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.

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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 (Bogle, 2002).

Concentration