Lauren Brubaker explains at the Daily Signal how the 18th-century prophet of free-market capitalism would respond to claims from Vermont’s high-profile socialist senator that our economic system is “rigged.”
Is there something inherent in the system of natural liberty, or in human nature itself, that is systematically corrupting in ways that undermine its claims of universal benefits? Is [Adam] Smith overly optimistic or naive in his defense of the benefits of free markets? …
… For Smith, the dangers that natural liberty faces are not a result of the system of free markets itself, but of mankind’s flawed human nature, particularly the desire of those he called “merchants and manufacturers” (among others) to “rig the system.”
The natural desire to “better our condition” motivates us to strive for a better life. This is the motivation that underlies the success of natural liberty. Yet this same natural desire also leads to cronyism and corruption when businesses and others use the power of government to procure for themselves “systems either of preference or of restraint.”
In so doing, Smith said, they impose an “absurd tax on the rest of their fellow citizens,” retard growth, and increase inequality.
As a result, free markets are neither self-establishing, nor self-sustaining. If we are to continue to reap the very real benefits of natural liberty, we must be prepared to defend against cronyism.
Smith showed that many groups and businesses have incentives to try to evade the discipline of the market by using government rules, tariffs, licensing, subsidies, and other forms of government intervention to give themselves special privileges not available to their competitors, to restrain new entrants, or to prevent competition entirely.
Further, governments at all levels have a built-in bias in favor of expanding their power and perks, are constantly subjected to undue influence or outright corruption by special interests, and often use their powers for private gain.
