The Hijacking of Adam Smith


Advocates of an unregulated global economy like to use Scottish philosopher Adam Smith’s Wealth of Nations to support their bold claims about the invisible hand.  Smith, capitalism’s patron saint, however, was much more nuanced and reflective than unscrupulous market-friendly ideologues portray him.  Here are a few passages from Wealth of Nations that are frequently (and purposefully) overlooked by libertarians.

“No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.  It is but equity, besides, that they who feed, clothe and lodge the whole body of the people should have such a share of the produce of their own labor as to be themselves tolerably well fed, clothed and lodged.”

“Civil government, so far as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor, or of those who have some property against those who have none at all.”

“It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.”

And that’s just from the more market-friendly book.  The Theory of Moral Sentiments, Smith’s treaties on ethics, is even more blasphemous.

“This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments.  That wealth and greatness are often regarded with the respect and admiration which are due only to wisdom and virtue; and that the contempt, of which vice and folly are the only proper objects, is often more unjustly bestowed upon poverty and weakness, has been the complaint of moralists in all ages.”

Snap, crackle and pop.

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The year 1975, the year in which I launched the Viking Society in Tasmania in the old church at Colony 47, is far too recent to find the root of the capitalist question. For this we must venture back in time to a rather interesting year in human history.

Two events occurred in 1776, one rather well known and the implications of the other less appreciated. Yes, it was on the 4 July 1776 that the United States was born with the Declaration of Independence: and then the fight was on to become a new nation and later, the most powerful empire the world has ever seen.

The other event in 1776 was the publication of a book by Adam Smith called ‘An Inquiry into the Nature and Causes of the Wealth of Nations’, or more generally, ‘The Wealth of Nations’. This document became the foundation of modern capitalist thinking and is still hammered away in universities around the world.

However, there was another book by Adam Smith that somehow slipped from the sights of power and economics, that was published in 1759 called ‘The Theory of Moral Sentiments’. It was Smith’s wish that the first book serve as a companion to the second and that the two books be read together, so that the art of compassion might be balanced by the skill of competition.

If we could return to that fork in the road of modern nation-building in 1776 and follow a trail forward that includes both of Mr Smiths great books, we might find that the missing link in how we run our national economies and the global economy, is the quality of compassion that would demand that any economy is built in such a way that all members of society are included.

This approach would also lead to a greater sense of care about the underlying ecology upon which all economies ultimately depend. The key to compassion is individual responsibility expressed personally and in community action that cares about the environment, that does not tolerate poverty or homelessness, that would view any child dying of starvation as a crime against humanity and deal with the situation immediately.

In the age of empire building and global conflicts, compassion would have been an inconvenient inconvenience. The only way this will ever be turned around will be by individuals awakening to the power of compassion to heal individual lives, nations and the global environment that our neglect of compassion has driven to the brink of oblivion.

We have quite a challenge ahead, but we can handle it. When we know the cause of a problem, then we can press on to identify the solution and design an effective path of action.

At the same time we need to keep in mind deeper causes for our problems stemming from Nature and evolution, where the ferocity of competition and the drive for expansion must be born in mind. Even in this deeper root of causes, it is the appreciation of compassion that will help us to save our hides. If we awaken to causes that are buried deep in time and take a firm hold of the reigns of expansion and progress, even to become a star-faring Solar Civilization and balance the excitement of competition with the compassion involved in cooperation to achieve a fully healthy Human family living on a happy Earth, or in orbital settlements across the Solar System, then we will assure our survival and a healthy and creative life for all Earth’s children.

Kim Peart

Save.islandEarth@gmail.com

Comment by Kim Peart

Context is very important here. You have left it out, quoting merely three paragraphs from the GIANT text that is The Wealth of Nations, and only one from The Theory of Moral Sentiments. And now, I will show you how this is wrong, based merely on the context.

On the first quote:

Prior to this bit, Smith spent quite a bit on talking about how the free market was improving the lot of the poor, and was answering a rhetorical question as to whether this was a good thing or not. Specifically, I will quote a bit of his passage on the SAME PAGE regarding the benefits of competition. After discussing how food, such as potatoes, and other necessities are now cheaper, and as a result of higher demand from the poor, luxury items – such as soap, in those days – have become more expensive, Smith says:

“The common complaint, that luxury extends itself even to the lowest ranks of the people, and that the labouring poor will not now be contented with the same food, clothing, and lodging, which satisfied them in former times, may convince us that it is not the money price of labour only, but the real recompence, which has augmented.”

On the second quote:

The part of the government Smith was railing against here was not the idea of property rights in general, but the idea of the protection of the VALUE of property through government laws. Much like the Homeowner’s Associations now that strip liberty of private property rights for the protection of property value, in Smith’s day (and now) corporations set up government-backed monopolies to “protect property”. Earlier in the text, he goes into this:

“Corporation laws enable the inhabitants of towns to raise their prices, without fearing to be undersold by the free competition of their own countrymen.”

Here it is the protection of property VALUE that is at odds with the free market competition.

On the third quote:

This quote, in full context, is clearly talking specifically about taxes on land rents, which would necessarily fall mostly on richer renters, rather than the rent of the poor labourer.

“The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable.”

In context, it is not an argument for a tax on the wealthy, specifically, as you have implied. It is, in fact, an argument that a tax that is written fairly is not unreasonable, even if it happens to fall mostly on the rich – as sales and rent taxes are wont to do. Note that a sales tax on non-necessities would fall more heavily on the rich in proportion to their revenue, as well, and so would a flat tax rate of all income over a certain value (like twice the poverty rate), as there was no “middle class” then. (I would also say the “middle class” is a misnomer – they are rich. Not quite as rich, but when your quality of life means you have to choose between various electronic gadgets because you just don’t make enough for all of the ones you want, you are a long way from poverty.)

In addition, Smith does talk about how items that are not necessities (whether bought by the poor or rich) should be the the major source of tax, which you conveniently left out as you implied a progressive INCOME tax. Smith, if anything, was an advocate of the FairTax or FlatTax system.

As for the quote from The Theory of Moral Sentiments, I have not read it recently, and do not have my copy on hand, so I will make only this comment.

Decrying the fallen nature of man, that of a sinful, selfish being, makes sense in a text on moral sentiments. However, to claim that the government, being made of men – and men in positions of corrupting power, no less – is somehow more moral is nonsensical. The government is no better than individuals, and usually worse, at determining who should get what amount of money in aid.

Taxing the rich higher than the majority is no more than legalized theft by an appeal to majority. Government instituting laws that treat a small segment of society differently because they have wealth is nothing more than class-based discrimination. Constitutional limits on government are instituted to protect the minority from the majority for a reason.

Comment by Matt Tanous

I admire what you’re trying to do by using the term non-necessities. You want to avoid the fact that when necessities are taken into account, those at the bottom pay a greater percentage of their incomes to taxes.

Now, on your general response. The post isn’t intended to argue that Adam Smith was a Keynesian or supported the policies of the Democratic Party. It was my intention to highlight some passages that show that wherever Smith stood, he was far from the ideologue that free-market zealots portray him as in their quest to find intellectual support for the views and convictions. Your comment that “Smith, if anything, was an advocate of the FairTax or FlatTax system” is as laughable as statements by those who try to interpret what the Founding Fathers actually meant when they made a constitutional argument that goes against what they believe.

And your argument that poor people are not really poor because they own electronics is simply silly. Maybe you’ve been reading too much into the nonsense put out by the Heritage Foundation.

http://www.heritage.org/research/reports/2011/07/what-is-poverty

Comment by subalternate




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