policy, with John McCain’s climate policy, with Bill Clinton’s tax policy, and George H.W. Bush’s foreign policy. He’s all these things not because the technocrats in his administration think they’re the best possible policies, but because [White House adviser] David Axelrod and company say they poll well. 
And [Chief of Staff] Rahm Emanuel and company say we’ve got to build bridges to the Republicans. We’ve got to let Republicans amend cap and trade up the wazoo, we’ve got to let Republicans amend the [Affordable Care Act] up the wazoo before it comes up to a final vote, we’ve got to tread very lightly with finance on Dodd-Frank, we have to do a very premature pivot away from recession recovery to “entitlement reform.”
All of these with the idea that you would then collect a broad political coalition behind what is, indeed, Mitt Romney’s health care policy and John McCain’s climate policy and George H.W. Bush’s foreign policy. 
And did George H.W. Bush, did Mitt Romney, did John McCain say a single good word about anything Barack Obama ever did over the course of eight solid years?
No, they fucking did not. No allegiance to truth on anything other than the belief that John Boehner, Paul Ryan, and Mitch McConnell are the leaders of the Republican Party, and since they’ve decided on scorched earth, we’re to back them to the hilt. So the politics were completely wrong, and we saw this starting back in the Clinton administration. 
Today, there’s literally nobody on the right between those frantically accommodating Donald Trump, on the one hand, and us on the other.
Is this the end of the American century?
Adam Tooze [London Review of Books 4-4-19]
By the 1980s the Republican Party was an uneasy coalition between a free-market, pro-business elite and a xenophobic working and lower-middle-class base. This was always a fragile arrangement, held together by rampant nationalism and a suspicion of big government. It was able to govern in large part owing to the willingness of Democratic Party centrists to help with the heavy lifting. The Nafta free-trade agreement between the US, Mexico and Canada was initiated by George H.W. Bush, but carried over the line in 1993 by Bill Clinton, against the opposition of the American labour movement. It was Clinton’s administration that righted the fiscal ship after the deficit excesses of the Reagan era, only for the budget to be blown back into deficit by the wars and tax cuts of the George W. Bush administration....
Re: The Green New Deal: First, Shoot the Economists
CounterPunch 3-29-19 [via Jon Larson]
Not content with having acted as apologists for rapidly accumulating environmental crises, economists are now coming out of the woodwork to give their advice on the limitations of any transition program. In the first, the claim is that ‘we’ can’t afford one. In the second, it is that even if we could afford such a program, it would cause inflation. Both assertions proceed from the premise that Western capitalism is a neutral basis from which to proceed....
The affordability argument is a canard: capitalists have already absconded with the “profits” that make a Green New Deal necessary. These profits are either equal to or greater than the cost of cleaning up the environmental mess they created, or the totality of profits is less than their cost in terms of environmental destruction. In the prior, the Green New Deal is affordable. Capitalists have already proven it is by putting its costs in their own pockets. In the latter, three centuries of capitalist production have been a net loser once environmental costs are considered.

Thursday, March 28, 2019

Economics as Cultural Warfare: The Case of Adam Smith

Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.—John Maynard Keynes

For over a century now, professional economists have taught that the ideas on which the USA economy was built were those of Adam Smith.

I am going to debunk that, and I expect it will cause some people to freak out. For some reason there are many educated people in USA who take it as a personal affront to attack Adam Smith. It's not that hard to understand—they have had "successful" (read: well remunerated) professional careers based on the fundamentals they were "taught" (read: indoctrinated with) in collage. Adam Smith as the Brahma of modern "scientific" economics is one of those fundamentals.  So allow me to begin by presenting what one of the recognized giants of professional economics thought about Adam Smith.

Joseph Schumpeter, one of the most influential economists of the twentieth century, in his last book (which was never finished) History of Economic Analysis (pdf), conceded the importance of Smith's work, while also eviscerating it (pages 171-184). Schumpeter basically damned Smith's actual ideas with faint praise, while acknowledging that Smith obtained enormous influence as a peddler of specific economic doctrines. Much like Milton Friedman and his neoliberal Freedom to Choose of our current national nightmare.

Schumpeter begins his evaluation of Smith by noting that Sir James Steuart's An Inquiry into the Principles of Political Economy (1767) had "more originality and deeper thought than does the Wealth of Nations." So, why do we remember Smith today, and not Steuart? Schumpeter concluded that Steuart "was never much of a success in England," as a result of the elite disfavor Steuart faced for being a Jacobite adherent of restoring the Catholic Stuarts to the throne of the United Kingdom. In fact, Steuart was forced to live in exile from 1745 to 1763.

Schumpeter then noted that Adam Smith's greatest contemporaneous academic achievement was not Wealth of Nations, but A Dissertation on the Origin of Languages, which was appended to the 1767 third edition of the Theory of Moral Sentiments. "Moreover," wrote Schumpeter, "Smith’s philosophy of riches and of economic activity is there and not in the Wealth of Nations.... the Wealth of Nations contained no really novel ideas and... it cannot rank with Newton’s Principia or Darwin’s Origin as an intellectual achievement..."

Schumpeter concluded that Adam Smith's undeniable success in Great Britain was due to English elites' favor for "the policies he advocated—free trade, laissez-faire, colonial policy, and so on." In other words, Adam Smith was crowned with success for being a prominent apologist for the exploitative brutality of the British empire:
....it was Adam Smith’s good fortune that he was thoroughly in sympathy with the humors of his time. He advocated the things that were in the offing, and he made his analysis serve them. Needless to insist on what this meant both for performance and success: where would the Wealth of Nations be without free trade and laissez-faire? Also, the ‘unfeeling’ or ‘slothful’ landlords who reap where they have not sown, the employers whose every meeting issues in conspiracy, the merchants who enjoy themselves and let their clerks and accountants do the work, and the poor laborers who support the rest of society in luxury—these are all important parts of the show. It has been held that A.Smith, far ahead of his time, braved unpopularity by giving expression to his social sympathies. This is not so. His sincerity I do not for a moment call into question. But those views were not unpopular. They were in fashion. 
In fact, as Smith biographer Salim Rushid details, Adam Smith very carefully and deliberately went about currying favor with Scottish and English ruling elites. Rushid writes"
Smith’s involvement in politics was neither marginal nor ineffective. Strange as it may sound, in today’s parlance he would have been called “street-smart.” He was considered a good judge of what would sell.... Despite the radicalism of his personal sympathies, Smith tailored his views and his life to be acceptable to the established order. There is little surprise in finding that this cultivation bore fruit and that Smith’s ideas proved serviceable in the defense of conservatism.
Elsewhere, Rushid writes, that during his time "Adam Smith was not hailed as a new prophet except by some few, but very influential, persons such as Lord Shelburne and William Pitt." Adam Smith was merely a paid apologist for the ruin and misery Great Britain imposed on millions of colonial people in Ireland, Africa, China, India, and elsewhere. As Philippine economic historian Erle Frayne Argonza wrote in September 2008:
To continue on the theme of laissez faire, a doctrine started by the French physiocrats and systematized further by the Scots, let it be known that the principle of ‘free trade’ generated by physiocracy was largely a doctrinal defense of slave trade....  Adam Smith was an ‘intellectual prostitute’ whose services were procured by the British East India Company, precisely for the purpose of crafting in theoretical form the ‘free trade’ doctrine that was to justify, though subtly, the slave trade of that historic juncture. 
Schumpeter also very briefly, and very significantly, noted "that which I cannot help considering relevant, not for his pure economics of course, but all the more for his understanding of human nature—that no woman, excepting his mother, ever played a role in his existence..." In 2012, Katrine Marçal, lead editorial writer for the Swedish newspaper Aftonbladet,  published Who Cooked Adam Smith’s Dinner? (English translation: Pegasus Books, 2016), based on one of the most famous sentences in Wealth of Nations: "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 interest." One reviewer, Ed Walker,  Assistant Attorney General of Tennessee for consumer protection and securities, explained how the question posed by Marçal devastated Adam Smith's economic ideas, and all systems of economics based on them.
But the butcher, the brewer and the baker did not cook for Smith. That job went to his mother, Margaret Douglas, later joined by his cousin, Jane Dauglas. These women took care of Smith’s household until they died. Smith never mentions their labor. 
Marçal explores the impact of Smith’s omission on the study of economics. One thread is the feminist story: much of the crucial work of care is provided through benevolence, not for money, and so is not considered part of the economy or part of the field studied by economists. Marçal points out that when an economist marries his housekeeper, the GDP goes down. 
Smith’s omission makes it possible to make “markets” the center of the study of economics. Eventually theorists dreamed up the silly story of Homo Economicus with his rational calculation of individual advantage as the essential human characteristic. We identify that rationality as masculine as opposed to feminine in the context of male-centered history and culture. In feminist terms, homo economicus is ungendered and dominant; women are the other in every way. 
Instead of this stunted theory, Marçal shows that the economy isn’t just about the production of things for the market. A huge part of the work of any society is care for one another. We care for children, for the aged, the sick, the abandoned, the orphan and the widow, those injured in war and those injured in mind. We care for our planet, our air, our parks and our public spaces, our cities, our lakes and rivers. Much of that care has nothing to do with markets. We do it solely out of benevolence, in direct contradiction to Smith. 
If economists are ignoring the importance of care in the functioning of an economy, what are they doing? They tell us that they study the allocation of scarce resources.... Care for the vulnerable must not involve a scarce resource under this definition, probably because everyone blithely assumes that women will do it for free, and there are plenty of women. Importantly, care isn’t controlled by the demands of efficiency. If the baby cries, what does it even mean to talk about efficiency? We do whatever it takes and for as long as it takes. So taking care of each other is excluded from the study of [Smithian] economics from the outset....
Pick up almost any introductory economics textbook today, and you will find, somewhere near the beginning, a sentence like this: "Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people." (Economics, by Samuelson and Nordhaus, 18th edition, 2005)

But the great contribution of the industrial revolution, was the overcoming of scarcity, including of food, clothing, and shelter. One of the few economists to ignore the Smithian focus on scarcity is Thorstein Veblen, who recognized the essential difference between business—which focused on making profits and accumulating wealth—and industry—which focused on making products and marshaling resources and machine capacity to do so. Business, Veblen observed, most often involves the predatory characteristics of "pecuniary culture": chicanery, deceit, and fraud. By contrast, industry requires both an individual instinct of workmanship, and a high level of social cooperation and collective action. Moreover, Veblen noted, the need for collective cooperation in industry mitigated the predatory characteristics of finance and business inculcated into individuals.

Veblen noted that, rather than scarcity, the major problem faced by modern industrial society was overproduction. In The Engineers and the Price System (B. W. Huebsch, 1921), Veblen wrote:
Without some salutary restraint in the way of sabotage on the productive use of the available industrial plant and workmen it is altogether unlikely that prices could be maintained at a reasonably profitable figure for any appreciable time. A businesslike control of the rate and volume of output is indispensable for keeping up a profitable market and a profitable market is the first and unremitting condition of prosperity in any community whose industry is owned and managed by business men. And the ways and means of this necessary control of the output of industry are always and necessarily something in the nature of sabotage; something in the way of retardation, restriction, withdrawal, unemployment, of plant and workmen, whereby production is kept short of productive capacity. The mechanical industry of the new order is inordinately productive. So the rate and volume of output have to be regulated with a view to what the traffic will bear; that is to say, what will yield the largest net return in terms of price to the business men who manage the country's industrial system. Otherwise there will be overproduction, business depression, and consequent hard times all around. Overproduction means production in excess of what the market will carry off at a sufficiently profitable price. (pp 7-8)
Adam Smith's ideas placed no value on industry, and it is therefore no real surprise that in those countries where Smith's ideas came to dominate—such as USA and United Kingdom in the 1980s—entire national economies were deindustrialized, the working class destroyed, and the financial systems allowed to be reshaped and dominated by waves of dirty money, transforming them into  crimonegnic environments.

Adam Smith was the voice of the British establishment and the newly minted British commercial oligarchy which vehemently opposed the idea that the United States should attempt to be anything other than producers and suppliers of basic agricultural commodities. According to Smith and his fellow apologists for British imperialism, any attempt to foster the growth of manufacturing industries and thus establish America’s economic independence from the powers and princes of Europe, was “unnatural”: a violation of the established order of Nature—and therefore a sinful exercise in economic inefficiency and waste of resources. The foremost manifestation of this "established order" in Smith's political economy was equilibrium—which remains a key concept of mainstream economics today, revealing the profession's refusal to repudiate its heritage of British imperial economic theory.

In Book II, Chapter V of Wealth of Nations, Smith wrote:
It has been the principal cause of the rapid progress of our American colonies towards wealth and greatness that almost their whole capitals have hitherto been employed in agriculture. They have no manufactures [and] The greater part both of the exportation and coasting trade of America is carried on by the capitals of merchants who reside in Great Britain.... Were the Americans, either by combination or by any other sort of violence, to stop the importation of European manufactures, and, by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they would retard instead of accelerating the further increase in the value of their annual produce, and would obstruct instead of promoting the progress of their country towards real wealth and greatness.
In other words, the British oligarchs, speaking through Smith, were declaring they could tolerate their former Atlantic colonies achieving political independence, so long as North America remained in economic bondage to Britain. This stratagem of economic warfare was the basis for Lord Sheffield's 1783 Observations on the Commerce of the American States, and was exposed by Thomas Paine in A Supernumerary Crisis II. It was also repudiated by Assistant Secretary of the Treasury Tench Coxe in A brief examination of Lord Sheffield's Observations on the commerce of the United States (M. Carey, 1791). 

The historical record of what was actually taught in USA as political economy in the nineteenth century, shows that Adam Smith was rejected in favor of economic doctrines developed indigenously by Americans, especially in Pennsylvania and the northeast.  In Origins of Academic Economics in the United States (Columbia University Press, 1944), Michael J.L. O’Connor notes that the first American edition of Smith’s Wealth of Nations did not appear until some years after the American Revolution. Jefferson termed it the best book on political economy in 1790, but by 1810 Jefferson was more impressed with the work of the Frenchmen Antoine Destutt de Tracy (who coined the term "ideology") and Jean B. Say.  A third edition of Smith was published in Hartford in 1818. O’Conner observes that 53 years then passed before another edition was published in the United States. (Though O’Conner postulates that what demand there was in the US was met “by the numerous cheap foreign editions.”)

O’Conner found that in the late 1830s and afterwards, the most popular “principal text” used to teach economics in the USA was Elements of Political Economy, by  Francis Wayland, pastor of Boston's First Baptist Church and later president of Brown University. While American publishers ignored Adam Smith entirely, editions of Wayland were published in 1837, 1838 (New York); 1840, 1841, 1843, 1846, 1848, 1849, 1850, 1851, 1852, 1853, 1854,1855, 1856, 1858, 1859, 1860, 1867, 1868, 1869, 1873  (Boston); and 1875 (New York). In 1878, Presbyterian minister Aaron L. Chapin, founder and president of Beloit College (the oldest continuously operated college in Wisconsin) extensively revised Wayland, and this new edition was published in 1878, 1879, 1880, 1882, 1883, 1884, 1885, and 1906. (O’Conner, page 174)

By comparison, O’Conner noted, after the Hartford 1818 edition, another edition of Adam Smith was not published until 1871.

In his article "Francis Wayland's 1830s Textbooks: Evangelical Ethics and Political Economy," (Journal of the History of Economic Thought, 2002), Donald E. Frey wrote, "A comparison of book sales to college enrollments suggests that Wayland's Political Economy served a greater proportion of the market of its day than Paul Samuelson's Economics did between 1948-1980."

In the excellent and highly readable study of Abraham Lincoln’s economic beliefs (Lincoln and the Economics of the American Dream, Memphis State University Press, 1978), Gabor Boritt noted that Lincoln’s Springfield law partner, William Herndon, recalled that Lincoln read Henry C. Carey and Francis Wayland (Elements of Political Economy). No mention was made of Adam Smith. As Boritt observed, “It is remarkable that in 1886 his former partner still remembered Lincoln’s special liking for this by then rather forgotten book.” (p122) 


Simply put, Adam Smith was a factotum for the British oligarchy, and as such, was fundamentally hostile to the United States and its grand experiment in self-government and republicanism. This marks the cultural conflict with the continuing existence of monarchy and oligarchy in Britain. 

In 1834, there was published in Boston a little book entitled Tracts on Sundry Topics of Political Economy, written by Oliver Putnam, a sickly but wealthy merchant of Newburyport, Massachusetts. To preserve his health, Putnam retired in his thirties, but busied himself with an intense study of political economy. Putnam's ideas were informed by his travels throughout the U.S. and Europe, travels he had undertaken in search of a cure for his ailments. The second part of the book is entitled "Observations on Smith's Wealth of Nations," and I venture to assert they were typical of American views of Smith, and British political economy in general, in the mid-1800s. 
In the following remarks, the writer's aim has been briefly to expose the fallacy... of doctrines, which, he conceives, are of tendency injurious to the welfare of his country. Adam Smith has founded a school in political economy... too plausible in the defence and too zealous in the advancement of their favorite theory, not to have gained a host of proselytes. What influence they may obtain abroad, is of little consequence to us; or certain it is, rather, that the more influence they do exert in Europe, the better they will promote the interests of America. But it is time for us to be vigilant and circumspect, when men and men of letters among us, who deservedly possess great credit in the public mind, profess themselves emulous to pin their faith on the infallibility of Adam Smith. When this becomes apparent, it is evidently time to exhibit the proofs of his fallibility, and of the pernicious effects arising from injudicious application of his theories to practice. . . . 
As Americans, also, we are all bound to take exception to his illiberal reflections on the dispute, which led to the revolutionary war, and on our causes of complaint against the mother country.— We have not been sufficiently awake to the mischievous effects of introducing many English writings into our seminaries of education, and of giving credence to their authors on subjects of political economy and politics. —It is a truism to say that our institutions are radically different from the English. Ours are throughout republican, theirs are substantially monarchical. Theirs are the oft-changed remnants of feudal barbarism; ours are a great political invention, which undergoes its first trial in this country.—And yet we have Blackstone and Paley for our text books in politics, who, whatever may be their excellencies on other accounts, are certainly the bigoted advocates, the courtly apologists, of whatever, in the system of the British government, is corrupt in itself, and most adverse to the genius and principles of our own government.
And so also we take Smith as our magnus Apollo in political economy, the basis of whose theory is, that the country gentlemen, that is, the landed aristocracy, of Britain, are the only class for whose benefit government is instituted, laws enacted, or who deserve the regard of the statesman, and that all the other productive classes, the mechanical, the manufacturing, the mercantile, are a set of sharpers, who have been constantly engaged, ever since the Conquest, in a conspiracy to defraud the simple, innocent, and defenceless country gentlemen, and to impoverish and ruin the country. These are strong terms, but they are not stronger than the text warrants. . . Surely it is not for our interest to allow the opinions of our national enemy to acquire a kind of prescriptive authority in the country.—It is not for our interest to place the writings of our national enemy in the hands of our youth, and thus administer, ourselves, poisoned aliment to the lips of the rising generation. 
...Adam Smith... takes pains to ridicule our colonial legislatures as little knots of factious rebels... he sneers at the high minded men, who composed our continental congress, as being upstart shopkeepers and attorneys, animated only with the little pride of becoming provincial dukes and marquises... he stigmatises, with the grossest terms of opprobrium, the master spirits of seventy-six, Washington and Adams, Franklin and Jefferson and their compeers, whose glorious names are and will be the watchword of millions, who shall never dream of the learned Glasgow sage's existence. Americans may not be apprised of these things; but they ought to be, ere they determine to repose implicit reliance upon the opinions of Adam Smith. 
The opinions of Adam Smith on this subject, are introduced here, not for the purpose of refuting them, for they do not deserve so much attention; but only to hold them up to the reprobation and indignation of an insulted people. 
Let it be holden in remembrance then, that, in treating of colonies, he traduces, in good set phrases, the whole American people. 
If not Adam Smith, then whose ideas provided the basis of the new USA economy?

The USA economy was built on the ideas of Alexander Hamilton, the first Secretary of the Treasury. Hamilton had served on Washington's headquarters staff during the Revolutionary War, and the historical evidence indicates that Washington came to consider Hamilton almost like a son. Much of Washington's wartime and presidential correspondence was drafted by Hamilton for Washington's signature. During Washington's presidency, Hamilton acted much like a prime minister, being involved in a number of administration details beyond his duties as Treasury Secretary.  For example, Washington's Farewell Address was largely written by Hamilton. In the 1879 book, The Life of Albert Gallatin, a biography of the fourth, and longest serving Treasury Secretary, Henry Adams wrote:
In governments, as in households, he who holds the purse holds the power. The Treasury is the natural point of control to be occupied by any statesman who aims at organization or reform, and conversely no organization or reform is likely to succeed that does not begin with and is not guided by the Treasury.... The vigor and capacity of Hamilton’s mind are seen at their best not in his organization of the Treasury Department, which was a task within the powers of a moderate intellect... The true ground of Hamilton’s great reputation is to be found in the mass and variety of legislation and organization which characterized the first Administration of Washington, and which were permeated and controlled by Hamilton’s spirit. That this work was not wholly his own is of small consequence. Whoever did it was acting under his leadership, was guided consciously or unconsciously by his influence, was inspired by the activity which centred in his department, and sooner or later the work was subject to his approval. The results—legislative and administrative—were stupendous and can never be repeated. A government is organized once for all, and until that of the United States fairly goes to pieces no man can do more than alter or improve the work accomplished by Hamilton and his party.
Hamilton's design for a national economy is thoroughly explained in the series of reports he submitted to Congress in 1790 and 1791:
In addition, Hamilton wrote a report for President Washington on the Constitutionality of the National Bank, dated February 15, 1791. Taken together these six are the foundational documents of the USA economy. And they largely repudiate the economic ideas of Adam Smith, especially the Report on Manufactures.

In European Origins of the Economic Ideas of Alexander Hamilton (Arno Press, New York, 1977), Robert James Parks argues that the Report on Manufactures
...demonstrates even more conclusively that [Hamilton] was not Smith’s disciple…. Careful analysis of Hamilton’s Report reveals basic conflicts with Smith so deep that Hamilton had to dedicate a major portion of his Report to attacking the validity of Smith’s system for American use…. From the beginning Hamilton disagreed with Smith over the logical course for America to follow in her economic development.
In his Report on Manufactures, Hamilton paraphrased, then refuted, four major arguments Smith made in favor of free trade and laissez faire.  If Hamilton had not succeeded in establishing a new national economy which included an activist role for government, it is likely the United States would never have emerged as a single, unified superpower, but probably would have broken up over a number of issues and crises which threatened the Union—even before the Civil War. It should also be noted that today conservatives and neo-liberals use Hamilton's paraphrasing of Adam Smith, not Hamilton's arguments refuting Smith, to promote the falsehood that the USA economy is based on the ideas of Adam Smith. The fact is that Hamilton paraphrased Smith not to agree with Smith, but to refute him.

First was Smith’s argument that agriculture provided higher returns to capital, because the puny efforts of man are assisted and magnified by the biological power of nature. (Smith, Wealth of Nations, ed. Edwin Cannan, Modern Library, New York, 1937, pp. 345, 639-641.) Hamilton merely pointed out that the art and skill applied by artisans, craftsmen, and workers to manufacturing activities often created much more value than the simple labor of man and nature in agriculture. Moreover, Hamilton pointed out, the aid of nature is widely applied to manufacturing activities through the use of water power. Hamilton also noted that the application of the power of nature to agriculture was seasonal, and occasioned periodic unemployment, while manufacturing remained steady all year round. (Parks, pp 123 ff.)

Second was Smith’s argument that agriculture yields revenue which manufacturing does not, namely, rent. (Wealth of Nations, p 345.) It should be noted here that political economists, in the century after Smith and Hamilton, would greatly refine and change the concept of economic rent. With that proviso, Parks explains that
Smith regarded rent as the surplus remaining from the labor of nature after the returns to man and capital had been deducted. Hamilton’s analysis used Smith’s division of returns into the profits on stock (capital) and rent to attack him. He reclassified land as a form of stock, argued that it earned profits, and held Smith's distinction as merely a verbal one. (Parks, pp 126-127.)
At first glance, you might wonder if this point is significant, or just a splitting of hairs. But arguing that land was as much a malleable "stock" as other factors of production, strikes at the heart of the British Smith-Malthus-Ricardo school which held that land was a fixed and finite resource, which could only be abandoned when its fertility was exhausted. In America's Protectionist Takeoff 1815-1914: The Neglected American School of Political Economy (ISLET, 2010), Michael Hudson includes a fascinating chapter on the origins of the US Department of Agriculture. Pro-slavery Democrats in the 1840s and 1840s resisted the introduction and dissemination of the breakthroughs in agricultural chemistry and soil science made by European scientists Justus von Liebig, Albrecht Thaer, and John Bennet Lawes. The very basis of soil science destroyed the Ricardo-Malthus model of diminishing returns which underlay British free trade doctrine. American System economists instead argued that industrialization—promoted by an activist national government—would create a home market for agricultural products: the "forge and anvil" would take their place next to the "farm and plow," "putting the consumer by the side of the producer" and cutting out the middlemen in the British system who enriched themselves by trading and transporting goods around the British Empire but added nothing of real value.


Hamilton's repudiation of Smith's argument that land was the primary source of wealth was essential for the creation of a new system of economics. This new system made zero-sum economics obsolete. Smith's economics were still shackled to feudal conceptions of wealth and property: a nation's stock of wealth is based on its land and the slaves and serfs who worked it, and whatever mass of precious metals and debentures it had accumulated. Growth of national wealth could only be achieved by 1) seizing other lands and peoples and imposing colonial status on them. or 2) gaining an advantage, usually unfair, over other countries in international trade. Smith wrote: "The colony of a civilized nation, which takes possession, either of a waste country, or of one so thinly inhabited, that the natives easily give place to new settlers, advances more rapidly to wealth and greatness than any other human society." (Wealth of Nations (Oxford, 1976), II, 564)

Under Hamilton's economics, national wealth becomes primarily based on the scientific and technological achievements of a nation's people, and the consequent improvements in their ability to use machinery to increase the productive power of labor. Thus, Hamilton argued that Smith failed to account for the full value of the output of manufacturing:
The Artificer may be regarded as composed of three parts; one by which the provisions for his subsistence and the materials for his work are purchased of the farmer, one by which he supplies himself with manufactured necessaries, and a third which constitutes the profit on the Stock employed. The two last portions seem to have been overlooked in the system [of Smith], which represents manufacturing industry as barren and unproductive.
Not content to just explain how Adam Smith was incorrect to believe agriculture was inherently more productive than manufacturing, Hamilton also observed that the advantages of manufacturing would be squandered under a policy of free trade, since
manufacturing pursuits are susceptible in a greater degree of the application of machinery, than those of Agriculture... all the difference is lost to a community, which, instead of manufacturing for itself, procures the fabrics requisite to its supply from other Countries. The substitution of foreign for domestic manufactures is a transfer to foreign nations of the advantages accruing from the employment of Machinery, in the modes in which it is capable of being employed, with most utility and to the greatest extent.
Third was Smith’s argument for free trade, and its basis in the ideas that 1) nations were “naturally” specialized to produce only certain commodities and goods, and 2) nations would gain more economic benefit by focusing only on what they specialized in, and trading for what they did not. Smith wrote,
To give the monopoly of the home market to the produce of domestic industry, in any particular art or manufacture, is in some measure to direct private people in what manner they ought to employ their capitals, and must, in almost all cases, be either a useless or a hurtful regulation.... The industry of the country, therefore, is thus turned away from a more to a less advantageous employment, and the exchangeable value of its annual produce, instead of being increased, according to the intention of the lawgiver, must necessarily be diminished by every such regulation.  (Wealth of Nations, Vol. I, Book IV, Chapter II, 421-422)
Adam Smith believed and argued that America, with its vast and amazingly fertile unsettled lands, should specialize in agriculture and purchase all needed manufactured goods from overseas. Hamilton dismissed this idea as valid only in theory. The plain reality, Hamilton argued, was that the nations of Europe simply did not follow Smith’s theoretical principles of free trade, but continued to apply mercantilist policies of favoring and protecting certain economic interests. Hamilton stated emphatically that given the trade restrictions imposed by European nations, and their lack of reciprocity, it would be suicide, not just folly, for the United States to attempt to practice free trade.

Parks notes that this argument by Hamilton in 1791, is a repeat of the arguments Hamilton put forward his February, 1775 Revolutionary pamphlet, The Farmer Refuted. Parks also notes that within two years (1793), Thomas Jefferson, as Secretary of State, had swung around to a similar position on foreign trade. (Jefferson, Report on the Privileges and Restrictions on the Commerce of the United States in Foreign CountriesDecember 1793.) Jefferson's presidency would later founder on his abandonment of a realistic Hamiltonian approach to foreign trade, and his attempt to bludgeon France and England into a reverse form of reciprocity: trade restrictions, and finally an all-out embargo.

The fourth point Hamilton refuted in the Report on Manufactures, was Smith’s parroting of the physiocratic doctrine that industry should be neither encouraged nor discouraged to seek its most useful and profitable employment. This is based on the idea of a "natural" equilibrium in the economy, Smith's famous "invisible hand."
....every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it... he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. (Wealth of Nations, Vol. I, Book IV, Chapter II, 421)
Hamilton was laying the foundations for building a new nation, and his plan rejected Smith's "natural development" and instead deliberately and consciously promoted the nation's agriculture, science, industry, technology, commerce, and transportation. Hamilton lays out his vision for an active role by the national government in promoting technological and economic progress:
The remaining objections to a particular encouragement of manufactures in the United States now require to be examined. 
One of these turns on the proposition, that Industry, if left to itself, will naturally find its way to the most useful and profitable employment: whence it is inferred, that manufactures without the aid of government will grow up as soon and as fast, as the natural state of things and the interest of the community may require....
Experience teaches, that men are often so much governed by what they are accustomed to see and practice, that the simplest and most obvious improvements, in the [most] ordinary occupations, are adopted with hesitation, reluctance and by slow gradations. The spontaneous transition to new pursuits, in a community long habituated to different ones, may be expected to be attended with proportionably greater difficulty. When former occupations ceased to yield a profit adequate to the subsistence of their followers, or when there was an absolute deficiency of employment in them, owing to the superabundance of hands, changes would ensue; but these changes would be likely to be more tardy than might consist with the interest either of individuals or of the Society. In many cases they would not happen, while a bare support could be ensured by an adherence to ancient courses; though a resort to a more profitable employment might be practicable. To produce the desireable changes, as early as may be expedient, may therefore require the incitement and patronage of government.

The apprehension of failing in new attempts is perhaps a more serious impediment. There are dispositions apt to be attracted by the mere novelty of an undertaking—but these are not always those best calculated to give it success. To this, it is of importance that the confidence of cautious sagacious capitalists both citizens and foreigners, should be excited. And to inspire this description of persons [TW: artificers, inventors, manufacturers, industrialists] with confidence, it is essential, that they should be made to see in any project, which is new, and for that reason alone, if, for no other, precarious, the prospect of such a degree of countenance and support from government, as may be capable of overcoming the obstacles, inseperable from first experiments.
We have here a very important, even, crucial, point: that the free enterprise system under laissez faire is actually not that innovative and entrepreneurial without the support and nurturing of government. 
The left usually misses this crucial point of what Hamilton designed. Rather than the Marxist model of the means of production determining the political superstructure, what actually happens under Hamilton's system is government support for new science and technology creates new means of production. The machine tools and machining techniques developed at the Springfield Armory after the War of 1812, became the basis for the manufacture of interchangeable parts, laying the foundation for industrial mass production. In 1843, Congress directly funded Samuel B. Morris's development opf the telegraph. Just before and during the Civil War, it was Navy research that introduced the science of thermodynamics to steam engine design. In the 1930s, the Bonneville Power Authority and the Tennessee Valley Authority promoted rural electrification. Computers come entirely out of the USA government research during World War Two to create calculating machines for artillery and naval gunfire ballistics, cryptography and code breaking, flight simulation, the physics calculations of the Manhattan Project, and more. All the underlying technologies of today's cell phone and smart phones were originally developed in government research programs. The three major developments in aerodynamics of the post war-period -- the area rule, supercritical wings, and winglets -- were developed by a government scientist named Richard Whitcomb using the wind tunnels at the NASA Langley Research Center.

In his 1973 book, The Foundations of American Economic Freedom: Government and Enterprise in the Age of Washington (University of Minnesota Press, 1973), E. A. J. Johnson writes:
...in the Hamiltonian program, government played a central role; as a consequence, Hamilton's basic doctrines were much more closely related to those of Malachy Postlethwayt and Sir James Steuart than the atomistic theory of Adam Smith. Like Postlethwayt, Hamilton was convinced that national economic vitality demanded planning on the part of businessmen, and like Steuart, he felt certain that such planning could not be systematic and truly purposeful unless it was coordinated by statesmen.
There are a thousand hacking at the branches of evil for one who strikes at the root.”—Henry David Thoreau. 

My intent is to strike at the root.