Corporate Corruption

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.

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.

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).