The right have it all wrong about Adam Smith

I gave the bare facts of his life in the Sunday National and to mark the tercentenary. Today I am going to attempt to show just how important Smith was to Scotland and the world – a massive task for just one column, but I will try it anyway.

The trouble with Scotland and Scottish history is that not enough people in Scotland and elsewhere really take much of an interest in the great men and women in our nation’s history and Adam Smith is one of those figures.

It was only in 2008, for instance, that a proper statue and monument was erected in Edinburgh, where Smith lived and died more than two centuries ago. You can see it on the Royal Mile, near to St Giles’ Cathedral.

So why should an 18th-century Scottish thinker be lauded today? The simple answer is that Smith’s work is as relevant today and debated now more than ever.

Since his death in 1790 he has influenced generations of economists, businesspeople and politicians.

Every major economist from every side of the political spectrum has relied on Smith’s pioneering science of political economy and almost every major economist has quoted Smith in their work.

He influenced everyone from Karl Marx to free-marketeer Arthur Burns – guru of President Richard Nixon – and Margaret Thatcher, but has also been acclaimed by socialists for his thinking.

Let’s start with his legacy, which can be found in almost every economic work – terms such as the free market and the danger of monopolies all derive from Smith’s work.

Yet, as I will show, he was not merely the father of political economy but also a profoundly influential moral philosopher. His great friend was David Hume, who is in any sensible person’s top 10 philosophers of all time.

READ MORE: The facts about life of great Scottish economist Adam Smith

They shared many a bottle of claret but Smith was no abject disciple of Hume. Instead, he would often dispute matters with his friend.

They differed widely in certain matters, too, such as slavery – Hume was in favour of it while Smith was not, though mainly on the grounds that enslaving people to work was a bad economic idea.

Many of Smith’s works did not survive him, as he instructed his executors, James Hutton and Jospeh Black, two other titans of the Scottish Enlightenment, to burn the manuscripts of his unfinished works.

One which did survive was his account of Hume’s death in 1776, the year that Wealth of Nations was published.

Smith raged against the cruelty of the world in taking Hume from them, only for the atheist Hume to say: “No, no. Here am I, who have written on all sorts of subjects calculated to excite hostility, moral, political, and religious, and yet I have no enemies except, indeed, all the Whigs, all the Tories, and all the Christians.”

Smith was not as charismatic as Hume and was noted for his absent-mindedness but his written works show the extraordinary genius of his razor-sharp intellect which deployed in many fields – he even wrote a book about astronomy.

His two greatest works were the Wealth of Nations (1776) and The Theory of Moral Sentiments (1759). It is very significant in my view that on his tombstone in Canongate Kirkyard it states: “Here are deposited the remains of Adam Smith author of Theory of Moral Sentiments and Wealth of Nations.

To his contemporaries, therefore, his worth as a moral philosopher was as great as his reputation for economics.

The product of his time at Glasgow University, Smith’s moral philosophy was based on what we would know as psychology. He believed individual self-interest should be balanced with concern for the common good, emphasising the importance of virtue and ethics in society. The free-market think tank the Adam Smith Institute says this on its website: “It was not The Wealth Of Nations which first made Smith’s reputation but a book on ethics, The Theory Of Moral Sentiments.

“Once again, Smith looks to social psychology to discover the foundation of human morality. Human beings have a natural ‘sympathy’ for others. That enables them to understand how to moderate their behaviour and preserve harmony. And this is the basis of our moral ideas and moral actions.”

That's a good and succinct summary of the book. The foremost expert on Smith in recent years was Andrew Skinner, who died in 2011, and who was the Adam Smith Professor of Political Economy at Glasgow University from 1994 to 2000. Skinner spent many years researching the works and legacy of Smith and was one of the academicians who helped raise Smith’s profile from the 1970s onwards.

READ MORE: How turning to Adam Smith can help drive the push for Yes forward

Skinner convinced me that Smith saw his work as progression, writing: “Precisely because Smith viewed his philosophical, historical and economic work as parts of a single whole, we should perhaps expect that a useful perspective on anyone may be gained by paying at least some attention to the others.

Equally significant is the fact that it is in The Theory of Moral Sentiments rather than the Wealth of Nations that Smith fully explained the psychological drives which support man’s desire to better his condition, an argument that is linked in turn to the pursuit of wealth, the desire for status, and the admiration of our fellows.”

Smith was radical in his views, writing in Theory: “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 … is … the great and most universal cause of the corruption of our moral sentiments.”

Tories might weep if they know Smith wrote: “It must always be remembered, however, that it is the luxurious and not the necessary expense of the inferior ranks of people that ought ever to be taxed.”

We know for certain that Smith was planning his magnum opus even when finishing the Theory of Moral Sentiments because he concluded it by writing: “I shall in another discourse endeavour to give an account of the general principles of law and government and of the different revolutions they have undergone in the different ages and periods of society, not only in what concerns justice, but in what concerns police, revenue, and arms, and whatever else is the object of law."

When Wealth of Nations came along, it caused uproar among the mercantile classes despite Smith urging freedom of trade. That’s because he targeted monopolies about which he wrote separately: “A monopoly granted either to an individual or to a trading company has the same effect as a secret in trade or manufactures.

“The monopolists, by keeping the market constantly under-stocked, by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate.”    

One of Smith’s great theories was that merchants were led by an “invisible hand”, basically the pursuit of self-interest by individuals in the market leads to overall economic benefit for society.

The late English economist Terence Hutchison once wrote: “Smith himself was ‘led by an invisible hand to promote an end that was no part of his intention’ – the end, that is, of establishing political economy as a separate autonomous discipline.”

Although he is acclaimed for his view on free trade, which directed the growth of the British Empire in the 19th century, Smith was no apologist for the rich, writing: “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.”    

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

HIS most famous lines in Wealth of Nations are these: “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. We address ourselves, not to their humanity but to their self-love, and never talk to them of

our own necessities but of their advantages…

“By pursuing his own interest [the individual] frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.”    

READ MORE: Adam Smith warned against the rise of the likes of Jacob Rees-Mogg

He added: “The interest of [businessmen] is always in some respects different from, and even opposite to, that of the public … The proposal of any new law or regulation of commerce which comes from this order … ought never to be adopted till after having been long and carefully examined … with the most suspicious attention.

“It comes from an order of men … who have generally an interest to deceive and even to oppress the public ... 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.”    

So no Tory and not just a simple free trader. That’s why I believe his tercentenary should be a starter for a re-examination of Smith, not least because he keeps being quoted by the right wing as their guru when clearly he was not.

As Skinner wrote: “It is not appropriate uncritically to translate Smith’s policy prescriptions from the 18th to the 20th century – moreover, it is quite inconsistent with Smith’s own teaching."

Britannica.com, derived from the Encyclopaedia Britannica first published in Edinburgh, states: “Over the years, Smith’s lustre as a social philosopher has escaped much of the weathering that has affected the reputations of other first-rate political economists.

“Although he was writing for his generation, the breadth of his knowledge, the cutting edge of his generalisations, and the boldness of his vision have never ceased to attract the admiration of all social scientists, economists in particular …

“Smith is the very epitome of the Enlightenment: hopeful but realistic; speculative but practical; always respectful of the classical past but ultimately dedicated to the great discovery of his age – progress.”

By some way the best modern assessment of Smith came in a book published in 2018 by the Conservative MP and now government minister Jesse Norman.

Writing for the Financial Times about “Adam Smith: What he thought and why it matters”, Norman said: “For many on the right of politics, the author of The Wealth of Nations is a founding figure of the modern era: the greatest of all economists; an eloquent advocate of laissez-faire, free markets; the “invisible hand” and the liberty of the individual; and the staunch enemy of state intervention in a world released from the utopian delusions of communism.

“For many on the left, Smith is something very different – the true source and origin of “market fundamentalism”, homo economicus and the efficient market hypothesis; the prime mover of a materialist ideology that is sweeping the world and corrupting real sources of human value; an apologist for wealth and inequality and human selfishness — and a misogynist to boot.

“The real Adam Smith is a vastly wiser and more subtle thinker. He forces us to discard the usual simplistic slogans and tired cliches. But more than this: he still has a vast amount to teach us, not merely about economics and markets and trade, but about the deepest issues of inequality, culture and human society facing us today.

“Far from attacking Smith, we must turn to him again. For we cannot understand, or address, the problems of the modern world without him …”

For once in my life I find myself agreeing with a Conservative MP.

If we are to combat the extremes, we need to know more and think about Adam Smith, a truly great Scotsman.