Adam Smith’s Open Letter* to Former-President George W. Bush (et al.)

(*First published in 1759 in anticipation of many presidencies, and also includes Prime Ministers, Kings, Queens, and other heads of state; therefore Mr. Bush is not the first to receive this open letter, nor shall he be the last. It’s all déjà vu for Mr. Smith.)

[Dear Mr. Former-President:]

[I, Adam Smith, first published this observation in 1759 and made it comprehensive in scope so as to be useful in a variety of situations. I suspect you may fall into several categories of my concern. Hopefully, you will recognize the ones that apply, which may be useful as you draft your memoirs and prepare for your after-life—by which I mean, after-your-presidency-life. So here we begin, as I quote myself:]

“To attain to this envied situation [of wealth and greatness], the candidates for fortune too frequently abandon the paths of virtue; for unhappily, the road which leads to the one and that which leads to the other, lie sometimes in very opposite directions. But the ambitious man flatters himself that, in the splendid situation to which he advances, he will have so many means of commanding the respect and admiration of mankind, and will be enabled to act with such superior propriety and grace, that the luster of his future conduct will entirely cover, or efface, the foulness of the steps by which he arrived at that elevation. In many governments the candidates for the highest stations are above the law; and, if they can attain the object of their ambition, they have no fear of being called to account for the means by which they acquired it. They often endeavour, therefore, not only by fraud and falsehood, the ordinary and vulgar arts of intrigue and cabal, but sometimes by the perpetration of the most enormous crimes, by murder and assassination [of reputations in more civilized societies], by rebellion and civil war [or dissension], to supplant and destroy those who oppose or stand in the way of their greatness. They more frequently miscarry than succeed; and commonly gain nothing but the disgraceful punishment which is due to their crimes. But, though they should be so lucky as to attain that wished-for greatness, they are always most miserably disappointed in the happiness which they expect to enjoy in it. It is not ease or pleasure, but always honour, of one kind or another, though frequently an honour very ill understood, that the ambitious man really pursues. But the honour of his exalted station appears, both in his own eyes and in those of other people, polluted and defiled by the baseness of the means through which he rose to it. Though by the profusion of every liberal expense; though by excessive indulgence in every profligate pleasure, the wretched, but usual resource of ruined characters; though by the hurry of public business, or by the prouder and more dazzling tumult of war, he may endeavour to efface, both from his own memory and from that of other people, the remembrance of what he has done; that remembrance never fails to pursue him. He invokes in vain the dark and dismal powers of forgetfulness and oblivion. He remembers himself what he has done, and that remembrance tells him that other people must likewise remember it. Amidst all the gaudy pomp of the most ostentatious greatness; amidst the venal and vile adulation of the great and of the learned; amidst the more innocent, though more foolish, acclamations of the common people; amidst all the pride of conquest and triumph of successful war, he is still secretly pursued by the avenging furies of shame and remorse; and, while glory seems to surround him on all sides, he himself in his own imagination, sees black and foul infamy fast pursuing him, and every moment ready to overtake him from behind.”

[PS: Mr. Former-President: Some of this may also apply to certain of your former associates. You are not alone. Ambition, on many levels, can be blinding and power intoxicating so as to pursue agendas at any cost. Thus, I send this not in judgment, but as a general observation of déjà vu.]

Reference: Adam Smith, The Theory of Moral Sentiments (Mineola, New York: 2006, Dover Philosophical Classics) first published 1759; p. 61-2—I.III.III.

Mr. Smith [is desperately needed in] Washington*

(*AND Beijing, Berlin, Brazalia, Cairo, Canberra, Damascus, Harare, Havana, Jakarta, Khartoum, Kingston, Kinshasa, Lima, London, Madrid, Manila, Moscow, New Dehli, Oslo, Ottawa, Paris, Riyadh, Rome, Santiago, Seoul, Stockholm, Tegucigalpa, Tehran, Tokyo, Warsaw, and every other place inbetween that is feeling the pressure of extremes from laissez-faire ideology to command economies; AND in every corporate boardroom)

Adam Smith’s “invisible hand” has been presumptively extracted from his 1000-plus page treatise on economics to mean “hands-off” business. Too bad those who wrap themselves in this invisible hand haven’t taken his books in-hand. Mr. Smith was not a laissez-faire determinist, but a moderate, aware of the need for balance between the private and the public good; and fully aware of the dangers inherent in accumulated power and wealth. Here, for the record, are a few of Mr. Smith’s observations:

On the Public Good:
The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it. (The Wealth of Nations, p. 287-8—I.XI.III)

Though the standard by which casuists frequently determine what is right or wrong in human conduct be its tendency to the welfare or disorder of society, it does not follow that a regard to the welfare of society should be the sole virtuous motive of action, but only that, in any competition it ought to cast the balance against all other motives [emphasis added]. (The Theory of Moral Sentiments, p. 304—VII.II.III)

The wise and virtuous man is at all times willing that his own private interest should be sacrificed to the public interest of his own particular order or society. He is at all times willing, too, that the interest of this order or society should be sacrificed to the greater interest of the state or sovereignty of which it is only a subordinate part: he should, therefore, be equally willing that all those inferior interests should be sacrificed to the greater interest of the universe, to the interest of that great society of all sensible and intelligent beings, of which God himself is the immediate administrator and director. (The Theory of Moral Sentiments, p. 236—VI.II.III)
[In the interests of full disclosure, Mr. Smith also wrote, when speaking of the invisible hand, that he had “never known much good done by those who affected [emphasis added] to trade for the public good.” (The Wealth of Nations, p. 485)]

On Labor:
Labour, it must always be remembered, and not any particular commodity or set of commodities, is the real measure of the value both of silver and of all other commodities. (The Wealth of Nations, p. 214—I.XI.III)

The liberal reward of labour, as it encourages the propagation, so it increases the industry of the common people. The wages of labour are the encouragement of industry, which, like every other human quality, improves in proportion to the encouragement it receives. A plentiful subsistence increases the bodily strength of the labourer, and the comfortable hope of bettering his condition, and of ending his days perhaps in ease and plenty, animates him to exert that strength to the utmost. Where wages are high, accordingly, we shall always find the workmen more active, diligent, and expeditious than where they are low: … Some workmen, indeed, when they can earn in four days what will maintain them through the week, will be idle the other three. This, however, is by no means the case with the greater part. Workmen, on the contrary, when they are liberally paid by the piece, are very apt to overwork themselves, and to ruin their health and constitution in a few years. … Something of the same kind happens in many other trades, in which the workmen are paid by the piece, as they generally are in manufactures, and even in country labour, wherever wages are higher than ordinary. Almost every class of artificers is subject to some peculiar infirmity occasioned by excessive application to their peculiar species of work. (The Wealth of Nations, p. 84—I.VIII)

If masters would always listen to the dictates of reason and humanity, they have frequently occasion rather to moderate than to animate the application of many of their workmen. It will be found, I believe, in every sort of trade, that the man who works so moderately as to be able to work constantly not only preserves his health the longest, but, in the course of the year, executes the greatest quantity of work. (The Wealth of Nations, p. 94—I.VIII)

On Management:
The directors of such companies [joint stock company, i.e., corporation], however, being the managers rather of other people's money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master's honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company. It is upon this account that joint stock companies for foreign trade have seldom been able to maintain the competition against private adventurers. They have, accordingly, very seldom succeeded without an exclusive privilege, and frequently have not succeeded with one. Without an exclusive privilege they have commonly mismanaged the trade. With an exclusive privilege they have both mismanaged and confined it. (The Wealth of Nations, p. 800—V.I.III)

On Corruption:
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary. (The Wealth of Nations, p. 148—I.X.I)

... This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect, persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments. That wealth and greatness are often regarded with the respect and admiration which are due only to wisdom and virtue; and that the contempt, of which vice and folly are the only proper objects, is often most unjustly bestowed upon poverty and weakness, has been the complaint of moralists in all ages. (The Theory of Moral Sentiments, p. 58—I.III.III)

When masters combine together in order to reduce the wages of their workmen, they commonly enter into a private bond or agreement not to give more than a certain wage under a certain penalty. Were the workmen to enter into a contrary combination of the same kind, not to accept of a certain wage under a certain penalty, the law would punish them very severely; and if it dealt impartially, it would treat the masters in the same manner. (The Wealth of Nations, p. 164—I.X.I)

On Monopolistic Tendencies:
But the cruellest of our revenue laws, I will venture to affirm, are mild and gentle in comparison of some of those which the clamour of our merchants and manufacturers has extorted from the legislature for the support of their own absurd and oppressive monopolies. Like the laws of Draco, these laws may be said to be all written in blood. (The Wealth of Nations, p. 700— IV.VIII)

… Were the officers of the army to oppose with the same zeal and unanimity any reduction in the numbers of forces with which master manufacturers set themselves against every law that is likely to increase the number of their rivals in the home market; were the former to animate their soldiers in the same manner as the latter enflame their workmen to attack with violence and outrage the proposers of any such regulation, to attempt to reduce the army would be as dangerous as it has now become to attempt to diminish in any respect the monopoly which our manufacturers have obtained against us. This monopoly has so much increased the number of some particular tribes of them that, like an overgrown standing army, they have become formidable to the government, and upon many occasions intimidate the legislature [emphasis added]. The Member of Parliament [or Congress] who supports every proposal for strengthening this monopoly is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary, and still more if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public services can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists. ¶ …The legislature, were it possible that its deliberations could be always directed, not by the clamorous importunity of partial interests, but by an extensive view of the general good, ought upon this very account, perhaps, to be particularly careful neither to establish any new monopolies of this kind, nor to extend further those which are already established. Every such regulation [favoring monopolists] introduces some degree of real disorder into the constitution of the state, which it will be difficult afterwards to cure without occasioning another disorder. (The Wealth of Nations, p. 501-2—IV.II)

References: Adam Smith’s: 1) The Theory of Moral Sentiments (Mineola, New York: 2006, Dover Philosophical Classics) first published 1759; & 2) The Wealth of Nations (New York: 2000, Modern Library Paperback Edition) first published 1776.

Promises, Promises

By lavish self-presentation, BK is a b-b[1] oilman; though by comparison to the BM-types[2], BK is of the bottom-rung variety. He began a dream-project—a massive, corporate retreat for b-b comrades who were said to crave a western, cowboy experience on a big ranch. BK bought sections of land on a river; fenced it with miles of post and rail (none of that tacky, cheaper barbed wire!); bought cows, horses, exotic harnesses & tack, and brand-new, earth-moving equipment. Not just one new high-hoe, but two. Not just one new Cat, but two. Not just one massive, commercial-size, fuel-storage tank, but three. Not to mention the county-size road-grader and the tractor-trailer unit to haul his equipment to “other” big projects, as needed. And, of course, three, huge generators to power the “K-Ranch” project as electricity had not yet arrived on site. BK instructed that a lake (pond-size) be constructed; and hired a gifted, local contractor to construct houses, cabins, and two huge barns, as fast as he and his crews could (calving season was on the near horizon). And of course, top-of-the-line, panel corrals were ordered and installed to manage the livestock.

Over the next months, BK and his courtier side-kick would arrive on Fridays to review the progress and make expensive change-requests that had popped into his (their) minds. Huge progress was mandated for each visit, so outward appearance would have to always trump finish-work. Soon there were dozens of projects, half-done, and promises, promises about agreed-upon compensation, supply accounts, up-front payments, etc., etc. It was a huge, potentially profitable job for many, but soon the red-flags began blowing in the western breeze all along the long, gravel road to the “K-Ranch.” It’s just that no one wanted to see them—to doubt BK’s integrity, his honesty, the viability of his dream or their own jobs or their outstanding accounts. Why BK even had some local family roots!

So promises, excuses, and periodic, late payments kept his contractors and other employees working—and buying materials & supplies, out of their own pockets, to meet the requisite weekly progress. Wages and reimbursements were always just a cheque away, even though several payments bounced once or twice before finally landing firm. When unpaid contractors, with less trust and patience, walked before job completion, BK hired others to finish up (and didn’t quite get them paid either). Of course, he paid critical employees (e.g., his calving crews) till the end of their last crucial month, then zip—nada. Even extended family members were recruited at the end to push the earth-moving and building projects as far as possible before … .

Well, no one yet knows what he told them. Perhaps, before the equipment had to be moved to some “other” big project?

His one-on-one personal chats about employee loyalty were crafted to solicit silence or spread the BK-line.

NOW, the cattle are sold, the equipment hauled away in a long convoy (by repo?[3]), and hundreds of thousands owed to contractors, suppliers, and employees. And still the promises are coming. “You will be paid—ASAPT[4].” With the unspoken, but subtle message, “Don’t do anything rash like try to sue, or register a builder’s lien, or do anything more than just wait patiently, and trust that I will do the right thing. ... Otherwise, you might offend me. And of course, neither of us wants that.” (Like the unpaid, young cowboy who reportedly carried his saddle offsite as collateral for unpaid wages? Now reported to the police for theft—by or on behalf of our b-b man who, dare we say, has a legion of his own more egregious offenses?! Dare we suggest reciprocity for all the materials and supplies BK incorporated into his project that he “neglected” to pay for? Dare we suggest that BK and his courtiers self-reflect?!)

And so the déjà vu strikes. How many must repeat this sad saga as the con-frauds wend their way through the world?

But of course, there was no intent to con or defraud! There was always intent that income or loans would be sufficient to exceed project outflow, even when extravagance, excess, and new commitments seemed undiminished by the reality of bouncing cheques, late payments, cash-flow bottlenecks, and mounting defaults. There was always intent to get things sorted out even as new contractors and employees were hired while prior ones remained unpaid. There was always intent to pay for the stuff he maneuvered contractors and employees to buy on his behalf. There was always intent to set up accounts for materials and supplies. There was eventually intent (promises) to realize enough from the sale of assets to pay unsecured debts even when those assets were known to BK to be secured by others. There was always intent to keep his promises.

And so, another b-b man, with “no intent” to harm, con, or defraud, manages all three with a clear conscience, offended by any suggestion otherwise. A b-b man who will likely follow in the steps of his greater and lesser comrades whose red-flags look suspiciously criminal in pattern and consequence, but who manage to keep things “civil” in the bankruptcy courts. A b-b man who will in all likelihood pass on his improvements to someone (an insider?) for a fraction of their cost, because huge parts of the costs were born by others.

The story of BK is still playing out, unknown to the general public as he maneuvers his options, stalls whatever creditors he can, postures himself, and plans to literally “parade” his defunct enterprise before an unsuspecting, festive public. For what purpose? To solicit new investors to pay off prior obligations? To stall for self-interest? To self-delude?

Maybe it’s about time to begin calling a spade, a spade.

[1] big-business
[2] aka Bernie Madoff’s
[3] Those who know are commanded not to talk about the equipment!
[4] “As soon as—perhaps tomorrow."