On the Royal Mile in Edinburgh stands a statue of Adam Smith. Sculpted by Alexander Stoddard and unveiled on July 4, 2008, the only statue of the great man to be erected in the Scottish capital at first seems unexceptional—a worthy memorial to one of the great figures of the Scottish Enlightenment. It is certainly a more impressive work than the travesty of Hume, also by Stoddard, on the other side of the High Street. Hume appears in Classical garb and looking rather slimmer than contemporary memoirs and paintings of the philosopher would leave us to believe. Smith is at least represented in the costume of his age, standing in front of a scythe and sheaf of corn, symbols that rightly reflect the agricultural focus of The Wealth of Nations. Viewed from the back, however, the statue displays the difficulties we still face in coming to terms with Smith and his work.
On the plinth is a plaque containing the names of the subscribers who paid for the statue, the first of which is that of Dr Eamonn Butler. In one respect this is appropriate, since it was the organisation which Butler heads, the Adam Smith Institute (ASI), which commissioned Stoddard, negotiated with Edinburgh Council for his work to be situated on the Royal Mile and collected the subscriptions. But in another respect Butler’s imprimatur is not appropriate at all; for the ASI is a body whose views bear as much resemblance to those of Smith as the views of the former Soviet Institute of Marxism-Leninism bore to those of Marx and Lenin. In both cases some phrases are brandished – a ‘hidden hand’ here, a ‘dictatorship of the proletariat’ there – to disguise the infidelity of these institutions to their supposed sources of inspiration.
The ASI was established in 1976, the bicentenary of The Wealth of Nations, by Butler and two fellow-graduates of St Andrews University, Stuart Butler and Madsen Pirie, as a think-tank which would focus on developing policies which could be adopted by sympathetic governments, the type of policies we now think of as characteristic of neoliberalism. At one point in 1994 the ASI ran a mock-interview with Smith from beyond the grave in which he called for the abolition in the USA of ‘minimum wages, tariffs, export subsidies, agricultural marketing boards, taxes on capital, “free” education at government schools and the whole US system of central banking’. To be fair – although there is no reason why one should be fair to those wonderful folks who thought up the Poll Tax – the ASI is obviously aware that it is unable to use Smith as a ventriloquist’s dummy for its own views in every case, so it also includes a cautionary note on its website: ‘While Adam Smith is our inspiration, we do not pretend that he was right about everything.’ The issues on which Smith was wrong, one gathers, are those on which he would disagree with the ASI.
The neoliberal attitude to Smith is well expressed by ASI heroine Margaret Thatcher, who noted with bemusement in her autobiography the failure of her ‘revolution’ to win hearts and minds in Scotland, ‘home of the very same Scottish Enlightenment which produced Adam Smith, the greatest exponent of free enterprise economics till Hayek and Friedman’. The more openly pro-market figures in the SNP, like Michael Russell, have a similar reasons for admiring Smith: ‘Adam Smith was the father of modern capitalism and it is high time that his own people rediscovered his genius, particularly as, in his own land, that genius is currently tarnished by the half-baked economic models espoused by most of our political parties.’
These comments confirm an observation by two of Smith’s more acute recent interpreters: ‘It is no longer thought necessary to examine how and why Smith argued in favour of the market, nor indeed how he qualified his case.’ Yet many on the left accept neoliberal nostrums at face value and merely reverse their value judgements. On the occasion of Smith’s appearance of the £20 banknote in 2007, the late James Young claimed in the pages of The Herald that ‘Adam Smith was a pioneer of the vicious anti-humanist economics of capitalism’ and linked him, somewhat implausibly, ‘with all the other advocates of anti-gay entrepreneurship; aggressive immoral and naked capitalism; and post-modernism’. As Young’s ravings suggest, the radical left often ascribe positions to Smith which are even less plausible than those of the neoliberal right.
Those on the social-democratic or centre-left tend not to abandon Smith to the tender mercies of the neoliberals, but instead claim him for their own traditions. In 2002 Gordon Brown gave a lecture in which he ‘asked whether Adam Smith would feel more at home in the right-of-centre Adam Smith Institute or in the left-of-centre (John) Smith Institute, named after my good friend John Smith, the leader of the Labour Party’. Unsurprisingly, Brown opined that the latter would have proved the more congenial to his fellow native of Kirkcaldy. In a work intended to support and elaborate Brown’s position, Iain McLean argues that to describe Smith as ‘a man of the Left’ would be anachronistic as the terms left and right did not acquire their political meanings until the French Revolution.
This seems unnecessarily concerned with labels rather than attitudes, since we can retrospectively identify what would later be left-wing positions prior to 1789, for example in the English Civil War; what is genuinely inapt is to ascribe to Smith positions associated with social democracy – a term from an even later date than ‘Left’ – as McLean does: ‘It favours government intervention to counter market failure’s redistributive taxation; and trade liberalisation for the benefit of all including the poor of the world. It does not favour producer groups; public ownership of trading enterprises (where there are no market failure issues); or protection, either in rich or poor countries.’
Finally, there have been attempts, perhaps surprisingly from the radical left, to discern in Smith’s work a model of a ‘real free market’ which has been violated by ‘the global corporate system’. As John McMurty writes, ‘every one of Smith’s classical principles of the free market has been turned into its effective opposite’. This is an attractively counter-intuitive idea, which challenges the neoliberals on their own terms. Other writers, like the late Giovanni Arrighi have gone further and argued, not only that the market system envisaged by Smith can be distinguished from capitalism, but that ‘market-based growth’ distinct from ‘capitalist growth’ is now embedded in Chinese or perhaps East Asian development more generally.
All great thinkers are subject to different interpretations of their work but, as this brief survey suggests, few can have been subject to quite so many contradictory interpretations as Smith. Why?
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There have in fact been three major stages in Smith’s posthumous reputation, each associated with differing attitudes towards his work. The first began to gather support virtually from the moment of his death on 17 July 1790, which, as Emma Rothschild writes, ‘was the subject of little interest, in England and even in Scotland’. Yet within a decade Smith’s work began to be presented in a way that minimised its more radical elements, as part of the conservative reaction to the French Revolution.
The mechanisms by which this occurred were often directly political. Dugald Stew-art, Smith’s first biographer, was appointed professor of political economy at Glasgow — the first anywhere — in 1793. In his Life and Writings of Adam Smith, published the same year, Stewart drew attention to parallels between and mutual influences on Smith and his French Enlightenment contemporaries. Here and in his other writings, Stewart attempted to maintain a balance between rejecting extreme interpretations of Enlightenment doctrine and urging the timely reform of the conditions that made such interpretations attractive to the unwary.
Remarks of this kind, which would have passed unnoticed in enlightened publications fifty years earlier, or even during the American War of Independence, now bore the mark of the Jacobin beast and Stewart swiftly recanted. His retreat is emblematic in respect of the impact it had on his theoretical approach to political economy, for Stewart was primarily responsible for deradicalizing Smith. As Richard Teichgraeber has written: ‘In 1793, Dugald Stewart talked of a hope that “in due time” Smith’s example would be followed by other students of political economy. Only ten years later, Francis Horner, a former pupil of Stewart and a founder of the Edinburgh Review, spoke of a “superstitious worship” that had come to be attached to Smith’s name.’ The generation of British Whig thinkers who rose to prominence after 1800, particularly those associated with the Edinburgh Review, illustrate the shift. They by no means completely abandoned scientific thought or even the desire for reform; but the issues over which these cadres were most deeply concerned were far narrower than those that had interested the Historical School of the Scottish Enlightenment to which Smith belonged.
Yet there was also a reaction to this interpretation of Smith, associated not with the ideologists of industrial capitalism, but with the emergent working-class movement which was concerned to oppose, or at least humanise it. Both drew on The Wealth of Nations, but from markedly different sections of the book. ‘As a result’, writes David McNally, ‘by the 1820s, “Smithian” apologists for industrial capitalism confronted “Smithian socialists” in a vigorous, and often venomous, debate over political economy.’ The latter strand ultimately led into Marxism, but from the last third of the nineteenth century in particular, the intellectual defenders of capitalism show far less interest in Smith. Interestingly, this is increasingly because they began to regard as legitimate the claims which the left made on his legacy and this shift represents the second turn in Smith’s posthumous reputation.
Key here is the emergence of neoclassical economics, above all the marginalist reaction against both the classical political economy of Smith and the Marxist critique which sought to build on what he had accomplished. In economic theory marginalism represented the final retreat from the kind of scientific inquiry undertaken by Smith, however imperfect, into ideological justification. It was signalled by the abandonment of the law of value, with its dangerous claim that the socially necessary labour required to produce commodities was also the objective measure of their value. The tenets of mar-ginalism were first set out by Leon Walras in his Elements of Pure Economics (1874) and ultimately codified by Alfred Marshall in his Principles of Economics (1890), although they have a long prehistory dating back at least to the 1830s. In relation to neoliberalism, the most important thinkers have been those of the Austrian school, above all, Menger, Ludwig von Mises and Fried-rich von Hayek. Their attitude to Smith is instructive.
Smith presented a problem for the neoclassical school: Walras saw his work as being tainted by ‘unscientific’ social and moral considerations; Menger regarded it as flawed because of Smith’s insistence that national economy was not simply an abstraction – a view incompatible with the ‘atomism’ or methodological individualism of the mar-ginalists. This was understood as late as the final decades of the nineteenth century. Carl Menger was only exaggerating slightly when he wrote in 1891: ‘Smith placed himself in all cases of conflict of interest between the strong and the weak, without exception on the side of the latter.’
Indeed, in 1883 Menger had explicitly criticised Smith for his ‘one-sided rationalistic liberalism’, his ‘effort to do away with what exists’ which Menger claimed “inexorably leads to socialism”. Nevertheless, the marginalists needed, for reasons of ideological continuity, to claim Smith as a forerunner whose work they had completed, above all in relation to his advocacy of the market, which they removed from any historical context. ‘It was only the “marginal revolution” of the 1870s’, wrote Hayek, ‘that produced a satisfactory explanation of the market processes that Adam Smith had long before described with his metaphor of the ‘hidden hand”.’
The source of this misidentification lies in Hayek’s belief that there are two types of rationalism: constructivist and evolutionary. According to Andrew Gamble, adherents of constructivist rationalism ‘believe that human societies can be mastered by human beings and remodelled according to rational criteria’. Adherents of evolutionary rationalism show ‘a distrust of the powers of human reason, a recognition of the extent of human ignorance about the social and natural worlds, and therefore a stress upon the unexpected, unintended consequences of social action’. Hayek’s ignorance of both the theory of the Scottish Enlightenment and the history of capitalist development in Scotland leads him to treat The Wealth of Nations as a description of how ‘commercial society’ works rather than as a programme for bringing it about; but considered in the latter way, Smith was as much of a constructivist rationalist as Marx, which was, of course, precisely why Hayek’s predecessors regarded him with such caution.
The triumph of Keynesianism in the post-war West seemed to signal the final reduction of Smith to purely historical figure in the history, and one confined to the pre-history of economics, rather than of sociology or moral philosophy, at that. The prevailing attitude to Smith’s work has been admirably summed up by James Buchan: ‘His books now, were long and Scotch and close-printed. They were no more use to the modern economist and politician than sixpenny tracts of eighteenth-century medicine to a General Practitioner or MD.’ Yet from the mid-1970s on Smith’s reputation began to experience an extraordinary revival. More extraordinary still was that the people responsible for this third reputational shift were largely the intellectual descendants of the neoclassical school which had previously shown no great enthusiasm for his work. Here, for example is Milton Friedman in a speech given in the year of the bicentenary, the hour of the ASI, at St Andrews: ‘Adam Smith was a radical and revolutionary in his time – just as those of us who today preach laissez faire are in our time. He was no apologist for merchants and manufacturers, or more generally other special interests, but regarded them as the great obstacles to laissez faire – just as we do today.’ There was one respect, however, in which Friedman believed contemporary free-marketeers would have to extend their categories, broadening ‘the “tribes” of “monopolists” to include not only enterprises protected from competition but also trade unions, school teachers, welfare recipients, and so on and on.’
In a sense this was a return to the original distortions of Smith which arose immediately after his death, but now in the context of the crisis of Keynesianism and state capitalism, and a resurgence of ideas about ‘free’ markets as the alternative. Some writers, such as PJ O’Rourke, have even ascribed visionary powers to Smith: ‘Smith was fostering free enterprise, and he was also nurturing – just in time – resistance to socialism.’ Resistance to socialism – in 1776. O’Rourke is a comedian and here he is, as they say, having a laugh. But the stupidity of these remarks indicates a flawed approach more fundamental than misconceptions about Smith’s attitudes to markets. It is summed up by this comment from the Bank
of England website: ‘Adam Smith’s explanations of the society he observed in the 18th century are as relevant today as they were then.’ The essential error is repeated even by those who disagreed with the nature of his relevance, as in this ‘social-democratic’ perspective by Ryan Hanley: ‘Insofar as the conditions of contemporary capitalism are in many respects similar to those of debated by commercial society’s founding fathers, those engaged in the project to ameliorate those conditions stand to gain much from the effort to ameliorate similar these conditions stand to gain much from the effort to develop our answers to today’s problems in light of their efforts.’
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The point is this: Adam Smith is not ‘relevant’ to our contemporary problems. Anachronistic misconceptions concerning his work could of course be corrected by the radical expedient of actually reading The Wealth of Nations and The Theory of Moral Sentiments, preferably after situating them in their historical context, namely Scotland’s emergence from feudalism. When Smith attacked unproductive labour, he was not making some timeless critique of state employees, but thinking quite specifically about Highland clan retainers. When he opposed monopolies, he was not issuing a prophetic warning against the nationalisation of industries in the twentieth century, but criticising those companies which relied for their market position on the possession of exclusive royal charters in the eighteenth. Above all, unlike his modern epigones, he did not see the market as a quasi–mystical institution that should be made to penetrate every aspect of social life; but rather as a limited mechanism for liberating humanity’s economic potential from feudal and absolutist stagnation.
Even so, the advocacy of Smith and his colleagues for what they called ‘commercial society’ was very conditional indeed. He intuited, long before capitalist industrialisation began in earnest, that it would lead to massive deterioration in the condition of labourers and their reduction to mere ‘hands’. Understood in the context of the Scottish Enlightenment conception of human potential, the description of pin manufacture at the beginning of The Wealth of Nations, reproduced from 2007 on £20 banknotes, not only celebrates the efficiency of the division of labour, but also shows the soul-destroying repetition that awaited the new class of wage labourers. In Book V, in contrast to the more frequently cited Book I, Smith explicitly considered the way in which the division of labour, while increasing the productivity of the labourers, did so by narrowing their intellectual horizons: ‘The man whose whole life is spent in performing a few simple operations, of which the effects, too, are perhaps always the same, or very nearly the same, has no occasion to assert his understanding, or to exercise his invention, in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging; and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war. … His dexterity at his own particular trade seems, in this manner, to be acquired at the expense of his intellectual, social, and martial virtues.’
Smith contrasts this unhappy state of affairs with that existing under earlier modes of subsistence — modes which, remember, he was committed to transcending: ‘It is otherwise in the barbarous societies, as they are commonly called, of hunters, of shepherds, and even of husbandmen in that rude state of husbandry that precedes the improvement of manufactures, and the extension of foreign commerce. In such societies, the varied occupations of every man oblige every man to exert his capacity, and to invent expedients for removing difficulties which are continually occurring. Invention is kept alive, and the mind is not suffered to fall into that drowsy stupidity, which, in a civilized society, seems to benumb the understanding of the people. . . . Every man, too, is in some measure a statesman, and can form judgments concerning the interest of the society, and the conduct of those who govern it.’
It was uneasy anticipations such as these, which Smith shared with James Steuart and Adam Ferguson, that later informed Hegel’s conception of alienation and, through him, that of Karl Marx. In response he calls for the state to intervene to raise the educational level of the common people to that fitting of a ‘civilized and commercial society’: ‘For a very small expense, the public can facilitate, can encourage, and can even impose upon almost the whole body of the people, the necessity of acquiring those most essential parts of education.’ Here he has before him the example of his own country, in one of the few occasions it features positively in The Wealth of Nations: ‘In Scotland, the establishment of such parish schools has taught almost the whole common people to read, and a very great proportion of them to write and account.’
It was therefore possible for Smith to approve of commercial society while disapproving of the activities of actual capitalists. Indeed, in a passage which does prefigure Marxist analysis, he specifically denies that they represent society as a whole: ‘the clamour and sophistry of merchants and manufacturers easily persuade [the public] that the private interest of a part, and of a subordinate part of the society, is the general interest of the whole’. It is this, entirely realistic, attitude which allows him to make his most famous comment: ‘People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.’ But what would become of the arguments for commercial society if these excrescences turned out to be the essence of the new system? His argument in The Wealth of Nations can be seen, in McNally’s words, as a defence of ‘agrarian-based capitalist development in a landed commonwealth ruled by prosperous and public-spirited country gentlemen’ against the emergent ‘industrial and commercial capitalists’ whose amorality Smith distrusted. In relation to his native Scot-land, McNally notes: ‘Smith hoped that commercial forces could be used to hurry the development of an agrarian-based capitalism guarded by a state run by a natural aristocracy of landed gentlemen.’ It did not. What if, as indeed seems to be the case, commercial society as he envisaged it was actually impossible, or only possible under very specific conditions, such as pertained in the North American colonies whose independence he supported?
Smith based his support for commercial society on a hypothesis concerning its likely positive effects compared to those associated with feudal absolutism. Now that the consequences of ‘actually existing capitalism’ have been experienced for more than two hundred years, and it is clear that, for the majority of humanity, the dehumanizing effects of the division of labour already identified by Smith were not an unfortunate by-product but the very essence of the system, there is less excuse for such misrecognition. Political economy was the central discipline of the Enlightenment, the greatest intellectual achievement of the bourgeois revolutions. The expectations that Smith had of capitalism have been disappointed, the predictions he made for it have been falsified; to defend capitalism now, to further claim him in support of such a defence while ignoring the discrepancy between his model and our reality, is to attack Enlightenment values quite as comprehensively as did the feudal obscurantists to whom Smith was opposed. We now have a fine statue of Smith on the High Street; but his works need to be read for what they tell us about his century, not ours.
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Among the books consulted in writing this article are the following: Adam Smith in Beijing: Lineages of the Twenty-first Century by Giovanni Arrighi (Verso, 2007); Adam Smith and the Pursuit of Perfect Liberty by James Buchan (Profile Books, 2006); The Adam Smith Problem by Dogan Gocmen (Taurus Academic Studies, 2007); Adam Smith and the Character of Virtue by Ryan Patrick Hanley (Cambridge University Press, 2009); Adam Smith: a Moral Philosopher and his Political Economy by Gavin Ken-nedy (Palgrave Macmillan, 2008); Adam Smith, Radical and Egalitarian: an Interpretation for the 21st Century by Iain McLean (Edinburgh University Press, 2006); After Adam Smith: a Century of Transformation in Politics and Political Economy by Murray Milgate and Shannon C. Stimpson (Princeton University Press, 2009); On The Wealth of Nations by PJ O’Rourke (Atlantic Books, 2007); The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers by Michael Perelman (Monthly Review Press, 2011); Adam Smith: An Enlightened Life by Nicholas Phillipson (Allen Lane, 2010); Economic Sentiments: Adam Smith, Condorcet, and the Enlightenment by Emma Rothschild (Harvard University Press, 2001); Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics by Daniel Stedman Jones (Princeton University Press, 2012).