Thought this a most significant take on Adam Smith who, like all great ideas people who’ve influenced humanity, has been partly read and misread as has been people’s wont and their own prejudices:
Smith saw economics as a branch of moral philosophy, and he saw capitalism as an ethical project whose success required political commitment to justice and freedom, not merely an understanding of economic logistics.
The notion of classical liberalism certainly embraces economic freedom but it also embraces that pesky bit “unless/until it is to the detriment of others”. Cue the moral dimension.
A great deal of contemporary (neo-classical) economics can be understood in terms of translating Smith’s Invisible Hand metaphor into a systematic theoretical form, with a particular emphasis on the economic efficiency of perfectly competitive markets.
However the popular view of Smith that has resulted from this emphasis is twice distorted.
Firstly, it is based on the narrow foundations of a few select quotations from The Wealth of Nations (WN) that are taken in isolation as summing up his work (Smith only mentions the ‘all important’ Invisible Hand once), and secondly these quotations have been analyzed in a particularly narrow way.
Both selection and interpretation have been driven by contemporary economists’ interest in justifying orthodox economic methodology and their peculiar (Mandevillian) assumption of the selfish utility maximising homo economicus.
And that’s the nub of the matter.
But anyone who cares to read Smith’s Wealth of Nations for themselves will find an economics discussed and justified in explicitly moral terms, in which markets, and the division of labour they allow, are shown to both depend upon and produce not only prosperity but also justice and freedom, particularly for the poor.
This more than just a philosophical nicety and sets it at odds with the Randian dystopic view of freedom, the free market’s motivation and the cold indifference of the amoral “business is business”. This extremist position is a central plank in the platform of the crony capitalists and justifies all the corruption and I’m all right, jack of the Dimons et al.
It has zero to do with classical liberalism, it is maniacally driven and all consuming, monopolistic and anti-market in the end, in the sense that it wishes to eliminate the free market altogether. That’s why the global capitalists can be called the global socialists – with a state full of serfs run by the economic oligarchs above, for their pleasure and enrichment.
While Rousseau sought a perfect and absolute solution to the problem through his famous social contract, Smith argued that under conditions of freedom and justice, society could endogenously produce a decent social order for co-ordinating moral and economic conduct without centralised direction or coercive moral policing by religious or secular authorities.
In the light of yesterday’s post and using the analogy of the Lord of the Rings, while it is good not to be under the thumb of the diktats of religious or secular authorities, it is an impossible dream if you think it can be achieved by setting up model communities with man providing for man. Hobbiton only survived in the first place because of the rangers such as Strider who patrolled the region and kept the nasties at bay.
I put to you that the analogy holds true in terms of Adam Smith’s vision and in terms of the possibility of the free market. Using a further analogy – that of our armed forces – it is only with such as these defending us, well-funded, well-equipped, well-trained, honoured and respected, that the nation is safe enough to indulge in its Smithian ideals. As a parent with a child beginning to run, the watcher, the guardian, is a necessary precondition of whatever we wish to achieve, otherwise it’s not going to last all that long.
There is an enemy out there and also within. The trick is that the watchers need to have the altruism of a Strider, rather than that of a Barosso.