Melvyn Bragg in his book, 12 Books That changed the World, discusses Adam Smith’s book, The Wealth of Nations. As with anyone who has anything significant to say – there are those who love Adam Smith’s work and who are firm believers of his economic policies and there are those who believe that his work has “unleashed unbridled rapacity, licensed greed and ignored inequality and suffering.” (292) At the time of writing The Wealth of Nations the subject of political science did not exists. Smith’s approach of arguing and writing “used analytical tools logically to investigate his subject, making deductions from observations of history, seeing patterns and mechanisms in the communal relations between individuals and nations, adducing principles. The scientific method exemplified and honed by Newton had struck deep.” (295) Thus Scottish Enlightenment principals characterize his working methodology.
In order to understand The Wealth of Nations it is important to understand the Smith’s earlier work, The theory of Moral Sentiments. Bragg’s writes, “Smith saw morality as a matter which began in imagination – to imagine the other person was to begin to sympathize with him/her – and he saw wealth creation too as a capacity bred by imagination – imagining ourselves becoming wealthier; ‘it is this deception’, he wrote, which rouses and keeps in motion the industry of mankind.’” (296-297). More controversial is when Smith wrote about the rich that they “consume little more than the poor and in spite of their natural selfishness and rapacity, though they mean only their own conveniency … they divide with the poor the produce of all their improvements. They are led by an invisible hand to make the same distribution of the necessities of life which would have been made had the earth been divided into equal portions among its inhabitants … thus without intending it, without knowing it [the rich] advance the interests of society.” (297) This is what is known today as the “trickle-down-effect.” Despite past success of Smith’s theory Bragg raises the following question: “Did Smith fully attend to the reality of the lives of those at the bottom of the heap?” (297) Thus Smith’s contention that self-interest leads to noble actions has been continuously challenged and critiqued. Nonetheless Smith and those who follow in his footsteps hold strongly to the conviction that, “Since people look after their own affairs better than anyone else, leave them as free as possible to do so and the result will be increased wealth which will benefit everyone. This simplistically phrased, is typical of the Scottish Enlightenment in that it blends an optimistic reading of human nature with a reading which sees self-interest as the dynamo of individuals and of society. Straddling those two forces he predicated the greatness of capitalism.” (297-298)
One important aspect to remember before critiquing Smith’s economic policies is his conviction that “capitalism was a higher stage of human society than had been reached hitherto. He also believed it could be improved. It broke the back of the long history of slaves, serfs and the subjugated toiling for those who had successfully set themselves, it sometimes appeared immovably, above the mass. It broke the idea of a life fixed in one rut – like father, like son, with, for the majority, low life expectancy, no advance, no progress since time immemorial and forever. This had been the history, often declared the fate, of the mass of mankind and Smith saw a way to change it radically.” (298)
According to Bragg’s one central conviction “to the philosophy of The Wealth of Nations was the belief that the human drive to self-betterment is innate. [….] Yet Smith’s view of life has transferred profitably into the marketplace. ‘It is not’, he wrote, ‘from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard for 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 own advantages.’” (298-299) For me it is bizarre that selfishness and love for self can really be the key ingredient to the success and well-being of others and to the person itself. I can see that self- interest can drive us to achieve things and can be a propelling force that helps us provide better for our families. However, I wonder when self-interest becomes toxic for people and toxic for society. Self-preservation and self-interest seems to go against self-giving which is an essential component of the Christian life. Bragg even draws a parallel between Adam Smith and Richard Dawkins when he writes, “Smith takes his notion of the benevolence of self-interest into an area not too far removed from Richard Dawkins’s ‘selfish gene’: arguing that the promotion of self-interests is a sure way to promote the greater general interests. Of the rich investor he writes, ‘by pursuing his own interest he 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. It is an affectation, indeed, not very common among merchants and very few words need to be employed in dissuading them from it.’” (305)
Another aspect of his policy which I find questionable is his understanding of a “win-win” situation. For example, Smith was fighting against a win-lose dynamic which he found in the mercantilist system where wealth was seen as something that you should hold onto. However, “Smith argued and proved that trade was and, properly conducted, should be seen as a ‘win-win’ certainty. The seller got the money but the buyer got the goods he wanted and – this is crucial – at a cheaper price than if he tried to produce them himself.” (301) According to Smith, this creates a win-win situation. However, applying this principal in a global economy can have a massive negative impact on cities, regions or even countries. For example Bragg’s notes that, “when cotton mills close for ever in Yorkshire and Lancashire, and whole towns become ghost towns; when the 12 million sari makers of India with their tested and ancient methods begin to be mown down by the machine-made saris of the Chinese; when goods from the East pour into the West and threaten what seemed impregnable fortresses of manufacture and then after a short siege capture and destroy them, then there is a ‘natural instinct to say – protect your own bullion, keep the gold and silver [like the mercantile system] even if it is expressed in other less dramatic materials: how can this invasion be other than debilitating?” (302) According to Smith’s economic principles the state should not interfere in these dynamics and let them play itself out for the greater good. Bragg’s notes, “Nevertheless, Smith is firm. His observation is that ‘trade which, without force or constraint, is naturally and regularly carried out between any two places, is always advantageous to both.’” (303) The problem with this view regarding trade is that it might be true in general or in the big picture (abstracted way) but it does not take the particular person’s well-being into consideration. If a families father permanently loose a job it does not seem “advantageous to both” for this particular family.
I don’t know of any better system than capitalism for the world economy, but I wonder about strategic policies and regulations that maximize capitalism’s benefits while minimizing it’s costs. Moreover, I wonder how good a system can be if it is truly built on selfishness. Any thoughts?
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