In other words, contrary to Smith's analysis, capitalism does not automatically confer on people a good standard of living with jobs for everyone and products at reasonable prices.
Nevertheless, the true believers are now engaged in slashing government programs that funded by our taxes aid us and help our communities.
Speaking recently at the Iowa State Fair while a chant of "Wall Street Greed" came from the back of the crowd, Mitt Romney placed his foot on a bale of straw and whinged, "There was a time in this country when we didn't attack people based on their success." Well, he doesn't want people taxed based on their success, either.
The " Virtuous Spiral"
Smith theorized that the division of labor into ever smaller tasks would make for greater efficiency and, therefore, greater profits. Foley explains that Smith believed that the division of labor would be linked to extending the market. By reinforcing each other they would create a system of positive feedbacks, forming a continuous "virtuous spiral" of economic development that would make nations wealthy. A heady scenario, to say the least.
Although Smith did not want governments imposing limitations or restrictions on, or intervening in, this fragile spiral, he recognized that a few situations might warrant such actions.
Division of labor gave birth to the assembly line that Henry Ford, for example, used in manufacturing Model-T's. As Foley points out, the cheaper his cars the greater volume of sales Ford needed in order to cover his costs and still make a profit.
It is the profit, not just for Henry Ford, but for all for-profit enterprises, that drives economic growth and the need to find new markets and more consumers or to entice regular customers into buying more products or services from a business. Without growth, many enterprises stagnate and fail.
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