Chapter 5: Economists and the Banking System, Part 2: Adam Smith, Some Early Americans, and Friedrich List
This chapter is about economics in transition. Economics means literally ‘housekeeping’ and most early writers on economics (roughly speaking before Adam Smith, 1723-90) treated it that way. They worried about a nation’s solvency, whether fairness generally prevailed in economic dealings, and whether the vulnerable were sufficiently protected against the powerful. By the end of this chapter, however, nationalist economics is promoting a ‘war of extermination’ between nations; and ‘institutions of credit’ – i.e. banks – have become economic weapons in the hands of national elites, for use both at home and abroad.
Economists before Adam Smith noticed that huge quantities of credit, based on very few assets, were passing as money, enabling real property to be purchased by people who had done nothing to gain it besides speculate or fund the speculations of others.[i] The ‘financial revolution’ was inevitably accompanied by a social revolution: the old landed gentry were being bought out and displaced by speculators in finance.[ii] Some economists were concerned about the effects on society generally, of such people gaining political and financial power.[iii] ‘Every little scoundrel gets a new estate’ commented Charles Davenant in 1701.
In 1707, there occurred one of those momentous turning-points in history which no one much remarks on. The nature of the event probably explains why it is so obscure: debt became a legally-recognised commodity. Not exactly a bit of history to thrill the imagination, and yet it changed the world, transforming how money could be made and leading by slow process to the situation today, when financial operators own most of the world’s wealth.
– See more at: http://www.cobdencentre.org/2015/10/chapter-5-economists-and-the-banking-system-part-2-adam-smith-some-early-americans-and-friedrich-list/#sthash.zN59Wvw7.dpuf
