V. The Economic Failures
The Enlightenment extended its confidence to the economic realm. Just as reason could discern the laws of nature and the principles of just government, so too could it uncover the mechanisms by which wealth is created and distributed. The result was classical economics, with its promise of prosperity through rational organization of production and exchange.
Adam Smith’s Wealth of Nations, published in 1776, became the founding text of this enterprise. At its heart lay the law of supply and demand: the elegant mechanism by which prices adjust to balance what producers offer and what consumers desire. Let the market operate freely, Smith argued, and an invisible hand would guide individual self-interest toward collective prosperity. The baker bakes not from benevolence but from self-love, and yet we all have bread.
The law of supply and demand became the bedrock of economic reasoning. It appeared in every textbook, was taught in every university, and informed the policy of every nation that aspired to modernity. For two centuries, it seemed as solid as Newton’s laws.
It was an illusion......
.....No one who has watched the hollowing-out of the American industrial heartland, the stagnation of Western wages, the rise of the Chinese export machine, can believe that free trade has delivered on its promises. The economists who assured the public that the gains would be shared, that the dislocations would be temporary, that retraining would absorb the displaced, these economists were not necessarily all lying. But they were reasoning from simplified models that did not describe reality and mistook the coherent elegance of their mathematics for the truth.
And finally, for three hundred years, we have been assured by the economists that debt did not matter. They even omitted it from their most complicated equations and declared that it did not matter if Peter owed Paul or Paul owed Peter, that debt was just a variable on both sides of the equation that cancelled itself out. Now the entire Western world awash in debts it cannot pay and institutional investors now own 20 million private homes, 15 percent of the total housing stock in the United States.
This, too, is a consequence of the Enlightenment’s successful war on the laws that once prevented people from falling into debt servitude. Now debts are increasingly noncancelable even by bankruptcy, the total U.S. debt is $106 trillion, and each and every native-born U.S. citizen’s share of that debt is $365,500. Instead of making everyone wealthy as was promised, the economics of the Enlightenment have turned a once-free people into a collection of debt slaves.
