Wednesday, November 2, 2011

Adam Smith and the State-Corporate Complex

The Canadian Manifesto: How the American Neoconservatives Stole My Country

In a videotaped address to the crowd at the Fraser Institute's 30th-anniversary celebration, Stephen Harper showed off his $45 Fraser Institute silk Adam Smith tie, and confirmed he was a big fan of the institute.  In fact, he is such a fan, that he often plucks staff and candidates directly from the conservative think-tank.

The Fraser also had reason to show their appreciation to the prime minister.  Buried in his first budget, was a provision to exempt tax donations of stock to charity, from capital gains. (1)  Believe it or not, the Fraser is a registered charity, as are most of the think-tanks and Astro turf groups working in the shadows of the Conservative Movement.  This new exemption means that the donor pays only 40 percent of the dollars they donate. Taxpayers pick up the rest.

Wall Street uses the same tactics when negotiating salaries for their executives, keeping below any board restrictions, by offering stock instead of salary as part of their remuneration.

The father of modern economics and capitalism, Adam Smith is the patron saint of neoconservatives and his Wealth of Nations, the Bible for the "religion of market knows best".

The Sovereignty of the Consumer

Adam Smith (1723-1790) created the philosophy of the sovereignty of the consumer, believing that the butcher and baker needed no central planning to engage in commerce, since consumers set the price.  In many ways that is true, however, many of the government regulations that are anathema to neoconservatives, came about because the business world sought the government's help in protecting their investments.

Trade marks, copyrights, grants for expansion or research, employee training.  All paid for from the public purse.  Other things like public education and healthcare, also benefit companies by providing an intelligent and healthy labour force.

A perfect example of this, though there are many, is the case of Knott's Berry Farm.

In 1932, the Department of Agriculture's Bureau of Plant Industry, received a letter reporting a rumor of a new berry being developed by a Mr. Boysen of Orange County, California.  Using taxpayer money, representatives of the Department of Agriculture, made their way to California, to investigate the possibility of a new product for their growers.

They met with Mr. Rudolph Boysen, then working as a park superintendent in Anaheim, who confirmed that he had indeed been experimenting with a hybrid: the cross between a raspberry, loganberry and blackberry, but was having difficulty with the cultivation.

Intrigued, Walter Knott, whose family sold berries, berry preserves and pies from a roadside stand, asked if he could tag along, when the men made the visit to Boysen's farm.  The abandoned vines were found in the weeds, and since Boysen no longer had any interest in the pursuit, he gave Knott permission to try to cultivate the berry for profit.  He did, made a fortune, and opened his Knott's Berry Farm theme park, which had it not been for the taxpayer funded Department of Agriculture, would have never existed.

Yet Knott added a "Freedom Center" to the grounds, where a former college president and a former minister, toiled full-time spreading the free-market gospel. Knott called it the "One Man's Crusade for Everybody's Freedom." (2) He became a staunch supporter of Barry Goldwater, who was preaching a similar sermon.

Goldwater, the multi-millionaire, who also reaped benefits from taxpayer funded programs, that helped to develop Arizona, and provide consumers for his family's department store chain.

They just don't get it.  "Self -made" men and women, rarely succeed without the "invisible hand" of government and taxpayers.

Actors like Michael Cain and Bruce Willis, are now bemoaning the amount of income tax they pay on their enormous salaries.  But would they get those kind of movie deals without taxpayers protecting them against pirating?  What if there were no government regulations in place, that forbid us from simply copying the film and selling it at a roadside stand?

Consumers determine the price but "big government" tells consumers where they can purchase their ticket or video of the movie.

Masters of Mankind

Did you ever wonder why headlines of a weak economy, run concurrently with headlines of strong profits, often "record profits"?  High unemployment and "record profits"?  Runaway deficit and "record profits"?

It is part of Adam Smith's warning against "the vile maxim of the masters of mankind".  In his day they were the  "merchants and manufacturers," who were the "principal architects" of state policy, using their power to bring "dreadful misfortunes" to the vast realms they subjugated.

Smith was then referring to imperialism and colonialism, especially in India, but today those being subjugated are the 99% of taxpayers propping up the fortunes of the top 1%.  The neoconservatives love to refer to Western nations an "nanny states" because of "generous" social programs, but the current nanny state rocks the cradles of the corporate elite.  Our growth is being stunted because corporations are getting all of the nourishment.

Noam Chomsky refers to this as the state-corporate complex and he says:  "Today the masters of mankind are multinational corporations and financial institutions, but the lesson still applies and it helps explain why the state-corporate complex is indeed a threat to freedom"  (3) and in fact threaten our very survival by not allowing governments to fight against climate change because it could affect their profits.  Even war is now a form of corporate welfare, as it has become so profitable that the corporate sector will never allow peace, especially in the Middle East. 

The most recent economic crisis that has allowed governments to table "austerity" budgets, was created by the state-corporate complex.  The crash was the result of deregulation that allowed Wall Street to gamble with our financial future, yet when the whole thing came tumbling down, the perpetrators were rewarded with taxpayer funded bailouts, while the victims of the crime continue to suffer.

Expect policy to be even further geared toward helping the wealthiest citizens.  On January 21, 2010, the U.S. Supreme Court ruled that the government may not ban corporations from political spending on elections.  The New York Times said that the ruling “strikes at the heart of democracy” by having “paved the way for corporations to use their vast treasuries to overwhelm elections and intimidate elected officials into doing their bidding.”

It wasn't enough that corporate executives and lobbyists had been moved into the halls of power.  They can now legally buy politicians.

In 2004, in a Supreme Court case fittingly named Harper vs Canada, Stephen Harper challenged the restrictions on third party advertising.  In fact, in 1993, the National Citizens Coalition donated $50,000 to his campaign in Calgary West, on a promise that he would put an end to what they called "gag laws". (4)

The first step toward that accomplishment since being named prime minister, was ending the voter subsidies.  These were put in place by Jean Chretien, to replace corporate donations, making for a fairer system.  It meant less than $2.00 being given to the party of your choice, as reward for upholding our democracy by getting out to vote.

We can expect this term, Harper will make sure that corporations can again buy political favours, and given that the NDP will have trouble getting corporate sponsorship, it will be attempt to create a one-party system.  Another reason why we must rebuild the middle.

The Sovereignty of the Nation

The Fraser Institute is not the only conservative think-tank espousing the theories of Adam Smith.  Many others share the adoration, forgetting that Smith also claimed that "No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable."

One of those think tanks is the Montreal Institute, once headed up by Conservative MP Maxime Bernier.  In a speech he gave just before stepping down to run for the Conservative Party of Canada (Reform-Alliance), he said that "Individual sovereignty is what is important – not sovereignty of the state. Indeed, the sovereign state is, by its very nature, a steam-roller of the individual ... " (5)

And from the Globe and Mail in 2006:
... since being named to Prime Minister Stephen Harper's cabinet in February, the rookie 43-year-old MP from Quebec's rural Beauce riding has demonstrated a stern resolve to get government out of the way of business. It is a perhaps an unusual stance for an industry minister.  The holder of that post is commonly seen as the champion of government programs aimed at helping Canadian companies compete with global titans and foster innovation at home. (6)
He would also ask of the interviewer, who expressed concern with foreign takeovers of Canadian companies, especially in the area of telecommunications:  "With economic globalization, is nationality important?", and claimed  "That is the question I'm asking myself now regarding telecommunications."

Stephen Harper shares Bernier's beliefs.  At the G-20 summit in Canada, he claimed that there was no longer any such thing as a Canadian economy, only a global economy. And yet during the last election campaign he said that all party leaders should be focusing on the Canadian economy, and suggested that he alone could preserve it.  In other words, he is the best to handle something that he himself claims not to exist.

At the same summit, when speaking of surrendering our economy to global interests, he said "I know some people don't like it.  It is a loss of national sovereignty."

David Ricardo (1772-1823), another leading founder of modern economics, worried about loss of sovereignty in a global market, hoping that “men of property [would] be satisfied with the low rate of profits in their own country rather than seek a more advantageous employment for their wealth in foreign nations. These are feelings that I would be sorry to see weakened.”  Even Adam Smith said that "if business turned abroad, England would suffer."

Politicians and captains of interest are losing their commitment to their own countries, in their bid to maximise profits.  They will do nothing to address climate change, despite the fact that it will have a devastating impact on their own children and grandchildren.  They are not stupid, but instead have allowed greed to come before anything and everything else.


1.  Harperstein, By Donald Gutstein,, July 6, 2006

2. Before the Storm: Barry Goldwater and the Unmaking of the American Consensus, By Rick Perlstein, Nation Books, 2001, ISBN: 0-8090-2858-1, p. 127-128

3. The State-Corporate Complex: A Threat to Freedom and Survival, Noam Chomsky, Text of lecture given at the University of Toronto, April 7, 2011

4. Loyal to the Core: Stephen Harper Me and the NCC, By: Gerry Nicholls, Freedom Press, 2009, ISBN: 978-0-9732757-8-0

5.  The Growth of Government in the 20th Century and the importance of debating ideas, By Maxime Bernier, Bishop’s University, December 3, 2005

6. How Far Will This Free Marketeer Go:  Telecom sector is Bernier's next target for reform? By Konrad Yakabuski, Globe and Mail, September 26, 2006


  1. Along with greed, another propelling force is a fear of being overtaken by others should a "captain of interest" (or, more likely, his paid minions) fail to perpetuate his established advantage over others. That fear of a loss of status and the possibility of being subjugated to another arriviste's power and influence can be implacable to those whose self-worth is a slave to their being on top. That is what explains the practice, prevalent among the 1%, of accumulating ever-more wealth - far more than the individuals in question and their progeny could exhaust in several lifetimes. It is about staying perched atop the pyramid however insanely high and precarious that perch might be.

  2. The so called "Conservative movement" you speak of is merely a countermovement to go against the socialist movement that has been quickly taking over the world over the last 100 years. Today if you look at the Tax Freedom Day of various countries of the world, and compare that data over the last 60 years, you will see that most first world nations have gone from total government spending being under 25% of GDP to over 50% of GDP. This means that we are over 50% socialist, or in other words, 50% of the economy is controlled by the government.

    Will you not be happy until that figure is 100%, or might you give us a little room?

    If income disparity is the only good reason you can find to ahbor free markets, you should be made aware that in the USSR, there was still great income disparity, and that though 1% unemployment sounds nice, this figure remained even while they were starving in the midst of their collapse in the late 80s and early 90s until they received billions in foreign aid. Socialism is a dangerous experiment that has a history of over a hundred million dead. If you're going to be in favour of it, please be responsible enough to at least examine its historical effects rather than merely its intentions. The same goes for free market capitalism or any other economic system, just try to be sure you know which system is actually in place when looking for who to blame.