Mark Steel Info

Adam Smith, Margaret Thatcher's favourite economist, is the new figure on the £20 note. Many of us know him mostly because of the Adam Smith Institute which, in the 1980s, was always in the news for its proposals to solve every problem by bringing in the free market.

So you'd read stories like: "A new report from the Adam Smith Institute has discovered babies are lame-duck enterprises who contribute nothing to the economy, costing the country nine million pounds a day, and demands this subsidy be stopped by selling them off to a gangster from the Ukraine. Ministers are said to be considering the proposals carefully." Or they'd insist the Army should be divided into competing regiments and sold to private enterprise, claiming: "Once competition is introduced, there'll be an incentive to see who gets to bomb a Middle-Eastern slum first, increasing efficiency, especially if we do away with bureaucratic restrictions regulating who can and can't destroy whom. Also, they'll be free to capture foreigners and force them to build a railway until they starve, which proved a huge economic success for the Japanese."

They're still around, and their current campaign is that the railways haven't been privatised enough. How do you argue that one? Will they try to confuse people by giving out leaflets at stations saying: "Our trains are a national disgrace. They're still too punctual, too spacious, and there aren't nearly enough crashes."

So to put Adam Smith on a banknote must seem as crazy as if the Post Office announced: "We are shortly to issue a series of stamps depicting each of the July 7 bombers." But the poor man has been hard done by. Because in the 18th century, just as early scientists were trumping the church by analysing how the anatomy and electricity worked, Smith tried to find an explanation for how money and the economy worked. And, while he supported the idea of "free trade", he insisted that wages should be sufficient to allow the worker to enjoy leisure, culture and beer.

Surely the Adam Smith Institute should lead a boycott of anything made in Third World sweatshops, until the 12-year-old machinists are given a week off, a free pass for art galleries and a six-pack of their choice.

He certainly wouldn't recognise the insatiable greed of modern business, in which nothing is assumed to have any value unless it makes a profit. If someone turned up on Dragons' Den, saying they needed a few grand because they'd love to set up a home for destitute sick people, the panel would go: "How dare you waste our time? This crackpot scheme's going to lose money hand over fist."

What he wouldn't have anticipated is the way in which business has turned everything into a commodity. For example, pharmaceutical companies don't see medicine, they see units that must be converted into an increased share price, which is why they go berserk if a country licenses cheap medicine, thereby deflating the price. Their attitude is: "Oh, that's right, give them drugs they can afford, then all the sick will get better cheaply, leaving a trail of disappointed shareholders who'll invest their money in some other industry. then see if all these cured people thank you."

Adam Smith might appreciate that, just as his banknote comes out, there's a panic in the housing market. Could there be a more shambolic way to organise everyone's houses, than leaving it to the free market? When primitive farmers first settled in villages, imagine if someone had said: "I know how to organise this. We'll build enough houses for everyone. But then we'll keep some empty as an investment. This will mean some of us have nowhere to live, so they'll be desperate and offer more money, pushing the price up, but they still won't get one, because someone from a richer village will pay even more for it, leaving it empty while it doubles in price because we put it about that this is an up-and-coming area with easy access to a circle of stones."

But now it's taken for granted that houses aren't to be lived in, they're an investment. So all day there are television programmes about buying houses, in which couples are advised: "Ooo, this has so much potential. You could turn the toilet into a bowling alley and double your value overnight."

Every magazine has housing columns telling you your investment will appreciate seven per cent if you paint the chimney turquoise, or you'll recoup your outlay plus 16 per cent if you convert the loft into a planetarium. And everyone's forgotten it's a bloody house. There must be people who, when they're round at someone else's and need a slash, ask: "Excuse me, which room is the gilt-edged equity-porcelain fiscal bond unit? I'm bursting."

One estate agent told me last week that bankers from the City come into her office, and immediately ask: "If I buy somewhere round here now, in two years how much will I make?" That's the free market, and the result is utter chaos, and possibly about to collapse, but no one knows. And while piles of these investments stay empty, thousands of people are homeless.

Presumably, the Adam Smith Institute's answer would be to start selling shop doorways and park benches. So before long the homeless would go: "Here, I got this place two years ago for two tins of Special Brew and a box of KFC bones. Had it valued this week: it's worth a six-pack of Tennents Extra and a whole binful of discarded Chinese rice. Ridiculous, this housing boom, isn't it?"