Gavin Kennedy, Adam Smith enthusiast after my own heart e-mailed me recently to tell me of a weblog post he’d done after reading a column of mine on on-line opinion (the longer version of which was posted at troppo) arguing that economic and social success comes not from a preponderance of self interested or of co-operative behaviour and attitudes, but from the quality of the dialectic between them. It’s an excellent post in my opinion. (Click here and search for the heading “More welcome ideas from Australia”)
If I manage to make the time I will have more to say about the marvelous quote that he points me to in his post. As Kennedy points out “the “fundamental error” among modern economists” is that Smith believes that markets are driven by self-interest “when in fact they are driven by its mediation, even its neutralisation or suspension”. Here is the Smith quote Kennedy provides from his Lectures on Jurisprudence given more than a decade before Wealth of Nations was published (though Wealth of Nations sat in Smith’s draw for the best part of a decade itself).
Many continually standing in need of the assistance of others, must fall upon some means to procure their help. This he does not merely by coaxing and courting; he does not expect it unless he can turn it to your advantage or make it appear to be so. Mere self-love is not sufficient for it, till he applies it in some way to your self-love. A bargain does this in the easiest manner. When you apply to a brewer or butcher for beer of for beef you do not explain to him how much you stand in need of these, but how much it would be in [his] interest to allow you to have them for a certain price. (emphasis added)
For now I’ll respond to Kennedy’s comment that, in reading my column, “First, ignore the hyperbole of the use of “miraculous”. I don’t want to style this as a disagreement with Kennedy, because if it is a disagreement it’s trivial compared with the agreement. It seems to me that our response to the word really just reflects different things that we’re trying to do (and our feeling about the politics of what we’re trying to persuade others of.) But I do want to reassert the ‘M’ word and I don’t think its hyperbole.
For me it is quite fundamental to assert as often as necessary that capitalism is a miracle. This thought came to me with particular force in a debate on Troppo and via private e-mail with Mark Bahnisch and Chris Sheil on Imanuel Wallerstein. In reading Wallerstein and others of his ilk it struck me how ridiculous was their constant rehearsal of the evils of capitalism. Not that capitalism doesn’t have evils. Not that we shouldn’t probably be devoting most of our energies to trying to alleviate them. But Wallerstein et al are clearly writing within an ideological and peer group code in which the incredible achievements of capitalism are not the backdrop of the critique of capitalism.
But, hey guys, have a think. Have a think about what was going on before capitalism, about what has gone on in the modern world without it. Have a think about what capitalism has done to alleviate poverty in the world. Capitalism is the great miracle of modern times. We should be grateful every day. It is to me completely miraculous that it works and that it does so as it must if it is to succeed as a whole social system. It has to work at the level of our economy and also has to garner political support. And to be really good it has to work in a democratic state. It does all this.
I think Smith was saying something like this and of course he was also a powerful critic of the worst of modern capitalism. He commented with great force about its tendency to dehumanise workers caught up at the pointy end of the division of labour (sorry for the weak pun his example of the division of labour is a pin factory). He wanted higher wages and wasn’t hostile to the idea of workers operating as a cartel to raise their wages and improve their conditions (I’m not necessarily a supporter of this but things are very different now). He wanted the state to invest in education etc.
However, at a deeper level, Smith’s project was to document and argue that his ‘system of natural liberty’ represented the workings of a benign Nature being played out in human beings. He argued that it provided a way of mediating human nature to bring about a parallel ascent of opulence, safety, civility, freedom, autonomy and virtue. Smith’s thought his system had someting of the beauty and power of Newton’s theory of gravity.
an immense chain of the most important and sublime truths, all closely connected together by one capital fact, of the reality of which we have daily experience.
That’s Smith describing Newton. Its also what he hoped he might achieve in writing The Wealth of Nations according to the “Newtonian Method” by building a theory of economics and civilisation from the single postulate that us humans had an innate drive to connect and communicate with each other to mutual advantage which, in the economic sphere was played out as the tendency to “truck, barter and exchange”.
I think he succeeded.