In the Capitalist Bible (more commonly known as An Inquiry into the Nature and Causes of The Wealth of Nations) Adam Smith prescribed a laissez-faire approach to the economy on the part of the government because he felt that workers would, if left alone by the government, do whatever work would create the most wealth for themselves. Collectively, this would lead to the greatest possible accumulation of wealth within a nation.
Smith wrote at the dawn of the Industrial Revolution. When Wealth of Nations was published (1776) 97% of the people in the United States lived and worked on farms and produced nearly everything they needed themselves. A person’s standard of living was tied directly to how hard he or she worked and nearly everyone was “self-employed.”
In the wake of the Industrial Revolution, mechanization, along with the principle of division of labor, and the specialization that results from it, have made us highly inter-dependent. Very few people are self-sufficient or self-employed. We are highly dependent upon the business community, both large corporations and smaller businesses, to provide employment. When young adults leave school and enter the work force, or older workers are laid off, most of them think in terms of “finding a job.” Very few think in terms of starting a business. We look to existing businesses to provide employment for us, but business owners and managers are driven by the profit motive, creating and providing jobs is simply a by-product.
Adam Smith’s famous “invisible hand,” its movements dictated by the immutable laws of supply and demand, takes away jobs as readily as it creates them. Markets operate quite efficiently for those involved, while leaving any number of people out of work. At the present time, as the prospects for profit dim for most industries, more and more people are finding themselves out of work and unable to find work. The downward spiral of recession has begun.
As George Santayana famously remarked, “Those who cannot remember the past are condemned to repeat it.” We keep hearing that this is “the worst financial crisis since the Great Depression” and yet our political leaders don’t seem to remember the curative power of alphabet soup. The various jobs programs of the “New Deal” (the WPA, PWA, and CCC) were quite effective in ameliorating the effects of The Great Depression and eased the suffering of millions of people in the bargain.
Franklin Roosevelt never fully bought into Keynesian economics and his jobs programs stopped short of achieving full employment. As a result, economic conditions improved, but it took our entry into World War Two to finally put an end to both joblessness and The Great Depression.