Capitalism: Adam Smith Never Even Heard of It


Metamodern Metablog. Adam Smith and Capitalism.

“If Adam Smith is ‘known’ as the ‘father of capitalism’, it is 20th-century accolade of which he knew nothing, nor, to be accurate, deserved. This is an example of projecting modern notions onto the past.” – Source.

By EJ Wickes
Image (top) “The Muir Portrait” of Adam Smith by an unknown artist (Scottish National Portrait Gallery).

In the discussions about capitalism and free-market economies the experts are quick to jump to Adam Smith and the “Invisible Hand”, while neglecting what it really means in terms of a morally engaged society. “Neo-liberal” capitalism has disregarded everything Smith taught us about what we refer to today as “economic nationalism”. Laissez faire had a much deeper meaning than it does today and it has been used to justify a very one sided and disingenuous debate about economic liberalism.

Adam Smith never used the word “capitalism”. He referred to a “commercial society” as one component to the over-all society. It was rarely used in the economic or political lexicon before Marx brought it to bear in his ultimate criticism of capitalism. One might dare to assume that Marx “invented” the term capitalism but “The Oxford English Dictionary (Vol II, p 863) locates its first usage in English in 1854 by William Makepeace Thackeray in his novel, The Newcomes“. Adam Smith died in 1790.

With the reading of An Inquiry into the Nature and Causes of the Wealth of Nations, (which was more specifically a philosophical a critique of Britain’s mercantile system), The Theory of Moral Sentiments should be included as a requirement. I argue that within both the reader will find how a commitment to the ‘self’ and personal freedom can benefit society economically as well as socially. It is when personal interest and greed over-emphasizes the need to produce, compete and consume for profits at all costs that becomes the problem. It is when the sustainability of the labor force and available resources become negelcted that the natural process of Laissez faire becomes corrupt.

Many historians and authorities on the subject of Adam Smith will agree that Adam Smith was a philosopher more than he was an economist. It was his philosophical understanding of the nature of man that helped to form his views on the commercial aspects of society. Much of this is overlooked by America’s version of laissez faire Libertarianism which is almost a contradiction in terms.

“It is this last book—ostensibly about the expenditures of government—that shows most clearly what Smith had in mind politically; the government plays a much stronger role in society than is often asserted. In particular, book five addresses the importance of universal education and social unity. Smith calls for religious tolerance and social regulation against extremism. For Smith, religion is an exceptionally fractious force in society because individuals tend to regard theological leaders as having more authority than political ones. This leads to fragmentation and social discord.”

Interesting. I’m feeling some “Libertarian Socialism” here:

“Smith’s caution against the love of systems is a component of Smith’s argument for limited government: “Harmony of minds,” Smith argues, is not possible without “free communication of settlements and opinion,” or, as we would call it today, freedom of expression (TMS VII.iv.27). It also offers a direct connection to Smith’s most famous phrase “the invisible hand.” In The Theory of Moral Sentiments, he uses the invisible hand to describe the conditions that allow for economic justice. This natural aesthetic love of systems leads people to manipulate the system of commerce, but this interferes with nature’s plan:

The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species. (TMS IV.1.10)

In this passage, Smith argues that “the capacity of [the rich person’s] stomach bars no proportion to the immensity of his desires, and will receive no more than that of the meanest peasant” (TMS IV.1.10). Thus, because the rich only select “the best” and because they can only consume so much, there ought to be enough resources for everyone in the world, as if an invisible hand has divided the earth equally among all its inhabitants.” Source

Smith was not describing the “neo-liberal” capitalism we suffer from today. A free-market economy can only work to a society’s prosperity and well being only if a certain amount of morality and ethical restraint is incorporated. He also points out the strength of domestic investment over foreign investment in anticipation of, or to the degree that we have been sold out today.

It’s funny how much you can get from reading the actual text instead of all those laissez faire faux-capitalist memes. Next up: Marx and how he understood the morality of “capitalism” better than most “capitalists”.

What all of this should be teaching us is that both points of view hold gems and pearls of wisdom that have value. The Bible, Marx, Smith and all the other texts get pervasively “cherry-picked” by those who have alternative agendas of control and manipulation.

Unfettered “capitalism” or “socialism” lead to fascism and communism. Simply put: The Soviets corrupted socialism and the United States corrupted capitalism. Period. It’s in how we choose to employ them both in morally and economically principled ways that will determine their effects on society.

We can have our cake and eat it too. That’s why I hate “Left vs Right” arguments and political parties; because each side is already skewed to its own dogma, leader worship and cherry picked philosophies. It’s hard for any candidate with a differing point of view to break free from their party line, as has been illustrated by the Bernie/Hillary divide within the Democratic party and Ron Paul with the Republicans in the past.



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