Thought for the Day: Adam Smith, capitalism in a theoretical vacuum

Disclaimer: No technical information follows, just food for thought, a nutrition that zealots have no taste for.



Last week I wrote the story: Made in America – data plates – obituaries to US manufacturing jobs . The basic premise of the story was pointing out what we lost as a country when we turned to buying cheap products from overseas.




Above, a 2,850 cc Corvair. The only used parts in this engine are the case halves, the head castings, the oil case casting, the distributor body and some misc. hardware. The rest, including the cylinders, pistons rods, crank, and all conversion parts are brand new, made in the United States of America.


Ironically, a Wall Street Journal writer, Bret Stephens wrote an editorial the same day, part of which extolled the virtues of buying cheap products from overseas. Because Stevens’s biography says went straight from the University of Chicago to the London school of economics to being a New York City resident and editor of the WSJ at the ripe old age of 24, I am going go out on a limb and guess that Stephens doesn’t know much about manufacturing that made America, nor the lives of the people who built the country he lives in.


Many journalists with a masters degree in economics want to justify their love of Lexuses and perhaps their embarrassment for their parents blue collar jobs, turns to the same paragraph in “The wealth of Nations” written by Adam Smith in 1776, as justification for avoiding buying anything made in America:


“It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better to buy it of them.”


OK, econ. 101 refresher course: Western Civilization is allegedly based on Judeo-Christian thought, but unfortunately it is mostly based on the worship of money, not God; Most faiths have an ancient text and a prophet, and the worship of capitalism has the book “The Wealth of Nations” and a prophet in the form of a peculiar Scotsman named Adam Smith. Like other malicious worshipers, the truly greedy benefit from selective reading of their good book and conveniently ignoring unholy elements of their prophet.


Before getting to why the quote above is ludicrous when applied to both families and countries, a few words about Smith are in order. First, he wasn’t as most people believe, an American, nor in favor of our countries existence; He never made anything other than two books; he was considered by his contemporaries as somewhere between totally absent minded and seriously mentally ill; in spite of his family analogies, he expressed no interest in women, was never married, had no children, and lived with his mother until he was 61.  As a Scotsman, he was required to be a cross dresser, and wear women’s skirts and knee socks. ( I don’t judge them for this, but does everything have to be plaid?)


Here is why “The Wealth of Nations” is a distorted view of capitalism:  In Smiths world it was ‘normal’ and legal for people to own slaves. Great Britain took this concept to the national level, where they owned other countries (like us). If you can own people, labor has no value, and if you have colonies that have to buy your products at gunpoint, the term market value doesn’t exist. Lets gloss over ideas like 9 year olds working in coal mines because 14 year olds want too much money, and slaves are too valuable for that kind of work. These were ‘normal’ in the world of the prophet of pure capitalism. He also didn’t take into account, corruption, lobbyists, currency manipulation, the eventual rise of imaginary financial instruments like credit default swaps, legislatures for sale, countries bent on war over trade, or any of the other factors that exist outside the vacuum of Smiths imagination. Just maybe, people should be a little more reluctant to draw random quotes from the good book of greed.


He is an easy (and true) example of why Smiths quote above is national suicide for profit: I have an old friend who is a citizen of an extremely wealthy middle eastern oil country. He tells me that his country is in deep trouble; They have never made anything domestically, they just followed Adam Smiths quote above, and paid for it with oil revenue.  They also came to believe that nearly everything in the country, including pumping the oil, could be done by paid foreigners. Every semi-skilled task is done by Palestinians on open work visas. Even the security forces are staffed with mercenaries. Now the problem: Every day, the world is figuring out how to use less oil, and he finds himself living in a country with fellow citizens who are several generations into having no have no idea how to make anything, while having the work ethic of a millennial addicted to video games. He ends all these conversations with the same exhaled sentence: “We are so screwed”.


What has that got to do with the good old USA? Follow this idea: We don’t have oil to buy everything with, so we made up something called the ‘national debt,’ spent 20 trillion dollars on that credit card, and the overseas banker got all the money to loan us buy moving our jobs to his place and selling us ‘cheap’ stuff he made in big box stores. This made 1% of America astoundingly rich, and most of us just got stuck with Craftsman tools that are now made in China, and a pile of personal debt. Now the problem: Just as people are figuring out how to use less oil, so are they figuring out that they may no longer need loan us money for our debt. We buy defense critical items from people who hate us and sell uranium to the Russians. Now go back to my old friends quote about his country, and think to yourself “We are so…….”


OK, before you walk across the street and torch your neighbors Volkswagen that still has the “Gore 2000” sticker in the back window, realize we can still turn this around. We are only one generation into blowing this, and we still have a giant percentage of people who know how to make stuff in this country. We are well educated, and we have a legacy from our parents and grandparents of actual hard work. The key thing is to cut way back or stop buying imported things that we should be making here. Adam Smiths example is stupid, unless you are the kind of parent that says “I can just work all the time if I hire a minimum wage babysitter to raise my kids.” In reality, your country is your family and buying things made here is an investment in your family, which is a lot cheaper in the long run if they learn productive trades rather than you paying kids in families on the other side of town to learn productive trades. Think it over next time someone tells you they bought the imported one because they thought it was “Cheap” or they said they bought it because they support “Free Trade.” Both of these are very surface goals when pitted against the survival of our country.



Hey William, why are you picking on Al Gore? The reason why I dislike old Al is because he was the single most outspoken champion of making it profitable and easy to ship manufacturing jobs out of this country, NAFTA. One of the great things about YouTube is that you can go and look at how Gore predicted it was actually going to bring waves of new jobs to this country. Right next to him was Ross Perot, who famously said that if NAFTA was passed there would be a “Giant Sucking Sound” until jobs in Mexico went up to $6 an hour, and Jobs in the US came down to the same wage.  He wasn’t exactly right, the people in the US who would have had jobs in manufacturing actually work for $7.25 an hour, but a lot of them have no job today.



5 Replies to “Thought for the Day: Adam Smith, capitalism in a theoretical vacuum”

  1. Another effect of spending money within your own community is that the ‘velocity of money’ goes up. Basically, the more times money passes from one to the next within your community the wealthier the community becomes. This concept scales at all levels from families to countries. The way I understand it, the United States is losing over $900 Billion yearly in trade deficits. I am not sure whether the cost of providing free defense services such as NATO is part of this number. If not, the sum is much larger. This is wealth that does not come back to the US so long as the deficit exists. We become that much poorer as a nation. A trillion here and a trillion there, eventually, it adds up.

  2. I can never understand the people who think buying cheap imported goods is a good thing for the country. When you buy those goods you end up putting an American who used to make them out of work on onto government subsidies which of course raise your taxes (or at least should if we were paying our way). And that quote from Ross Perot is so timely and I have been surprised that no mention of that rouge candidate’s prediction given the current political election process.

    The worst thing is that buying American is getting harder and harder to do these days, personally I never shop at Wal-Mart because of their high import content. With the rise of Harbor Freight and Craftsmen turning to import products it is really hard to find good Made in America tools and equipment. What we really need is to get country of origin clearly marked so we do not have to search the small print on the label for the info but then that is a bit of a shift to wrong thinking, rather anti capitalism.

    Keep up the writing William, you are one of the few voices in the dark who are willing to stand up for this great nation and its workmanship.

  3. I always enjoy your thoughts on engineering, systems, philosophy and personal responsibility/self reliance. Your parsing of Adam Smith is spot on. There are some items that you missed though.

    1. NAFTA: The person you should be vilifying is George HW Bush, who started NAFTA negotiations in 1990 and signed the treaty in 1992 while pushing to fast track ratification. Why? This was a treaty that benefitted Republican 1%ers far more than Democratic working class people. 700000 jobs lost, but in fairness, it has clearly benefitted close to 150000 small businesses (Wikipedia) in increased trade.

    2. Small motors/Data Plates: I miss the quality and heritage of companies like Briggs & Stratton and Tecumseh. And your data plate essay made we want to cry. But what do you do about the pollution that an old side valve produces vs a newer OHV model? Or vs a new car w current emissions? Also, the plant that built that old reliable engine, and the plant that built the steel for it, and the plant that built the rubber for the gaskets, etc. had smokestacks pouring who knows what into the air and drain pipes sending more mystery chemicals into the rivers they were built next to. Lastly, Briggs & Strattons are now built in China, but Kawasaki builds small engines in Missouri, and Honda builds lawn mower engines in North Carolina. So what do you do to buy American?

    3. Which leads to trucks (and cars): 70% of Toyota truck parts are domestic sources and assembled (Texas) in the USA. 45% of Chevy parts are domestic and trucks are assembled in Mexico. Fords are built in Michigan and Missouri, as well as Mexico and Venezuela.

    – Cars: Camrys (Kentucky), Avalons (Indiana), Corolla (Mississippi), Accords and Civics are built in (Ohio) the USA.

    – Minivans: The Honda Oddessy and Toyota Highlander & Sienna (Indiana) have more USA content and assembly than the Dodge Caravan and Chrysler Town & Country (Yet owned by Fiat).

    – The Ford Transit (Built in Spain), Buick Encore (Korea), Chevy Spark (Korea), Trax (Korea), SS (Australia) and Caprice (Australia) all are considered less than 10% USA made by the DOT.

    – Honda had a U.S. payroll in 2014 of $2.2 billion for 29,500 U.S.-based employees. There are 153,000 people in the U.S. employed by dealerships that sell Honda cars, motorcycles, generators, lawnmowers and other equipment. Using the average 2014 annual U.S. individual wage of $44,206, that would be an additional $6.76 billion in wages. Plus $35.6 billion spent on parts and supplies in the USA.

    – Toyota had 33,765 direct employees in the U.S. in 2014, reported a total payroll of just under $2.9 billion. The company’s 1,500 Lexus, Scion and Toyota dealerships had 132,900 employees, good for a $5.8 billion annual payroll at the 2014 average wages. $32.9 billion spent on parts and supplies in the USA.

    – For reference, General Motors counted 91,000 U.S. employees and about 4,300 dealerships with more than 250,000 workers at the end of 2014.

    – Ford Motor Co. had 80,000 U.S. employees and 3,247 dealerships.

    – Chrysler (Owned by Fiat) had 55,000 U.S. workers and 2,630 dealerships. ( for all of the above vehicle info)

    – Your BMW was likely built in South Carolina, VW in Tennessee, Volvos in South Carolina (but they are wholly owned by the Chinese now), Mercedes (C Class and SUVs of course) in Alabama.

    – As an aside, SAAB was a great car maker started in 1947 in the image of the old Briggs & Stratton. Yet since they’ve been owned by GM in 2000 (50% in 1989), they’ve gone straight into the ground by 2010, and are now (you guessed it) a Chinese holding company who has sold the IP rights to Turkey.

    Conclusion: It’s really hard to simply cite American made in vehicles (or most item) nowadays.

    The big picture: It doesn’t matter if you’re Republican or Democrat. Our country won’t get fixed until 4 things happen:

    1. Stop cutting taxes and deficit spending, and cut waste. You can’t bring in less money and hope to pay your bills and repair the long term infrastructure. When your B&S was made, Eisenhower was president and tax rates were above 50%. The economy was sound, people had jobs, your parents could split the work load of earning and family. As for spending, let’s cut wars too. Most importantly, the lives criminally wasted. Cut all of the money spent (over $3 trillion) on the unbelieveable and absurd “wars” in Iraq and Afghanistan, as well as the side effect of the unnecessary creation of the money pit Department Of Homeland Security ($300 billion dollars spent on a new bureaucracy over the existing agencies – Brown University), all of which money could have fixed every road, highway, bridge, tunnel, canal, channel and air traffic system in the USA, with money left over to build enough solar, wind and geothermal power for the Western half of the country. Which would end our foolish dependence on Middle Eastern oil.

    2. Reverse Citizens United and SpeechNOW. These two rulings have opened the door for SuperPACs and corporations to spend hundreds of millions of dollars in unidentified money on “independent expenditures” and lobbying. What politician is going to resist or ignore those sums of monies? You and I can donate $2700 on a candidate or $5000 on a PAC. Who wins that battle?

    3. Banning lobbying. See above. When most of the legislation is drafted by lobbyists and others, you are not serving your country’s interest. You’re serving corporate interests.

    4. Corporate/shareholder greed. On a related note, it costs 5 times more to pay a US auto worker than a Mexican. Why is that relevant to our country’s health? Greed. It’s not the government, it’s the corporations seeking to cut costs and boost profit and stock prices. So send manufacturing to Mexico, or wherever. Add service to that, as in call centers and computer programming. I’m no fan of his and most of his movies, but Oliver Stone hit it on the head in Wall Street. Take a successful small company, cut costs and workers/salaries, sell off the pieces, gut the pension plan, pump the stock price, and show a profit for investors in capital gains. Oh, but you’ve lost 500 jobs to foreign companies now, and increased the trade deficit, and the money spent by those 500 employees now no longer goes into the local and national economy. See Mitt Romney’s M.O. Greed…Stop allowing corporate compensation to be tied to stock prices/stock options. No CEO is going to put long term profitability and stability in front of short term profit and stock price appreciation if they can get an option on 1 million shares at $20 (or less) for a company that’s trading at $25 as a regular incentive. The only focus will be stock price. Which benefits only shareholders. Which is the root of why most of the expansion in wealth since 1980 has gone to the top 5% of the population wealth-wise. If we stop obsessing with growth in stock profits, prices and earnings, we won’t have to keep raising salaries to keep up, and we can be more competitive in keeping jobs here. Which allows people to have relatively more money. Which allows them to afford more homegrown/made items.

    Thanks William. Keep writing.

    1. Carl,

      Your very detailed thoughts illustrate that I may shine some light on problems, but the solutions which will have to take into consideration detailed factors like the ones you mention, are going to be long hard work for very determined and resilient people. I hope they are up to it.

      I love flatheads, but not enough to advocate returning to manufacturing them in mass and tolerating their pollution. I just want to broaden the discussion on what we should make, from myopically looking at “clean” to include durable and other factors like conservation in use, while being honest about what disposable appliances take to build.

      Part of what I look at when considering “made in USA” is not just the assembly plant, I want to know about who keeps the profits, are they really respecting US laws ( did I just say Volkswagen?) how they treat workers, and are their engineering jobs in the US. It will also become a factor at some point if the US has to get involved in a just war, will these foreign owned companies refuse to allow us to come to the aid of a small ally or will the boycott US? all possibilities in the long run that need answers now.

      I am from NJ, and my older brother lives here and is a state wide expert on water pollution and how to combat it without killing industry. He thinks of Flint’s problems as the most colossally stupid, completely foreseeable, error on record. We can’t afford to make too many errors like that. NJ once was the dirtiest of states, but know 25 years later is corrected, and they still make things here, which shows it can be done.

      I pick on Gore because he is easy, the environmental guy whos son was caught with a pharmacy of drugs driving a prius at 100 mph. But an aware that NAFTA had supporters in both parties, people who put profits ahead of jobs and national security. As far as Billionaires running for president, I found Ross Perot to actually understand business beyond casinos and beauty pageants. His support of POW issues and educational reforms made him a good guy in my book, and time proved he was right about NAFTA. There are a lot of trade statistics with Mexico, but few of them consider the deficit of the drug users in our country who send uncounted billions south, making some vile people wealthy and corrupting our neighbors chances at a just government.

      thanks again -ww.

  4. I want to expand on the premise of building it yourself vs. cheaply made somewhere else. To me this is essence of homebuilding. Who actually runs their household by the maxim “never to attempt to make at home what it will cost him more to make than to buy”?

    Making meals at home, growing food in a garden, doing crafts, repairing things, brewing beer, and building airplanes. These are the things that make my house a home. All of the items produced can be purchased elsewhere with cheaper costs, when you factor in the cost of my labor or my wife’s labor. But no purchased item has the same value to me as those I make.

    It is a joy to make something.
    It is a joy to build something with my hands.
    It is a joy to restore something.
    It is a joy to build something in the mind and then bring it to life.
    It is a joy to share the creation with friends.
    It is a joy to learn.

    As with any philosophy, knowing when to apply it is important. I am definitely a consumer, but not in all things.

    This weekend Mindy and I visited New Orleans. Two notable events:

    1. We visited Longue Vue House and Gardens: Hand built, high quality, long lasting, American made. (Highly Recommended)
    2. We took a ride on the Steamboat Natchez and toured the engine room. Hand built, high quality, long lasting, American made. (Highly Recommended)

    We also went on Bourbon Street for Halloween. Consumerism gone wild. Low quality. Fun. American made. (Highly Recommended)

    Lets be safe out there. Lets be smart out there.

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