Adam Smith, Radical and Egalitarian: an interpretation for the 21st century
Iain McLean Edinburgh University Press, 224pp, £40
ISBN 0748623531
Adam Smith and the Pursuit of Perfect Liberty
James Buchan Profile Books, 288pp, £15.99
ISBN 1861979053
It is a curious coincidence that Gordon Brown, Labour's most successful chancellor of the exchequer, hails from and represents the town where Adam Smith, generally regarded as the founder of modern economics, was born. Given that Smith is seen by many as a right-wing icon, this coincidence is potentially embarrassing. Brown has sought to turn the accident of history to advantage by explaining that Smith was actually an early West Fife socialist - as strong an advocate of the helping hand as of the invisible hand. If the author of The Wealth of Nations were alive today, he would be enthusiastic in his endorsement of the Chancellor's own policies.
Brown has often developed this theme, most recently at an event featuring his unlikely ally Alan Greenspan, the former chairman of the Federal Reserve. Greenspan did not oblige, declaring The Wealth of Nations a hymn of praise to the stability and growth of free-market capitalism, and that Smith's reference to the invisible hand was a prescient anticipation of the benefits of modern international financial markets.
These two books on Smith's life and work cover similar ground. Both examine his philosophical treatise The Theory of Moral Sentiments as well as The Wealth of Nations. Both dispel das Adam Smith problem - a preoccupation of 19th-century German critics - which questioned how one man could espouse such different positions in his most important works. Smith did not. The author who wrote in The Theory of Moral Sentiments that to restrain our selfish affections "constitutes the perfection of human nature" also wrote, in The Wealth of Nations, that "all for ourselves, and nothing for other people" was "a vile maxim". Both authors locate Smith as a central figure in the Scottish Enlightenment. James Buchan's elegant prose sparkles on the page; Iain McLean's wider scholarship enables him to relate his analysis more confidently to current debates.
The most important difference between the two books is that McLean is indulgent of Gordon Brown's harmless nonsense, and hence receives a foreword from the Chancellor, while Buchan is dismissive. As he points out, the economic world Smith inhabited was closer to the Roman empire than the markets of today. Someone impressed that eight tons of goods can be transported between London and Edinburgh in as little as six weeks cannot be expected to have much to say about globalisation in the 21st century.
There are several reasons for continuing to turn to the works of authors who died more than two centuries ago. The simplest is to enjoy fine writing from fine minds. Another is to ransack their prose for aphorisms useful in current controversies. Canonical works range widely enough to offer quotations in support of almost any position. And if they don't, you can always make quotations up: Smith never actually used the phrase "the helping hand". Or you can misinterpret what was said, as in Greenspan's applause for Smith's most famous metaphor, "the invisible hand". As is now well known, this remark reads differently if read in context, and certainly cannot be treated as an early formulation of the fundamental theorems of welfare economics.
Yet Smith's two most important contributions to economic doctrine are still poorly understood. The notion of spontaneous order - that coherent and even effective outcomes might result from the uncoordinated actions of many individuals - was central to the Scottish Enlightenment. It was perhaps better expressed by Adam Ferguson: "Nations stumble upon establishments, which are indeed the result of hu-man action, but not the execution of any human design." This sceptical view of the modernist redesign of institutions, anticipating an evolutionary approach to both national and social sciences, distinguishes Scottish Enlightenment thought from that of France or the United States.
The Wealth of Nations begins with the division of labour, and while Smith was certainly not the first to observe its contribution to the progress of opulence, it was he who emphasised it as the founding principle of modern economic analysis. People who are self-sufficient, or are part of small self-sufficient communities, spend most of their day gathering food and fuel. Specialisation by individuals, organisations, regions and nations according to competitive and comparative advantage is the foundation of the prosperity of the rich world. Such specialisation creates opportunities for mutually beneficial exchange. But, as McLean explains, most anti-globalisation protesters are still stuck in the pre-Smithian mercantilist frame that sees trade as a process in which one side's gain is the other's loss. Poor people are mostly poor not because they participate inequitably in the world economy, but because they hardly participate in it at all.
The power of spontaneous order points to a Burkean conservatism - of the merits of the division of labour to liberal free trade. It is unlikely that Smith, whose most important characteristic was deep cynicism about contemporary institutions and the capacity of individuals to improve them, would have had much enthusiasm for any current politicians. That will not stop them from claiming him as inspiration.
Post this article to
We want to encourage people to comment on our content and to exchange views with other readers and hope this will be done on a courteous basis. However, if you encounter posts which are offensive please let us know by emailing comments@newstatesman.co.uk and we will take swift action where necessary.
