Whatever Happened to Adam Smith

Here is a link to an article by Matt Ridley.  MR is on target.

Here are some excerpts.
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Last week both Hillary Clinton and Donald Trump set out their economic policies in set-piece speeches. Mr Trump’s, delivered in Detroit, so far as one could tell from the fractured syntax and the digressions into invective, involves a trade policy designed to punish consumers and protect producers, a recipe for recession. But Mrs Clinton’s, also delivered in Michigan, was even worse. She too wants to pursue the old mercantilist fallacy of restricting imports and helping exports, but while spending more money, unleashing a blizzard of new regulations and doubling the minimum wage.

“Laissez faire, laissez passer” is the most tolerant of all creeds. As Smith insisted, it’s the very opposite of “pro-business” or pro-inequality; the market loves to disrupt complacent cartels. Yet to listen to most of the intelligentsia, you would think that freedom to exchange goods and services – which they prefer to call by the Marxist word “capitalism” – has done terrible harm in the world and needs taming by virtuous government. Further, that small-government philosophy has been terminally discredited, not least by the financial crisis of 2008.

But the financial markets were heavily regulated cartels in the run-up to the crisis. The Insurance giant AIG, whose credit default swaps went belly up, had been, in George Gilder’s words, “supervised and pettifogged by federal, state, local, and global beadles galore, in fifty states and more than a hundred countries”. The explosion in sub-prime lending, far from being the product of deregulation, was the direct result of mandates passed by Congress to increase mortgage lending to low-income and minority people. These mandates were imposed on government–sponsored enterprises (Fannie Mae and Freddie Mac), enforced by law and encouraged by two presidents. George W. Bush added regulations to the US economy at the rate of up to 78,000 pages a year.

Why is economic libertarianism out of favour? Unlike welfare-socialism and crony-capitalism, it fails to create vested interests dependent on its subsidies. The whole point of running for president is to be able to hand other people’s money to your favourite causes and generate grateful patronage.Laissez-faire robs you of that treat.