The Economic Philosophy of Thomas Jefferson – Part 3
Thomas Jefferson’s belief and policies toward Laissez-faire economic policy and letting the people follow their own pursuits to produce a living based on their own goals and objectives, falls very much in line with the Adam Smith school of thought. Smith stated in The Wealth of Nations, that an “invisible hand” guides the economy to reach its most efficient method of meeting and creating supply and demand of goods and services. Smith was a leader in the Scottish Enlightenment and Jefferson considered his works to be outstanding in the field of economics and philosophy. It can be said the Jefferson was Lockean in his philosophy of government and Smithian in the economic philosophy. Both philosophies fit nicely together with no contradiction with Locke providing the theory and Smith providing the application of those theories.
Jefferson is often overlooked in the field of economics and capitalism in America due to much of the credit being given to Alexander Hamilton. In my opinion that is due to a fundamental misunderstanding of the term American capitalism.
Because of Jefferson’s preference for the agrarian lifestyle, he is often painted as anti-capitalist. I think that is an easy assumption to make for those not familiar with economic theory. It is true that Jefferson did not want America to become like the manufacturing capitals in Europe, but I believe it is not due to a dislike of capitalism, but rather an intense yearning for individual freedom.
For example, If one is an employee to a corporation, Jefferson considered it a form of economic enslavement because the employee is dependent upon the employer for their living. The employer can then exert control over their employees and the employees are likely to submit because of the dependence of their income. If a person creates their livelihood from their land or by their own hands such as farmers or artisans, they are dependent upon no one but themselves and can prosper in direct proportion to the amount of the value created. This is also in alignment with Jefferson’s rejection of the Ricardian view of “rent” as stated by the economist David Ricardo.
Basically, Ricardo argued there is mutually beneficial trade even if one party is more productive that it’s trading partner as long as each concentrates on the activities where it has a comparative advantage. Stated more simply… a person can trade their labor (an employee) in exchange for pay from a company. In this situation, Ricardo states that wages tend in the direction of subsistence in order for the maximization of profits. Jefferson believed that true freedom is in the creation of your livelihood by owning your own output, not just “renting it out”. Jefferson had heard of Ricardo’s Principles of Political Economy and Taxation, which was similar to other works of his favorite authors, but he thought it had mixed messages with regard to the legitimacy of rent.
By understanding the foundations of the influences of Thomas Jefferson on his philosophy of government and economics, I believe it is clear that Jefferson believed the best way for one to pursue their happiness; it is best achieved in a pure form of capitalism. It is a fundamental concept in economics that people are rational and will act in their best interests to achieve their goals. Jefferson believed that concept was never fully achieved in England, but he built the platform of capitalism in America by not taxing the product of one’s labor and by letting the people pursue their own self interest with no interruption from government. By letting Smith’s “invisible hand” work through the economy and not hindering the process by the assessment of income taxes on labor, there was a time of great prosperity which help build the United States in the economic powerhouse that it has become.
Never before in history has a Government allowed its people to be completely in control of their economic destiny without mandate by the State and without excessive taxation on their labor. Today we take this concept for granted, but the restraining Government and allowing citizens to pursue their own destiny was a radical and revolutionary concept and is still considered as much today.
Written by Todd Watson for NewWaveSlave.com