This year being the 300th anniversary of the birth of Adam Smith, I am doing quite a few talks all over the world on the great Scottish Enlightenment thinker. And I have been reflecting on the arguments of those who want to ‘reclaim’ Adam Smith as a sort of woke moderate socialist…
The evidence for this, runs the narrative, is that in The Wealth of Nations he complained about inequality and showed particular sympathy for the poor, “Wherever there is great property, there is great inequality,” he wrote, going on to remark how this led to social insecurity, “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.” It is only equitable, he continued that they should enjoy reasonable living standards.
So has Smith been misinterpreted by those who see him as a champion of capitalism (not that the word even existed in Smith’s day)? Not at all! Smith did indeed support free markets, free trade, free commerce, minimal regulation, low taxes, and a modestly sized government precisely because that was the best way to improve the condition of the working poor and promote economic equality.
But the more of the economy that is controlled by politicians — and of course by business people to seek advantage by becoming their cronies and leveraging their power over competitors and the public — the more are the poor oppressed, and the fewer opportunities they have to improve their own condition.
I support trade, free markets and the free society for precisely the same reasons. Left to itself, the ’system of natural liberty’ as Smith called it, will spread prosperity and tolerance through the whole society. Cronyism, centralism and socialism artificially and forcibly stifle those benefits.
A second set of Smith critics see him not as a proto-socialist, but as too confused to be taken seriously. There is an ‘Adam Smith Problem’ in that The Wealth of Nations is all about self-interest, while Smith’s earlier book, The Theory of Moral Sentiments focuses on feelings of empathy and benevolence. So which is it, Adam old chum?
This view underestimates Smith, though, by seeing him only as an economist whose moral ideas undermine his economics (or as an ethicist whose economic ideas undermine his ethics). But remember, in addition to economics and ethics, Smith also wrote and lectured on philosophy of science, logic, politics, and the arts. He was more of a social psychologist, in fact, and his two great books explore different parts of the psychology — different aspects of the human mind.
And even then, there is not such a great divide. Smith sees our moral behaviour as stemming from a deep human desire, as social creatures, to be admired and respected by others. We do things that make other people happy, or at least we avoid things that cause them upset.
Smith calls it ’sympathy’ and rejoices that it enables our species and society to flourish. He sees conscience as a sort of imaginary spectator by which we judge our own actions against this standard. Yes, we have feelings of benevolence towards others, but these feelings are weak. Much stronger is our desire to act in ways that will generate approbation from others.
Just as our economic actions derive from self-interest, therefore, our moral actions derive from a form of self-interest too: not so much our benevolent concern for there, but the fact that we feel better if we do right by others. In both cases, we are acting with ourselves in mind. In other words, there is no ‘Adam Smith Problem’. The only question is how all this self-interest can create a harmonious and functioning society.
Smith saw that it did, and described it as the ‘invisible hand’. F A Hayek, two hundred years later, explained it as ’spontaneous order’, and showed how regular behaviour, even self-interested actions, fit together to produce a beneficial hole. After all, as Smith put it, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”