Before commencing
to explain how corporate corruption such as the
case of Enron undermines Adam Smith's notion of
capitalism, it would only be imperative to briefly
state Adam Smith concept of free-market capitalism.
As it is this very ill of free-market capitalism
that has not only created a mirage for the masses,
it is in fact a proven tool for severely undermining
as well as underpinning the social good that was
preposterously propagated by Adam Smith in his
famous theories.
According to the great Englishmen Adam Smith,
whom we have come to consider as the father of
the concept of free-market capitalism since the
last more than two centuries, each and every individual
and person must act consistently to maximize his
or her own profit. To obtain such an objective,
the individual must therefore act selfishly and
greedily as possible, which would in turn provide
for some of the greatest social good. This particular
line of thinking has been named as the God's 'invisible
hand' at work, yet in reality it is exactly the
opposite as rationalization for a few individuals
to accumulate huge sums of capital at the expense
or exploitation of the working class only goes
on to severely undermine society, as well as the
environment at large. Some of the examples to
this respect are presented in the following lines,
which more than prove how Adam Smith's notion
of free-market capitalism has been nothing but
a mythical curtain used for both the domestic
exploitation of small businesses as well as exploitation
on a global scale by larger multinationals.
Growth of Monopolies and End of Free
Competition
Taking the example of monopolies and their practices,
though this was one of the topics severely criticized
and opposed by Adam Smith, yet the same can be
viewed today in practically every industry from
the automobiles, to airlines, petroleum, pharmaceuticals
and even such public domains as the media. Hence,
the concept of free competition and effective
management are perhaps left for the students of
economics to study, certainly not to practice
in real life as may be experienced from the activities
of national and multinational corporations. These
are then aided by such acts as mergers and acquisitions,
not only in the United States of America, but
a trend that is becoming more global by every
passing day, hence the end of age old concepts
of free competition.
End of 'Economics of Investment' and Emergence
of 'Speculation Mania'
Yet another important arena is that of the financial
markets, where Adam Smith's line of thinking on
the economics of investments are practically dominated
by the birth of a mania of speculations. In fact
such is the strength of this mania of speculations
that financial markets are today run on short
term speculations with the hopes of investors
in the rising price of stocks; this is in total
contradiction to the age old concepts which emphasized
on the creation of value of a corporation from
the long term investment strategies. The result
is the growing tendency towards an environment
where large financial institutions are observed
to pursue aggressive earning strategies, more
often than not through foul means; through the
creation of special purpose enterprises normally
hidden from the balance sheets primarily to hide
huge mounting debts; and abusing the powers of
the chief executives resulting in the unchecked
growth of personal assets often overlapping the
assets of the corporations and their investors
for which they are responsible and accountable
to (Bogle, 2002).
Concentration of Production and Capital
Other major areas of economic activity where Adam
Smith's teachings and notions on capitalism have
been severely trampled upon and which have become
but a common aspect of today competitive and economic
environment include the concentration of production
where the notion of economies of scale have been
changed to the purpose of concentrating an increased
production, and that too in fewer facilities and
equally fewer corporations.
A somewhat similar strategy is practiced in the
discipline of capital, which is today concentrated
in fewer hands, and the trend continues to date
with the number of people with more than a billion
dollars in USA alone rising continuously. According
to a study by the famous Forbes magazine issue
of 13 October of 1997, there were only 13 American
billionaires in 1982, which by 1997 had grown
to more than 170 billionaires (Conlin, 1997).
Yet, the greatest disparity found in the teachings
of our greatest Englishmen Economist Adam Smith
and what we observe today in the economic front
is the growing differences between business and
local communities, a trend that is becoming weaker
by the passage of time. For example today, one
may observe that ownership is now more concentrated
in fewer hands, as also reiterated in the above
lines, the same is also giving rise to tendencies
of being less responsible and accountable towards
ordinary people. In similar context the local
environment conditions too are becoming less important
to capitalists as they focus on the profit aspect
and the pursuit of accumulating capital. This
line of thinking is perhaps best worded by one
Michael Parenti writing in his book "America
Besieged", wherein he comments that
"Capitalism is a system without a soul,
without humanity. It tries to reduce every human
activity to market profitability. It has no loyalty
to democracy, family values, culture, Judeo-Christian
ethics, ordinary folks, or any of the other shibboleths
mouthed by its public relations representatives
on special occasions. It has no loyalty to any
nation; its only loyalty is to its own system
of capital accumulation. It is not dedicated to
'serving the community'; it serves only itself,
extracting all it can from the many so that it
might give all it can to the few." (Parenti,
1998).