How then would Adam Smith fix the present mess? Sorry, but it is fixed already. The answer to a decline in the value of speculative assets is to pay less for them. Job done.
We could pump the banks full of our national treasure. But Smith said: “To attempt to increase the wealth of any country, either by introducing or by detaining in it an unnecessary quantity of gold and silver, is as absurd as it would be to attempt to increase the good cheer of private families, by obliging them to keep an unnecessary number of kitchen utensils.” [440]
We could send in the experts to manage our bail-out. But Smith said: “I have never known much good done by those who affect to trade for the public good.” [456]
And we could nationalise our economies. But Smith said: “The state cannot be very great of which the sovereign has leisure to carry on the trade of a wine merchant or apothecary”. [818] Or chairman of General Motors.
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Smith also believed that corporations should not be ongoing entities. He thought they should be shut down as soon as they accomplished the goal they set out to achieve. Without this we end up with empty shells that exist solely to perpetuate the salaries of the employees. He also believed corporations were not efficient structures because the interests of the owners and the employees were so different: see every corporate executive who thinks in the short-term of his job and bonus rather than the long term goal of wealth for the stock holders.
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