What Would Smith Say?

The Walrus ^ | March 4, 2009 | Peter Foster

[Lorianne]

The financial meltdown, through the eyes of the father of capitalism ___ In the middle of the nineteenth century, Robert Owen, a British mill operator who sought to overturn the nascent capitalist system, found his collectivist schemes crumbling. He turned for support to the dead, proclaiming that he had the backing of Benjamin Franklin, Thomas Jefferson, Shakespeare, Shelley, Napoleon, the Duke of Wellington, and the prophet Daniel — not to mention the dearly departed Duke of Kent, whom Owen complimented for never being late for a seance.

Owen was an important figure in the development of anti-capitalist sentiment. Marx and Engels were among his early fans. The fact that he was actually a capitalist is not as peculiar as it might seem; so was Engels. Many capitalists have claimed to be exceptional in being motivated by more than the desire to make money, elevating themselves by impugning the motives and short-sightedness of their competitors, and in the process supporting the claim that capitalism is a system based on greed and exploitation. This demonic characterization would perhaps surprise Adam Smith, the kindly eighteenth-century bachelor frequently dubbed “the father of capitalism.” His great book, An Inquiry into the Nature and Causes of the Wealth of Nations, is widely regarded as the seminal work on economics, his master metaphor the market- guiding “invisible hand.”

If you go to the museum in Smith’s birthplace of Kirkcaldy, Scotland, which lies across the Firth of Forth from Edinburgh, you will find displayed, in the inconspicuous nook devoted to him, a quote from the economist John Kenneth Galbraith. “With Das Kapital and the Bible,” it says, “The Wealth of Nations enjoys the distinction of being one of the three books to which people may refer at will without feeling they should read it…There is so much in the book that every reader has full opportunity for exercise of his own preference.” Galbraith, who rejected Smith’s market-oriented world in almost every way, was on this point gallingly correct.

As an iconic figure, Smith tends to be as much channelled as quoted. His ideas are often twisted, much as Owen mangled Shakespeare and Jefferson. Even his fans are guilty of the charge. For example, Smith made only one reference, itself tangential, to the invisible hand in The Wealth of Nations. It was later free-market enthusiasts who embraced and glossed the term.

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[Alcibiades]

Good article. I need to read Wealth of Nations for myself.

[buwaya]

Its LONG and often VERY heavy going.

On the other hand, you can drop it open almost anywhere (rather like the Bible actually) and find something interesting.

[arthurus]

It takes time. It is time profitably spent.The great economics writers after Smith like Von Mises and Hazlett and Friedman, add little to Smith. They condense and are easier reading. They provide more modern examples.