I had an odd conversation today with the CEO of a technology services company. On discovering that I am Scottish, he asked if I knew the work of Adam Smith – the enlightenment philosopher and writer on economics. No sooner had I expressed my admiration for Smith’s insight than our CEO eagerly piped up, That’s great! I am an ardent follower of Ayn Rand and it’s good to meet someone who thinks the same way.
I wondered what that way might be and was regaled with a string of political declarations that, for all I know, were an accurate account of Rand’s thinking. I don’t know, because I have never been able to trudge through any of her work. I found Atlas Shrugged to be unreadable. Partly, I could not get past her appropriation of the name of John Galt, the Scottish author of Annals of the Parish, wherein he coins, in passing, the term utilitarianism. But mostly, I just found the book to be an undisciplined outpouring of obsessive wish-fulfilment to stand alongside Rolfe’s Hadrian the Seventh.
What ever they say about Rand, my new friend’s views bore little resemblance to anything Adam Smith wrote or lectured on, and in most cases were diametrically opposed to his views. They represented a modern caricature of Smith as a libertarian economist rather than as a moral philosopher of empathy and insight.
A list of all the errors of fact involved would be tedious, so here instead are four things to know about Smith which may offset a mistaken view of him, sadly all too common amongst American friends of a political habit.
Firstly, and to my mind, most egregiously, Adam Smith most certainly did not write, or even imply, that greed is good. When I read this in Yuval Harari’s Sapiens, the unfairness and inaccuracy ruined the entire book for me, which I had so much enjoyed up to that point. Smith, in fact, lists avarice as an extravagant passion doing least honour to our species which, along with ambition, has introduced into this world all the rapine and injustice. Each of these expressions is to be found in Smith’s Theory of Moral Sentiments.
So where did this widespread view of Smith come from? It came from a modernist self-serving misunderstanding of his writing on self-interest, such as this famous quotation from the Wealth of Nations: 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. What is most often overlooked is that Smith understands that we have almost constant occasion for the help of [our] brethren and can’t expect that help only from benevolence. The butcher, brewer and baker need their customers and so must address their customers’ self-love (as he puts it) by providing goods that customers want at appropriate prices. No one will buy your beef just to keep you in business. Similarly, the customer must understand that the brewer’s self-interest lies in selling beer and should not expect it for free. Smith’s world of negotiation is not one in which the merchant or customer acts merely through self-interest, but also with regard to the self-interest of others. It’s an extraordinarily humane insight.
But – I can hear my friend protesting – surely the market finds the right price for both customer and merchant by means of Smith’s famous invisible hand! Let’s make sure this is crystal clear: Smith did not believe in some magical process by which self-interest automatically generates best results. The invisible hand is a metaphor not a mechanism. Smith uses the metaphor to describe a process whereby investors, too nervous to place their money abroad, kept it at home and thus inadvertently helped the annual income of the country. But the unintended consequences of their behaviour could just as easily be damaging – and Smith gives numerous examples, even in the same section of the book.
Finally, for this short post, Smith did not write about Capitalism. For one thing, the term was not current until quite some time after his death. Capitalists existed, in the simple sense of one who held movable property as opposed to land. But Capitalism as a system, did not appear until after Smith. Rather, Smith’s work is a detailed criticism of mercantilism and the protectionist guild systems of British and European urban life. I expect Smith would have been most wary of any -ism at all. He writes scathingly of the man of system with a fixed plan of government and is in all ways pragmatic and humane, rather than ideological, in his approach to problems that individuals, groups or governments may attempt to solve.
Please do not equate the douce, sedulous and sympathetic Scottish philosopher with greed, selfishness or some mythical property of markets.