Yes. Pink Floyd remains my favorite band, and Money is one of my favorite songs. If you’ve never heard it, “Money” is about the pitfalls of accumulating wealth. Of course, Pink Floyd made quite a bit of money off the song, so there’s the irony.

In case you have forgotten everything you learned about economics in school (and I learned absolutely NOTHING), America’s economic system, referred to as “capitalism”, is theoretically based on Adam Smith’s The Wealth of Nations (the full title is longer) published in 1776, the year America declared independence from England. Our Founders were well aware of Adam Smith’s work.

The Wealth of Nations is not easy reading (I only read it because it was required), and it covers a broad range of topics related to economics. But Smith’s most important arguments relate to the factors making some nations wealthy while others are not. His essential arguments relevant to this post are:

1. The less government interference in economic matters the better. The term laissez faire, French for “allow to do” or “let people do as the choose”, best characterizes this attitude.

2. When permitted to trade freely the market will correct itself. In other words, manufacturers will, for example, produce goods (tennis shoes and frozen pizzas) according to the demands of the consumers.

3. The cost of an item is related to the cost of its production, primarily the labor required to produce it. So, the cost of Snickers Bars is directly related to the cost of labor for those who cook them (are Snickers Bars cooked?).

4. Government has three primary roles: providing national defense, ensuring justice, and enforcing our right to private property.

A quick and dirty summary: The less government the better. Let people invest, start businesses, and make profit with very little interference. If I want to open a coffee shop or a hardware store in my local town, I should be able to do so with almost no restrictions.

I don’t want to go too deeply into the weeds, but it is also important to know that Adam Smith, like most other Enlightenment thinkers, believed people are by nature good and generally make decisions that promote the greater good of society. That is the reason few restrictions on human behavior are necessary. We should not, according to this notion, need a lot of laws to control people’s behavior because we will almost always do the right thing.

OK…so this is one problem with his arguments. I don’t know about you, but the only reason I drive my truck under 80 on the interstate is because I know if I’m caught going too fast, I might have to pay a fine. There is a LAW against speeding. I remain unconvinced that humans consistently make decisions that promote the common good. I do believe most people are essentially good, but even good people can be selfish and greedy. And even good people like driving their trucks faster than might be good for their fellow citizens. But I digress.

Remember that capitalism is grounded in a human emotion: Greed. We work hard, we start companies or businesses, we invest in the stock market, etc., because we are greedy. This fuels the economy.

However, all the way back in 1913 Woodrow Wilson said “The truth is we are all caught in a great economic system which is heartless”. Capitalism is the most successful economic system ever imagined, but it leaves many folks behind. As I said, it is based on the idea that people do what’s right most of the time and that they do so without governmental control. Capitalism also assumes we all start from the same place and have the same opportunities to succeed. All we need to do is work hard.

While there is value in hard work, that alone does not guarantee success. And the system itself is far from perfect.

1. Workers obviously do not receive the same pay because, at least theoretically, they are paid based on their hard work and skills. This is supposed to motivate workers. After working the last 54 years I’m pretty convinced hard work does not necessarily lead to higher wages.

2. The system tends to favor monopolies in some areas where competition is not profitable. Perhaps one company develops a new drug for which there is limited need, for example, so that company can impose a high cost for that drug.

3. Related to #2, we really don’t have competition in many areas of the economy. In fact, corporations obviously prefer to NOT have competition (see #2 above). When companies ask the government for favors, they NEVER ask for increased competition.

4. Smith did not take the idea of inheritance into consideration. People can become wealthy simply by inheriting wealth rather than working hard to earn it. My plan is to win the lottery, and that does not require much hard work.

5. The system promotes social class differences so that those who are wealthy have greater access to benefits and greater wealth while those on the lower end of the income scale spend more of their income on simple survival. A 2022 study of 300 American companies found that the “the average gap between CEO and median worker pay jumped to 670-to-1 (meaning the average CEO received $670 in compensation for every $1 the worker received)”.

6. Business owners whose primary goal is generating wealth have no reason to pay workers good wages because they may be more focused on generating personal wealth. There are exceptions, but many (or most) companies choose to pay lower wages so shareholders earn more.

7. The entire system is based on people consuming goods. We are encouraged to BUY MORE STUFF that we may or may not need, and that’s what fuels economic activity. If we stopped buying STUFF the economy would collapse. That’s the reason we are inundated with ads telling us what we should buy to make us happy. I am absolutely certain those new Nike tennis shoes and the 2023 Ram truck are just the things to make me eternally happy!

8. The government itself may pay more attention to the needs of the wealthy than the needs of the poor, and there is little the poor can do about it.

9. As history has demonstrated, companies may ignore the environmental damage they cause in the interest of increasing profits.

10. We don’t all start from the same place, nor do we all have the same mentors and guides along the way. I had very supportive parents, and I also had teachers who encouraged me to do better, coaches who yelled at me as needed (quite often), and other mentors who helped me along the way. I know many people do not have the advantages I enjoyed and still enjoy.

To be clear, I am not a socialist. I am a capitalist. However, I absolutely believe that the government must play an active role in protecting workers, protecting the environment, breaking monopolies, and other similar activities.

I’ve lately focused on “fixing this mess” on these pages, and this is one more thing to fix. I believe in competition and in the value of hard work, but only government is powerful enough to ensure economic justice as envisioned by Adam Smith. We need to accept that fact.