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Political Philosophy Part 2

 

 

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                             Liberalism (ii) John Rawls

Liberalism (iii) liberalism today

 

 

Week 2: LIBERALISM AND LIBERAL CAPITALISM, (i) ITS ORIGINS AS REPRESENTED BY ADAM SMITH (pp13).

 

The eighteenth century thinker Adam Smith (1723 – 1790) is taken as a very useful example of liberal ideas.

 

Smith was both

(i) the explainer and advocate of liberal capitalism, and

(ii) the forerunner of the critique of capitalism in Marx (through, inter alia, the labour theory of value).

 

OUTLINE

 

1 liberalism – its historical origins and characteristics:

          1.1 Historical background: from mediaeval times to the 18th century and the industrial revolution

          1.2 18th century thought – the beginnings of liberalism

          1.3 further points on liberalism as a political philosophy (prevalent to this day) (BG) (* see #References at the end of these notes)

          1.4 liberal capitalism (S/C, Hag.)

          1.5 differences within liberalism

                  

2. Adam Smith’s ideas: his ethics and economics compared:

          2.1 Overview.

          2.2 His ideas in more detail:

                   2.2.1 the individual & society, conflict and co-operation (note Skinner p. 16, on civil soc etc p 29ff)

                   2.2.2 impartial observer etc

                   2.2.3 view of politics and the state (a negative view)

                   2.2.4 his views on economics (the market, progress, and contradictions)

                   2.2.5 state and economy (cf. Cole pp 29 38)

          2.3 how his ideas have been used since his time: laissez faire etc – including ‘updates’

 

3. Extracts from Adam Smith (Treatise on Natural Sentiments and Wealth of nations)

 

4. Commentary on the extracts

 

NOTES

 

1. Liberalism

 

1.1 Historical background: from mediaeval times to the 18th century and the industrial revolution

 

The changes that took place as the mediaeval world was replaced by the modern world (16th – 18th centuries) were complex and dramatic. Early on (in the 16th century – think of Machiavelli, Elizabeth I …) the nation-state came to be the typical form of organisation, rather than the wider (and looser) Holy Roman Empire. Kings thus took on new powers as national leaders. However, the power of the kings and lords in society was undermined. Cole et al (#References at end of notes) put it like this - p 30 ff; Sabine’s position seems to me to be different, as he stresses how rivalry among barons caused instability, which the kings resolved by taking more military power. Cole et al say that whereas once the right to produce goods had to be purchased from the king or a landlord, and the mediaeval guilds restricted production (they controlled entry to the trades - apprenticeships - and they influenced prices etc), now merchants were becoming more rich and influential, especially as they began to travel more widely abroad.

 

Most importantly merchants needed the freedom to travel, and exchange: ‘free trade’. However they also needed the protection that a monarch could give (much as now: demands for ‘free trade’ actually seem to me to involve national governments stopping each other from setting barriers!). When the state took an active role in protecting trade (by imposing import/export taxes) in this period, it was called “mercantilism”. (Note that Adam Smith was opposed to mercantilism)

 

With the influx of raw materials and luxury goods (gold, diamonds, spices) through the conquest of distant lands (the process of colonialism) European countries became much more wealthy.

 

The "putting out" system was used to get round the power of the urban guilds, and this(?) gave artisans and merchants more freedom - also new technology (iron

smelters, deep mines) broke the power of the guilds, and so control of technological change shifted to new class of capitalists, who employed labour (i.e. it was no

longer the craftsmen themselves who were in control) (Cole et al).

 

Thus, with the invention of steam-powered machinery, and labour organised (through the division of labour) in factories, the industrial revolution began (first half of 18th century).  As we shall see below, not everyone was happy with these developments, especially early socialists who watched the impoverishment of the workers with horror. Liberal and humanist minded critics saw the de-humanising effects of the emphasis on material wealth – what Marx later (in the Communist Manifesto) called the 'cash nexus.'

 

1.2 18th century thought – the beginnings of liberalism: John Locke (Sabine)

 

Sabine comments that the philosophy of this time, as with Locke (100 yrs before) had an odd mixture of empiricism (the basis of scientific method: we find out about the world by observing its behaviour) and a belief in natural law/natural rights (which must be God-given). Typical thinkers around the time of Adam Smith were the Physiocrats (e.g. Helvetius). They believed that all human behaviour can be explained in terms of pleasure and pain, while also believing that there were "natural" economic processes viz: there is a "natural" social order, where individual and social good were reconcilable, therefore the legislator should not intervene.

 

The social and political order that came about at this time we now call liberalism”. Individuals had freedom, especially to own property, and the state existed to protect the individual and his (not ever “her”!) property and rights. Smith called this the “obvious and simple system of natural liberty” (the term ‘capitalism’ was not current at the time). Given that the natural order was, as he saw it, effective, there was little need for government to intervene in the economy. (Note it is Conservatives today who hold to this – and Labour represents state intervention).

 

Thinkers such as John Locke (1632 – 1704) had earlier spelled out the philosophy of liberalism, and his ideas had a strong an influence on many subsequent proponents of capitalism. Locke’s starting-point was that the individual was made by God. In the “Letter on Toleration” he said that therefore each has a God-given right to his/her beliefs, conscience and religious practices, and no-one has the right to dictate beliefs to others. The state, he went on, should have no further involvement in society than to protect individuals and their property and their freedom to trade.

 

In his “Treatises on Government” he defined what is known as the “liberal” political view, that has dominated European thought (alongside socialism) ever since.

 

A further point that Locke makes is that since everything comes from God it would be morally wrong to waste resources (e.g. crops), or allow them to spoil.

         

Like Adam Smith, (below), Locke believed that what we have laboured to produce is our property. In explaining how the landowner then produces more than he can use, and sells the “surplus” of his produce, Locke makes the case for inequality (as does Smith). Unlike socialism, liberalism recognises the inevitability, and perhaps desirability, of inequality.

 

Dunleavy and O'Leary argue that liberalism derives from a "pre-democratic ideology", i.e. "there should be as much individual freedom in any society as is compatible with the freedom of others" (p5) – and it came from opposition (by the wealthy) to Catholic dogmatism and to monarchical absolutism, in the 17th and 18th centuries... hence: liberals originally stood for representative government for the propertied classes, to protect against arbitrary state interference. Only after the growth of socialist movements did most liberals accept that citizens = all adult males, and only after feminism and anti-colonialism, did citizens become "all adults"

 

Some modern Conservatives, notably the “New Right” and Mrs Thatcher, (see point at end about neo-liberalism) brought into Conservatism a number of ideas that belong to classical liberalism, notably the view that the state should not intervene in the economy (except when absolutely necessary – but of course this is where disputes arise, over how much intervention is necessary), and that individuals should have rights that are prior to those of the community. Originally conservatives believed (? Do they still believe this) that sudden change is undesirable, and whatever we have built up over a long period of time - that is, tradition - must be good.

 

1.3 Further points on liberalism as a political philosophy – and one which is clearly the dominant political idea of our times, underlying all political parties’ policies: (from BG)

 

          - individual as fundamental unit of society

          - state authority must have limits

          - self-interest motivates and regulates society

          - self-interest may lead to competition or co-operation

          - "formal" equality acceptable, substantive equality not sought

          - commutative justice believed in i.e. by exchange, emphasising procedures rather than outcomes

          - distinguishes public from private life

 

1.4 Another way of describing the modern world is to say that it is based on liberal capitalism (S/C, Hag.)

 

dominant economic system:

          - self-interest + rationality  i.e.

          - gain/profit + private property

 

          - economics works on basis of these motives alone (not therefore desire for welfare or for equality)

          - market forms links enabling commodities, labour, money and shares to be bought and sold

          - system seen as "natural" ( = corresponding to nature and natural in itself)

          - seen as maximising freedom - including individual freedom to make ethical choices (S/C)

 

1.5 Differences within liberalism:

         

(see BG:)

          The two 'core' liberal themes could be stated as (Eccleshall 1986):

 

- an equal right to liberty, together with

- an emphasis on a one class society based on 'common habits of self-discipline and responsible citizenship' despite inequalities of wealth.

 

          'Left-liberals' (or ‘social liberals’) developed these ideas to stress social justice, welfare, democracy

(e.g. in the 1920s and 1930s, liberals were discussing family endowments, industrial policy, Keynesian methods of dealing with unemployment)

John Rawls is an example of modern (social) liberalism

          while centre -(or right?) liberals: stress: individuality, property, security – and their ideas shade into those of the ‘new right’, it seems to me. Exemplar?

         

           There is therefore either a split in liberalism - i.e. a tension between its emphasis on individual freedom and its democratic/egalitarian side (A. Gamble: Modern Social and Political Thought) - &/or aspects of liberalism can be found in both left and right in recent British politics (A. Vincent: Modern Political Ideologies, 1992).

 

Thus we can see that ‘liberalism’ contains different and even contradictory strands.

 

2. Adam Smith (1723 – 1790)

 

2.1 Overview:

 

Adam Smith is a striking exemplar of the liberal/liberal capitalist view, since he advocates:

- what he called the "obvious and simple system of natural liberty" (nowadays known as either ‘capitalism’ or ‘the free market’… and

- minimal government intervention.

 

Adam Smith is regarded as the first writer to have “explained”, in “The Wealth of Nations” (1776), the workings of capitalism. Note that he used the expression “the system of natural liberty” – the word capitalism was not used until Marx’s time. Here Smith argued that individual acts (buying and selling), whilst motivated by self-interest, nevertheless promoted the common good, through the “hidden hand” of the market; that is, roughly, by the workings of the laws of supply and demand. For a producer will only sell at a price that will bring a profit, although of course it has to be a price that consumers will accept. Likewise, consumers only make purchases when the price is right for them – they will of course contribute to the wealth of the producers, but their main motive is self-interest. In the end, everyone benefits.

 

Smith is often cited in defence of the “free market”, but I believe that this is to misrepresent him somewhat, since:

 

(a) his portrayal of capitalism recognised that it had severe failings (such as alienation of the worker by excessive division of labour)

 

(b) he saw the need for the state to provide for services (education, health) that were not such as could be run by the market

 

(c) he did not trust businessmen (when they got together, he said, they would plot against the consumer!)

 

(d) he actually opposed both monopolies and the then new-fangled joint-stock companies with limited liability (he opposed them on the basis that businesses ran best when controlled by the owner, whose self-interest would ensure they were successful – limited liability, and in fact the widespread distribution of shareholders, so that they did not control the business, would militate against commercial success)

 

(e) he also saw how private ownership of land would lead to more inequality: “As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where never they sowed, and demand a rent even for its natural produce.” (see book review The New Enclosures, quoted in Updates on Inequality

 

And, most importantly:

(f) he had an ethical theory – set out in the “Theory of Moral Sentiments” (TMS) based on a natural sympathy he believed we all have; his preferred virtues were: “prudence, parsimony and productivity”; and all this suggests to me that he would have been horrified to hear people use his name to defend unbridled competition in the market. See, also, my notes on the extracts below.

 

I note that the Adam Smith Institute (www.adamsmith.org/smith/tms-intro) now recognises the importance of TMS, but I suspect that they have not thought through the problem of reconciling it with The Wealth of Nations. If we take some extracts from his “Theory of Moral Sentiments” - first published in 1759 - and compare them with extracts from his better-known work “The Wealth of Nations”, it seems to me that we have to argue that the market will only work fairly if Smith is right that we are motivated primarily by sympathy. But what a different market it would be!  (See the second set of extracts below).

 

Needless to say, this debate over the comparative importance of the individual and of society – and how to maximise the good of society (by state management, or by individual freedom) is still going on today!

 

2.2 Smith's ideas in more detail:

 

2.2.1 Individual and Society:

 

In his ethics (Theory of Moral Sentiments…) he tackled questions of: the individual & society, conflict and co-operation, self-interest and altruism.

 

He argued that:

 

- there must be an element of perceived common interest for any society to function: "natural law (God's law)" could be seen in empirical regularities [see quote 3 and

Peng. pp 19 - 20]

 

- what is right for the individual is also right for society - note emphasis on species rather than individual? (cf Locke - Smith is closer to Hayek in seeing society as automatically following from sum of individuals...?)

 

                             (note Skinner p. 16, on civil soc etc p 29ff)

 

2.2.2 The ‘impartial observer’ etc [ see quotes 1 & 2, also Cole and Strauss, Cropsey]

 

There are four steps in the formation of ethics and social standards:

 

          self-judgment        imagining effects on others      imagining others' perceptions/assessments         social code and sanctions

 

NB to pass to stages 2 and 3 we make use of the idea of an ‘impartial observer’ (so it is not just a question of thinking ‘how would we feel?’ – since that might lead to ‘distortions’ in our judgment of others’ feelings.  See the quotes below… 

 

In other words, the basis of morality is sympathy not abstract reason (but S & C: only rationality can promote freedom...)

 

Smith is therefore attempting to ground ethics in a ‘scientific’, sceptical approach (derived from Hume): ethics must be derived from "man as man."

 

It can be argued (S & C) that this – as against earlier formulations (e.g. Plato: philosophers discover the ethical ‘truth’; the Christian view: God reveals it) – represents the ‘democratisation of morality.’

 

2.2.3 His view of politics and the state:

 

Although he believed that feelings of sympathy are natural, this not the same as saying that man is a political animal; for Smith politics and justice are "negative": to do

with constraining or punishing, returning evil for evil. They are therefore not "praiseworthy" – nor are ‘good’ actions which are carried out as a result of fear of

punishment or a sense of obligation.  This is similar to the distinction drawn by a number of thinkers between the rule of law, and actual legislation (positive law). (cf.

Hayek?) The ‘rule of law’ is what we must aim at – but legislation does not necessarily always match the ideal (cf also Aquinas?).

 

Another reason for his negative view comes from the fact that, as he saw it, politics is based on reasoning (not feeling…), and on nationalism, which is "arbitrary."

 

2.2.4 His views on economics (the market, the economy, labour, progress and the contradictions of capitalism):

         

Society can easily produce our needs; most production therefore is for wealth and power – in contrast, Smith favoured "prudence, parsimony and productivity."

 

His account of the division of labour [thanks to the division of labour, where each does what he is good at, we satisfy our needs (without each of us having to be good at everything!)] stresses its role in promoting production - more goods, not more money... He also believed that more specialisation means more

interdependence (Cole p 32)

 

NB (see quote 6) the "corruption of our natural sentiments" that goes with the motivation to produce more – this to me is a very significant ethical statement, clearly

criticising the market system for not being a result of sympathy.

 

Smith went further, in revealing a paradox – or a fundamental contradiction? - within this society, where self-deceiving, greedy and selfish individuals, seeking status

and power, actually promote the common good i.e. "social production" is driven by "private consumption" (a point that Marx was to take up and in effect build his

whole theory on).

 

Note Smith also has little good to say of merchants... he recognises that when they get the chance they will ‘conspire together’ e.g. to fix prices…

 

The main idea is that in the market a ‘fair’ exchange is arrived at if buyer and seller both exercise self-interest (agreed price must suit both)

 

What has come to be called the "hidden hand of market" (quote 8) - i.e. the fact that supply and demand through the market leads to the sale of a good at the price "it

is worth" (covering the costs of rent, labour etc) can perhaps be seen as analogous to the "impartial and well-informed spectator"? (Macfie...Bus Org and Comp

Trad). Alternatively it can be seen as equating with God... (Heilbroner)

 

Smith’s theory is also a source of the "labour theory of value." But this phrase has two meanings: (a) labour time input creates value or (b) value of labour commanded

(can be bought) (see Cole)... it is the former explanation that leads on to Marx’s labour theory of value, not the latter.

 

2.2.5 The state and the economy (cf. Cole pp 29, 38)

 

Contrary to a widespread current view of Adam Smith, he was not against government intervention in law and order, transport, elementary education. He did oppose government intervention in the market but we still have no settled view (cf. New labour especially) on where the line should be drawn between government and private/market control – nor do we agree how much the market cover.

 

He also believed that we should also oppose manufacturers' and traders' cartels and monopolies (i.e. he opposed mercantilism - though the collapse of the East India

Company, and the loss) of the (American colonies had already showed limitations of mercantilism). However, he supported the Navigation Acts (only British ships

could trade between Britain and colonies). (Heilbroner:) he was a democrat because opposed monopolies and promoted wealth of nation (summary pp 71 -2)

 

On the question of who government should listen to, and who should influence government, it important to note that Smith rejected the labourers because they were

not educated; he also rejected the capitalists because they manipulate the economy to their own interests. This meant that the best group for government to consult

would be the landowners; they are both interested in the increase of the general wealth and they are educated.

 

Smith’s particular use of key terms has to be noted:

          liberty = freedom of contract

          equality = before the law

          fraternity = wide division of labour

         

2.3 How Smith’s ideas used have been used (or mis-used!) since his time: laissez faire etc

 

As noted, he vehemently opposed joint stock companies because he said they couldn't promote harmony or natural proportion (this seems to me to pre-echo the

debate today about the relative weights of stockholders and stakeholders... (see CSR notes, via the link at the end of these notes)

 

He actually said that self-interest frequently promotes good, etc – however, the word "frequently" has been omitted in translations…

 

Note that he thought that too much self-interest leads to selfishness, which in society is prevented by family ties, neighbours etc; these factors don't work in the

economy.

 

He argued the need for fair business practices (not just ‘competition’), and for the courts if necessary to promote/ensure this. (cf now..)  [quote p 39....

 

It is probably not trued that he would have opposed legislation to improve workers’ conditions etc, though his ideas/classical political economy were used later to

justify opposition to such legislation. (Heilb. p 70, Samuel Kydd p 40...)

 

Jevons and Cairns say that we must resist the over-simple identification of ‘political economy’ (what economics in Smith’s time was called) with laissez-faire (i.e.: freedom of enterprise and contract as the one sufficient solution of all industrial problems).

 

Updates:

(i) Felix Martin in New Statesman 16-22 March 2018 reviews ‘The Great Economists: how their ideas can help us today.’ Compares this book to Robert Heilbroner: The Worldly Philosophers. Latter is a survey of economic ideas, former more an approach to economics as science, or at least as providing techniques to deal with specific problems. Martin’s view is we need both the philosophical and ‘scientific’ approaches, especially as (as Heilbroner argues) economics is about understanding, evaluating and controlling capitalism. Before capitalism there would be no need to discuss ‘economics’ as the rules were all laid down by the ‘laws of the manor and the church and the city’. The key question now is whether capitalism is sustainable.

Martin is author of ‘Money: the Unauthorised Biography’.

 

(ii) In a book by Jesse Norman (Conservative MP), there are some very useful points about his hostility to unregulated capitalism (see NS 6-12 July 2018): https://www.newstatesman.com/politics/economy/2018/07/adam-smith-s-rescue-libertarian-right

 

3. Adam Smith Extracts:

 

Extracts 1 – 4 are from the Theory of Moral Sentiments (TMS):

 

1. “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others and render their happiness necessary unto him, though he derives nothing from it except the pleasure of seeing it” (Opening words of TMS)

 

2.       The sentiment or affection of the heart from which any action proceeds, and upon which its whole virtue or vice must ultimately depend, may be considered under two different aspects, or in two different relations; first in relation to the cause which excites it, or the motive which gives occasion to it; and secondly, in relation to the end which it proposes, or the effect which it tends to produce...         In the suitableness or unsuitableness, in the proportion or disproportion which the affection seems to bear to the cause or object which excites it, consists the propriety or impropriety, the decency or ungracefulness of the consequent action.. in the beneficial or hurtful nature of the effects which the affection aims at, or tends to produce, consists the merit or demerit of the action, the qualities by which it is entitled to reward, or is deserving of punishment.  [Theory of Moral Sentiments (1759) I i (iii)]

 

3.       Were it possible that a human creature could grow up to manhood in some solitary place, without any communication with his own species, he could no more think of his own character, of the propriety or demerit of his own sentiments and conduct, of the beauty or deformity of his own mind, than of the beauty or deformity of his own face. All these are objects which he cannot easily see... and with regard to which he is provided with no mirror which can present them to his view.  Bring him into society, and he is immediately provided with the mirror which he wanted before.  [from Raphael, D.D.: Adam Smith, Fontana 1985]

 

4.       We suppose ourselves the spectators of our own behaviour, and endeavour to imagine what effect it would, in this light, produce upon us.  This is the only looking-glass by which we can, in some measure, with the eyes of other people, scrutinize the propriety of our own conduct. [TMS I iii (iii) (?)]

 

5.       Self-preservation and the propagation of the species, are the great ends which Nature seems to have proposed in the formation of all animals... [TMS II i (v)].  Nature, indeed, seems to have happily adjusted our sentiments of approbation and disapprobation, to the conveniency both of the individual and of the society…  [TMS IV ii]

 

6.       [The perfection of human nature is] to feel much for others and little for ourselves... to restrain our selfish, and to indulge our benevolent affections... As to love our neighbour as we love ourselves is the great law of Christianity, so it is the great precept of nature to love ourselves only as we love our neighbour, or, what comes to the same thing, as our neighbour is found capable of loving us.  [TMS I i (v)] 

 

7.       Mere justice is, upon most occasions, but a negative virtue, and only hinders us from harming our neighbour. The man who barely abstains from violating either the person or the estate, or the reputation, of his neighbours, has surely little positive merit. [TMS II ii (v)]

 

8.       This disposition to admire, and almost to worship, the rich and powerful, and to despise or, at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks in the order of society, is, at the same time, the great and most universal cause of the corruption or our moral sentiments.  [TMS I iii (iii)]

 

9.       In what constitutes the real happiness of life, [the poor and obscure] are in no respect inferior to those who would seem so much above them. In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar, who suns himself by the side of the highway, possesses that security which kings are fighting for. [TMS IV]

 

10.     And it is well that nature imposes upon us in this manner.  It is this deception which arouses and keeps in continual motion the industry of mankind...

It is to no purpose that the proud and unfeeling landlord views his extensive fields, and without a thought for the wants of his brethren, in imagination consumes himself the whole harvest that grows upon the. The homely and vulgar proverb, that the eye is larger than the belly, was never more fully verified than with regard to him.  The capacity of his stomach bears no proportion to the immensity of his desires, and will receive no more than that of the meanest peasant.  The rest he is obliged to distribute among those who prepare [....] that little which he himself makes use of, among those who fit up the palace in which this little is to be consumed [....] all of whom thus derive from his luxury and caprice, that share of the necessaries of life, which they would in vain have expected from his humanity or his justice.  The produce of the soil maintains at all times nearly that number of inhabitants which it is capable of maintaining.  The rich ... 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 necessarily 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 interests of society and afford means to the multiplication of the species. [TMS IV]

 

11.     As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of greatest value; every individual necessarily labours to render the annual revenue of society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.  Nor is it always the worse for society that it was no part of it. By pursuing his own interest he frequently promotes that of 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. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.  [Wealth of Nations (1776) IV ii]

 

4. Commentary on the extracts:

 

1. “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others and render their happiness necessary unto him, though he derives nothing from it except the pleasure of seeing it”

 

Note that this “sympathy” is both natural and not self-interested. Does this fit in with the pro-market view that self-interest creates the common good?

 

2. the sentiment…

 

3. were it possible…

 

4. we suppose ourselves

 

5. self-preservation and

 

6. the perfection…

 

7. “Mere justice is, upon most occasions, but a negative virtue, and only hinders us from harming our neighbour. The man who barely abstains from violating either the person or the estate, or the reputation, of his neighbours, has surely little positive merit.”

 

Note: A “good” person, then, is someone who helps his neighbour.

 

8. “This disposition to admire, and almost to worship, the rich and powerful, and to despise or, at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks in the order of society, is, at the same time, the great and most universal cause of the corruption or our moral sentiments.”

 

Note: Despite our feelings of sympathy, and despite our knowing that goodness consists in helping others, we tend to admire the rich (and want to be like them) and despise the poor (fearing that we might become like them!). Smith seems to accept that social differentiation of ranks etc is necessary – he doesn’t say why here, but he implies that without this no production would take place: it is our envy of the rich and our fear of being poor that drives us to work hard. However, this process corrupts our natural moral sense.

 

9. “In what constitutes the real happiness of life, [the poor and obscure] are in no respect inferior to those who would seem so much above them. In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar, who suns himself by the side of the highway, possesses that security which kings are fighting for.”

 

Note: This is an argument that is often used to counter objections to extreme differences of wealth, or simply to reassure people that it is OK to have (great) wealth: real happiness does not come from wealth… Do you agree? Is such an argument always reactionary? How about what we might call a green socialist argument: it is true that wealth does not bring about happiness, but the pursuit of wealth, together with inequality, in fact bring about unhappiness and environmental destruction.

 

10. (From the Wealth of Nations:) And it is well that nature imposes upon us in this manner.  It is this deception which arouses and keeps in continual motion the industry of mankind... It is to no purpose that the proud and unfeeling landlord views his extensive fields, and without a thought for the wants of his brethren, in imagination consumes himself the whole harvest that grows upon the. The homely and vulgar proverb, that the eye is larger than the belly, was never more fully verified than with regard to him.  The capacity of his stomach bears no proportion to the immensity of his desires, and will receive no more than that of the meanest peasant.  The rest he is obliged to distribute. They are necessarily 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 interests of society and afford means to the multiplication of the species. [TMS IV]

 

11. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of greatest value; every individual necessarily labours to render the annual revenue of society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.  Nor is it always the worse for society that it was no part of it. By pursuing his own interest he frequently promotes that of 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. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.

 

Note: These extracts contain perhaps the most famous “quote” from Smith’s writings – the “hidden hand” idea - and I think you can see that, taken in isolation from the passages from TMS, it is a simple defence of the market as leading to the common good. The market, he claims, is nearly as fair as equal distribution ( = socialism)!  In fact, no-one is quite sure what the famous phrase “an invisible hand” means: could it be God? Or is it the workings of some natural law, i.e. supply and demand? The last sentences suggest that Adam Smith might not have favoured “Corporate Social Responsibility” (the deliberate consideration of social good rather than the production of goods or services to make a profit). At least, he clearly would not want it to become the main aim of a business to promote social good. This is of course a logical conclusion to his argument about self-interest. However, taking into account his moral theories, could we not argue that these passages (from Wealth of Nations) are descriptive, and not prescriptive? Some have said that Smith was a perceptive critic of the limitations of unbridled capitalism.

 

Main References:

 

Cole: Cole et al

Eccleshall

BG: Goodwin, Barbara: Using Political Ideas, 1987

Hag: Hagopian                                                       

Sabine: Sabine

Skinner: Skinner

S/C: Strauss and Cropsey

 

Other references:

A. Gamble: Modern Social and Political Thought

A. Vincent: Modern Political Ideologies, 1992

Dunleavy and O'Leary…

 

Link to chapter on Corporate Social Responsibility (historical background)