March 23, 2011
A MEANS, NOT AN END:
Morals and Markets: a review of Adam Smith: An Enlightened Life
by Nicholas Phillipson (Yuval Levin, March 21, 2011, New Republic)
Once he enters Smith’s most productive (and most public) period, Phillipson’s analysis is brilliant and clarifying. He demonstrates decisively the coherence and immense ambition of Smith’s life-long project—the development of an overarching system for the study of social life—of which his individual works were elements. By so doing, Phillipson effectively puts to rest the longstanding argument that the economics of The Wealth of Nations was inconsistent with the moral theory that Smith had laid out in The Theory of Moral Sentiments, a view that dominated the study of Smith until well into the twentieth century, and that continues to shape the way he is understood.Smith’s economics, Phillipson argues, was a function of precisely his understanding of morality—an understanding of man as a profoundly social creature whose capacity for sympathy and desire for approval made it possible to civilize him through the inculcation of “moderate virtues” like prudence, restraint, industry, frugality, sobriety, honesty, civility, and above all “self command” or discipline. These low bourgeois virtues were nothing to sneer at, Smith believed. They were the essence of a functioning liberal society. And the market, in turn, was an institution crucial to the effort to inculcate such virtues. It could both yield immense prosperity and encourage discipline and the moderate virtues by making self-command (which is essential to keeping a job, satisfying customers, and beating out the competition) a means of bettering our condition.
The compatibility and continuity of Smith’s two great works suggests that there was not—as left-leaning admirers of Smith ever since Thomas Paine have suggested—a hidden revolutionary morality in the The Wealth of Nations. The insistence on such a veiled radical agenda (which can be found in many contemporary studies of Smith, most recently Iain McLean’s book Adam Smith, Radical and Egalitarian) has kept too many readers of Smith from taking his moral philosophy seriously.
But the same continuity also means that many libertarian readers of Smith are wrong to believe that his economics is his morality, or that an unregulated market exhausts his idea of an ethical society. In fact, Smith’s market is highly regulated. Far from a pseudo-natural phenomenon best left to its own equilibrium, it is a social institution constructed by policymakers with very particular moral ambitions.
The nature of those ambitions speaks directly to the problems bedeviling our own capitalist economy—indeed Smith’s arguments are more relevant today than at any time since Smith’s own age. For most of its history, capitalism was locked in conflict with various forms of collectivism, and above all with socialism and communism. That conflict is for the most part over now, and what remains in the developed world is an argument about what sort of capitalism we want. And as Phillipson powerfully brings out, Adam Smith’s capitalism is a very particular type.
Smith, after all, did not offer up his economics in opposition to collectivism, which did not really emerge until the subsequent century. His adversary was mercantilism—by which each of the European powers set market rules that served the interests of a few large domestic manufacturers and trading companies working closely with the government. Mercantilism thus put economic policy in the service of the national interest, in order to advance the nation’s trading position. Smith believed this was counterproductive. Instead, he argued, legislators should govern the market in the interest of the common consumer. This was his key economic insight. As he put it:
Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident that it would be absurd to attempt to prove it. But in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer.
By turning the logic of mercantilist economics on its head and establishing a market designed for the good of the common citizen, Smith believed governments could both unleash immense productivity and wealth and create economic institutions that encouraged discipline, moderation, and order in an open society. This would mean drawing a clear distinction between “pro-market” economic policy and “pro-business” economic policy, and Smith believed there were few threats to the moral order of a liberal society greater than the entanglement of the government with the nation’s largest producers.
Posted by oj at March 23, 2011 6:10 AM
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