An economic theory written in Scotland in the years before the creation of the United States has guided advocates of capitalism for centuries. Adam Smith first coined the phrase “invisible hand” of capitalism in the March 1776 book The Wealth of Nations. Think about that date, published just a few months before the American colonies delivered the Declaration of Independence.
A gross simplification of the theory is that in a free-market economy, self-interested people and companies, motivated primarily by profits, will unintentionally improve society, lifting everyone in the process. The assumption is that creating great products that sell well creates new markets, creates new jobs, spawns new technologies, employs people, essentially improves lives, and improves the standard of living. It basically is saying that a rising tide raises all boats. I think a more modern reflection on the invisible hand comes from the Wolf of Wall Street story, “greed, for lack of a better word, is good.”
This rising tide idealism probably guided early American industrialists and magnates like John D. Rockefeller, Cornelius Vanderbilt, Andrew Carnegie, J.P. Morgan — early versions of Bill Gates, Steve Jobs and Elon Musk.
The trucking industry: A case study
Looking at trucking, examples such as the formation of Federal Express in the 1970s created today’s overnight delivery systems. Microsoft, Apple and IBM are largely responsible for the ability to order things from the privacy of our homes and phones today. These seem like clear examples of the invisible hand having a waterfall effect across a range of things like growth in airplane building, airport expansion, growth in materials production like aluminum and composites, a wide range of new Class 2b through Class 8 trucks, growth in containerized shipping, better roads, better telecommunications, more warehousing building, more jobs, etc. How many new products were spawned out of these pioneering companies? How many things in your everyday life were made possible as a result of these early pioneers primarily looking to become rich?
But free-market capitalism is not all good. If I can repurpose a well-worn phrase, absolute wealth corrupts absolutely. The 2% club or 1% club have taken a lot of flak over the last two decades for accumulating what seems like excessive wealth, not necessarily benefitting the masses making up the 98% or 99% of the world. Remember the Occupy Wall Street movement in 2011?
The efforts to reduce global warming stand as a direct argument that unfettered self-interested pursuit of profits is not necessarily good for all. Pollution, catastrophic weather, adverse health effects, poverty, homelessness, loss of educational excellence, and more stand in contrast to the idealism of the invisible hand.
Balancing profit and public good
Philanthropy was a stop-gap effort, I believe, to ease the conscience of the uber-wealthy in the days of the Industrial Revolution. Carnegie funded the creation of libraries across America. Rockefeller funded arts and humanities efforts. These were attempts to give back or pay forward for becoming extremely wealthy. The employment created by these financial giants certainly helped financially burdened families, but there were costs to that employment with increases in health issues near factories, shortened life spans, abusive labor practices and more.
Adam Smith had strong opinions that governments should stay out of economics and not hamper businesses. Yet the negative aspects of the invisible hand require attention. The government needs to step in when unfettered businesses are having negative impacts to people.
In my career, I’ve participated in OEM efforts to argue against or moderate government regulations of trucks on topics like emissions reduction. I’ve also participated in impressive efforts by OEMs to meet those same regulations. Having grown up in the 1960s and 1970s I can tell you that I truly enjoy the fact that today’s trucks do not spew black smoke every time they accelerate. My family and I were walking in town recently when an arrogant coal roller driving an illegally modified diesel pick-up truck filled the entire street with acrid black smoke. I’ve been in Cummins engineering headquarters and I know just how hard they have worked to make production vehicles clean. This driver was a massive insult to all their work to improve conditions for everyone.
Industry groups tend to immediately argue against government regulations. It seems to be a foundation for some trucking groups that all regulations are bad. In the late 1970s, regulations were created to reduce truck pass-by noise. Later regulations led to zones where it is illegal to use noisy engine brakes.
In talking to several older drivers in NACFE’s Run on Less events in 2021 and 2023, nearly all of them noted some hearing loss in their left ears as a result of their proximity to the truck’s exhaust stacks on older generation trucks. Many of these drivers are extremely happy with the new generation of battery electric and fuel cell trucks because they are so quiet. One driver remarked that when he drives through a downtown area with outside restaurant seating, the patrons actually notice the lack of noise and smile and wave. Air quality improvement near major arteries is helping to reduce childhood asthma.
The invisible hand creates problems that government regulation can moderate. Blanket arguments against regulations are quite frankly misplaced. Clearly all of us benefit today from past regulations. And yes, there are excesses in regulation as well. But like there are no average trucks, no average drivers, no average truck companies, etc. there are also no average regulations. Each one needs to be looked at in context of its costs and benefits. And clearly there are benefits to regulation.
Yes, pure, unadulterated pursuit of profit can have positive invisible hand benefits. Greed can be good for more than the top 1%. But it also carries significant risks that need to be balanced with regulations.
Industry groups need to consider that all regulation is not inherently bad. That bureaucracy may reduce profits but may also have significant benefits to quality of life — something not easily measured in dollars. Blindly lumping all regulation as bad shows an ignorance of the total picture.
Rational fact-based discussion of the pros and cons of regulation are needed. There is more to the topic than profit.
