Free Market and State Intervention: Why Reread Adam Smith

The objection of the socialist – or communist – friend is always the same: the free determination of market forces increases inequalities in society. State intervention is necessary to redistribute wealth, otherwise the luck of the few if we were to apply the classic laissez-faire policies.

Those who approached politics at a very young age, like the writer, cannot fail to have heard this refrain at least once. From a Gramscian cultural hegemony we have passed to a real hegemony of public intervention in the economy, the most insidious form of which remains – in my opinion – centralization at the European level.

The very large part of the political stage of the First Republic told us that liberalism contributed to the rise of fascism and Nazism, that the two world wars were the consequence of liberal policies. Even some constituent fathers – among all Palmiro Togliatti and Gustavo Ghidini – spoke of the unsustainability of the concept of free competition and free initiative in economic matters. This is because without the intervention of the state – for the socialists repudiated by liberal thought – the economic system would go into disarray.

But are we really sure that liberalism totally and ideologically rejects public intervention? The answer is no, and one of the fathers of liberalism itself explains why: Adam Smith.

Smith, in his "The Wealth of Nations" , did not ignore state power, on the contrary – no matter what they say – he assigned it three fundamental tasks: the defense of national borders, the guarantee of private property with the civil judiciary and, finally, the construction of all those public works that the private individual, autonomously, would not have been able to carry out. With regard to this latter function, the State must deal with the creation of institutions guaranteeing free trade and the right to education for all citizens, with particular attention to the younger sections of the population.

In short, as early as 1776, even the "bad" liberalist Adam Smith supported public intervention in certain sectors and the use of public spending for the construction of infrastructures.

As Nicola Porro recalled, Smith holds a record: "He is perhaps the best known and least read liberal philosopher and economist that exists." This sentence, in its simplicity, collects many years of superficial debates on liberalism, attributing to it the most serious faults of the previous century and simply limiting it to the concept of the "invisible hand".

In reality, it is much more. It is an economic thought that starts with Adam Smith, flows into Ayn ​​Rand's libertarianism, passes through the Austrian school of Hayek and Mises, and then arrives at the Chicago school of Milton Friedman.

Let me be clear: liberalism opposes economic planning and programming, not its controls. An uncontrolled market cannot exist but, at the same time, socialist planning of the economy – as history shows – has always led to tragic results.

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This is a machine translation from Italian language of a post published on Atlantico Quotidiano at the URL on Mon, 01 Mar 2021 04:50:00 +0000.