April 23, 2014

Thomas Jefferson’s Economic Policy – Part 3

Part 1: http://newwaveslave.com/2010/08/thomas-jefferson-influences-and-economics-part-one/

Part 2: http://newwaveslave.com/2010/08/thomas-jefferson-influences-and-economics-part-two/

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.

In Closing…

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

Related posts:

  1. Thomas Jefferson: Influences and Economics – Part Two
  2. Thomas Jefferson: Influences and Economics – Part One

Comments

  1. Ford says:

    I disagree that Thomas Jefferson was a capitalist because you said that a one should pursue a field in which they can be self-sufficient. The only way an econmy can truly function at it optimule performance is through specialization, and that requires people to depend on each other. That is why assemble lines produce more widgets then the individuals can do by themselves.

    • NewWaveSlave says:

      Division of labor and being self-sufficient have nothing to do with one another. Self-sufficiency as related to Thomas Jefferson and this particular article is about creating your own value rather than “renting” out your services as an employee. There is a big difference.

  2. mo says:

    To be quite honest, it sounds like Jefferson was more interested in, like you said, personal liberty as well as that person’s own labor. The fundamental core of Capitalism are the ideas of “private property”… this includes private property of natural resources (e.g. land) as well as that of the means of production (e.g factory machines) for the specific purpose of accumulating profit that is then re-invested in the form of capital… also for the purpose of profit.

    However, Jefferson places extra emphasis on the “ownership of the output by the laborer,” that is, the person who works ought to own the product of their work… that is ultimate freedom. This suggests that an individual’s work adds value to the resources he/she is manipulating… i.e. the difference between raw beets and useable, ready for consumption sugar is the processing and refinement that is carried out by a person, either by hand or by machine. Through their labor they add value to the raw beets. Ideally, that person ought to gain from adding value to the beets. In a capitalist economy, the person who extracts profit from the finished product is the person who owns that product. But most people who “own” the products are not necessarily those who “work and create” the product, and, by extension, the profit. This happens because the “owners” can invest capital in other enterprises without actually working. So people with the advantage of being born into privileged circumstances never have to work because their accumulated wealth continues to be invested in enterprises that produce profit for them. Investing and working are two very different things. And on the point of “wage enslavement,” most people get paid the same “hourly” wage regardless of how productive they are. Which means that if someone is a motivated worker and produces more per hour, the only thing that changes is the amount of profit the owner makes.

    If anything, Jefferson was a proto-Marxist. Placing the value of labor above that of capital. Marx just went the extra step in suggesting that all laborers unite in order to take the ownership of the profit through owning the means of production and redistributing that profit among all those who are working on that product. Marx also places capitalism in a historical framework preceded by primitive/agrarian economies, and feudal society. He had the advantage of 80 more years to observe the development of Capitalism and Industrial Society. Pure Capitalism, in my opinion, like Communism, is a beautiful theory when implemented in a vacuum that doesn’t include humans.

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