[This is the eleventh installment of my mini-history—two more to come]
I was not planning to cover Adam Smith in this history, much less devote most of a full post to his writings. Adam Smith is barely mentioned in the course of lectures by Prof. Alan Charles Kors, on whom I have depended to understand the full sweep of the historical transition to the modern mind, including the Enlightenment. Devotees of Smith should not be too put out; Prof. Kors doesn’t even mention another Enlightenment favorite, Montaigne – it seems he had to be selective, even in a 24-lecture course. But Arthur Herman, in How the Scots Invented the Modern World, claims that Smith’s Wealth of Nations is “the Summa of the Scottish Enlightenment, a summation of its exploration of the nature of human progress—and its salute to the triumph of the modern.” Like the Summa Theologiae, the grand synthesis by St. Thomas Aquinas, Smith’s Inquiry into the Nature and Causes of the Wealth of Nations is, according to Herman, a sweeping synthesis—of the dueling Hutcheson and Kames/Hume wings of the Scottish Enlightenment.
We think of Adam Smith and his Wealth of Nations as the starting point for economics as a social science. Which they are, but Adam Smith was not one of the number-crunching economists familiar to us today. In fact, he was first and foremost a moral philosopher focused on the nature of human nature and society. He set out to understand, in Herman’s words (on which I depend, given the silence of Prof. Kors), “What makes us good? Is morality inborn, as Hutcheson insisted, a gift from God and nature? Or is it something that has to be imposed from outside, as Hume suggested, a system of punishments and rewards that mold us into creatures fit for society?”
Theory of Moral Sentiments
In 1759, Smith published his Theory of Moral Sentiments, which laid the foundation for his later work, including the Wealth of Nations which appeared in print in the spring of 1776. Like his former teacher Francis Hutcheson, Smith proposed an inborn moral sense, but this was less an abstract urge to behave morally and more a sense of identification or sympathy with other human beings. We suffer when others suffer, are happy when others are happy. We experience the pain and pleasure of others, not actually but sympathetically. We are social creatures paying close attention to each other. This natural social instinct leads us to make moral judgments. We judge the acts of others toward us in terms of the pain or pleasure they cause us. We judge our own actions toward them by watching their reactions, which cause us pain or pleasure. Thus, other humans are like mirrors reflecting back to us the morality of our behavior, becoming our guide to what is good and evil. This capacity for moral self-judgment makes us fit for society. Our moral judgments of others, shown by our emotion-driven reactions to their behavior, helps make them fit for society.
Imagination plays a major role in Smith’s conception of what makes us good. We must be able and willing to imagine what it is like to be in another person’s shoes and to imagine what it is like to be that person watching us. This system works for the benefit of society when it prompts us to promote the well-being of others, making ourselves happy by making them happy. Thus, Smith makes visibly real Hutcheson’s abstract notion of an inborn moral sense. At the same time, Smith concedes Hume’s contention that human beings are largely driven by their self-interested passions, which are shaped by Smith’s “fellow feeling” to abide by Hume’s version of the Golden Rule: I’ll leave you alone, if you leave me alone, so that we both can be happy.
Smith extended the central role of human imagination beyond our moral and cultural lives into our economic lives. Imagination is the driver of the machine that produces wealth, the economy of a commercial society. How so? Our ability to imagine ourselves as wealthy and comfortable, inspired by those who have already achieved wealth and comfort, is what focuses and drives our energies toward that goal. Herman (p. 208) quotes Smith:
It is this deception which rouses and keeps in continual motion the industry of mankind. It is this which first prompted them to cultivate the ground, to build houses, to found cities and commonwealths, and to invent and improve all the sciences and arts, which have entirely changed the whole face of the globe, have turned the rude forests of nature into agreeable and fertile plains, and made the trackless and barren ocean a new fund of subsistence, and the great high road of communication to the different nations of the earth.
As Herman puts it, “The rich man is the man with the most fertile imagination.” By devotion of all personal efforts, and the efforts of employees or tenants, to working the land or warehouse or factory, the man with a fertile imagination often succeeds in producing far more than he and his family can consume themselves. Smith saw the irony that this self-interested pursuit of imagined personal success, wealth and comfort leads, as though guided by an “invisible hand,” to the unintended, unforeseen advancement of the whole economy. Thus, the average wealth and happiness of society increase. Smith did not actually propose the mystical reality of an invisible hand. He was writing metaphorically of his remarkable insight that the good of the whole, in the case of human economy and society, is best served when the individual parts are “doing their own thing,” under the regulation of “fellow feeling” and imagination – human nature.
Adam Smith had already formed by 1759 in his Theory of Moral Sentiments the central ideas of his 1776 Wealth of Nations. Herman contends that Smith always thought this first book was the better of the two. It made Smith famous and earned the admiration of David Hume, Edmund Burke, Immanuel Kant and Voltaire, among many others. However, a persistent criticism leveled at Smith, as well as many other Enlightenment writers, was that he seemed to treat morality as no more than socially useful. Smith denied that we are doomed to conform to whatever moral standards are set by our society, no matter how low or even evil those standards may become. He did not give up on Hutcheson’s inborn moral sense of an impartial moral standard that does not vary just to suit social context. But the argument was not convincing enough to close the door to moral relativism.
What Smith did in his Theory of Moral Sentiments and again in Wealth of Nations was what so many of the Scottish Enlightenment did. At heart, they were historians. History provided the facts they chewed on and digested. They drew rational conclusions about human nature and society from their understanding of history, especially the history of Scotland as it rapidly transformed from the primitive clan life still contemporary in the Highlands to the dynamic, sophisticated, commercial society of Glasgow, Edinburgh, Aberdeen and other population centers in the Lowlands. Learning from history was fundamental for the Scottish intellectuals. They fancied themselves clear-eyed and practical in their descriptions of what is rather than what should be human nature and society. But they also drew conclusions about how to secure and advance the gains of history while mitigating the losses inherent in this civilizing process.
Wealth of Nations
The driver of this civilizing process, according to Wealth of Nations, is what Smith called the “division of labor” or what we now prefer to call “specialization.” By focusing on one thing rather than many, we become more productive of that one thing. The farmer who specializes in growing a single crop rather than many different crops is likely to become really good at growing that crop, good enough to produce a surplus to sell to others, who specialize in other crops and sell their surpluses to him. All involved in this exchange of crops have more of each crop to consume. Collectively they are better off. Then some can leave farming and focus on just the buying and selling and become really good at that and earn even more than they could by farming. With surplus capital, these merchants can invest in innovation and manufacturing of agricultural and non-agricultural commodities that make living more comfortable and convenient. Thus capitalism is born. It powers commercial society to become more productive and inventive than ever before.
Specialization within this capitalist and commercial context gets to the point where some people can specialize in nothing but thinking about how to make improvements—engineers, doctors, lawyers, scientists and even those “whose trade it is not to do anything, but to observe everything,” as Smith referred to philosophers, artists, writers, teachers and professional managers of all kinds. Intellectual as well as physical labor becomes increasingly specialized, allowing technological innovation and cultural refinement.
Herman concluded: “Smith had finally defined the link between commerce and cultural progress, which the rest of the Scottish Enlightenment had written about and celebrated, but not really proved.” There is irony and paradox in so much of what Smith discovered in his analysis of Scotland’s recent and ongoing transformation from the ancient clan society, still extant in the Highlands, and the capitalist, commercial civilization of modern Scotland as part of Great Britain. The irony or paradox was usually due to unintended consequences. Who knew that specialization for the sake of self-interested economic productivity would lead to high culture? In retrospect, we like Smith could say that it makes sense – high culture has always depended on society becoming productive enough, therefore wealthy enough, to support a class of people whose jobs are to produce not physical and financial wealth but intellectual and artistic wealth.
There are other, more vexing ironies or paradoxes. Smith pointed out that capitalism produces great inequality of wealth, with a small minority of society owning the great majority of the wealth. At the same time, Smith observed “the superior affluence and abundance commonly possessed by even the lowest and most despised member of Civilized Society, compared to what the most respected and active savage can attain to.” In a capitalist economy, the amount of wealth is not fixed. It expands with the activity of many millions of self-interested actions and transactions of producers, middlemen and consumers. Like Hume, Smith saw self-interest not as cold calculation by the great majority of humanity but more like a passion or inner compulsion to strive for more in our lives and the lives of others.
Yes, even others. For the cooperation of others is essential to the capitalist system and the functioning of a complex civilization. Smith famously asserted: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” The pursuit of self-interest and the need for cooperation are taken to new heights by the capitalist system. Smith also wrote in Wealth of Nations: “In civilized society [a person] stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons.”
The paradox that Smith identified is that self-interest, even to the point of greed, is beneficial to the society at large. This is so counter-intuitive that many of us to this day cannot bring ourselves to believe it. But the advantage of rational analysis of solid evidence (historical in this case) is that it can yield results that are very likely true (never certainly true as long as new evidence waits in the wings) yet still defy our intuition. Accepting the probable truth of counter-intuitive results is a hallmark of the sophisticated modern mind, a legacy of the Age of Reason we also call the Enlightenment.
Even more ironic or paradoxical, Smith found that this interpersonal interdependence characteristic of complex modern society actually allows for much greater personal liberty. Herman calls it “independence of the mind, meaning freedom to see to one’s own self-interest and the opportunity to pursue it.” Smith combined Hutcheson’s definition of happiness as the capacity to live life as we choose as long as we cause no harm to others and Kames’s definition of happiness as gaining our sense of identity through ownership of property. Herman (p. 215) summarizes Smith’s combination of the two definitions: “By entering and competing in the great interactive dynamic network of modern society, at once impersonal but also indispensible to happiness, we become fully free and human.” Contrast this personal independence with the unhappy dependence and even subjugation of humanity through most of history to particular, fickle masters, such as feudal lords or clan chieftains. Herman again: “Capitalism breaks that cycle, and offers the conditions under which we forge our own happiness: independence, material affluence, and cooperation with others.”
Equally ironic are the present-day popular misconceptions of Smith’s argument in favor of free-market capitalism. He did not believe that market-based order is perfect or perfectible, only that the free market is a complex, interlocking system of self-interested exchange appearing to the superficial observer as though it is directed by a mind or “invisible hand.” His notion was that a freely operating market has a natural rational order, more rational and beneficial to society than a market constructed and manipulated by elites, whether politicians or business tycoons. Subject to their own limited understanding and passionate self-interests, even brilliant people with the best of intentions cannot do better, and usually do far worse, than the result of a freely operating marketplace in which large numbers of people are able to act in their own self-interest.
Thus, Smith was adamantly opposed to the “mercantile system” which the British government imposed on its relationship with British North America. This system put the interests of well-connected producers and merchants in London ahead of the interests of consumers (as well as the interests of competitors in Glasgow and North America). Smith understood that consumers are the real beneficiaries of a free market. They want low prices and a ready supply of goods, whereas business owners often prefer the opposite. The free market is as much a check on greedy merchants as it is on interfering rulers and bureaucrats.
At the same time, Smith did not believe in what others, not he, called laissez-faire capitalism, in which government has no legitimate role. To the contrary, Smith saw that free markets cannot function properly without a strong national government focusing on protection of its citizens and their commerce with neighboring nations through a strong national defense, a dependable system of justice that protects individual rights, particularly the right to property, and financial support for constructing and maintaining the roads, bridges, canals and harbors that make commerce feasible and profitable. But Smith also saw that other forms of government intervention in the free market have many unpredictable and unintended consequences. Again, like many other Scottish intellectuals of the 1700s, Smith was committed to learning the lessons of history, as he understood the facts of history. Those facts included too many examples of governments, like those of Rome and Spain, literally destroying their own prosperity by making (perhaps well-intentioned) adjustments of their national economies. Smith was worried that Britain and its mercantile policy in North America were heading for the same disaster, a worry soon justified by events leading to Britain’s loss of its American golden goose.
Here is Herman’s nice summary (p. 218) of Adam Smith’s message on government or other intervention in the free market:
To Adam Smith, belief in a free market was not an intellectual dogma, but a basic lesson of history. It was time for rulers to learn from their mistakes, and let commercial society follow its own course:
All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way …. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of society.
This is the Adam Smith with whom we are all familiar: the great prophet of free-market capitalism as a system of “natural liberty,” and the great enemy of any and all attempts to tinker with that system, whether for the sake of political power or social justice.
Dark Side of Capitalism
The not-so-familiar Adam Smith, like David Hume and other Scots, understood there was a dark side to capitalism. Increasing specialization, enabled and demanded by capitalism, narrows a person’s interests and worldview to focus on a farm, shop, office or factory and less on the larger society and higher pursuits of mind and spirit. Smith referred to “mental mutilation” and the minds of men “contracted and rendered incapable of elevation.” He had particular concern for poorer workers in factories, mere links in the chain of production, enjoying little of the freedom opened up by commercial society. Even before the Industrial Revolution had really launched, Smith was anticipating Karl Marx’s “alienation” of workers from “the means of production.” This and the increasing disparities of wealth in commercial society and other social and cultural costs of capitalism were already apparent.
But Smith and Hume and most other Scottish intellectuals believed the benefits far more than justified the costs. As Herman enumerated these benefits (p. 224):
A society that could finally feed everyone, not just a chosen few; that could relieve the poverty and misery of even the weakest and least productive of its members; that recognizes the sovereignty of the individual and his rights, and agreed to leave him alone to pursue his own ends; that put a premium on treating others with kindness and deference rather than disdain and exploitation; and, finally, that a society that recognized that it was better to do business with other nations than to try to conquer them, was not one on the verge of tyranny, but just the opposite. These were the conditions of modern liberty.
Moreover, even as commercial society created new problems, it also offered new opportunities to create solutions. Recognizing the great achievement of the Scottish parish schools in teaching the majority of ordinary citizens to read and even write and do basic accounting, Smith urged government support of education to spread widely the benefits of a civilized culture. Without this widespread elevation of the mind, Smith feared the populace could become easy prey to demagogues determined to undermine commercial society and the liberty it offers.
Another member of the Select Society of Edinburgh, Adam Ferguson, shared these concerns but not Smith’s optimism about the prospects for progress in commercial society powered by capitalism. Ferguson shared his fellow Scots’ understanding and interpretation of history, but he saw that history moving toward a very different destination. He worried that, in Herman’s words, “The last stage of modern history would be not liberty but tyranny, unless something was done to prevent it. Left to itself, commercial society would become humanity’s tomb.” To support this conclusion, Ferguson wrote a book titled Essay on the History of Civil Society, published in 1768. This book popularized the terms “civilization” and “civil society.” It made Ferguson famous, particularly on the Continent, and especially influential with the German Enlightenment, including the father of modern nationalism, Johann Gottfried Herder, and the founder of German Romanticism, the poet Friedrich Schiller, and especially the philosopher of history, Wilhelm Friedrich Hegel, who would have such impact on Karl Marx. As Herman maintains, Ferguson became capitalism’s most trenchant critic and the great alternative to Adam Smith as the prophet of modernity.
The essence of Ferguson’s argument was that commercial society renders men weak. Their overspecialization and “mental mutilation” destroys their sense of honor and courage. They must have their creature comforts and are willing to compromise their very freedom to get and maintain them. Ferguson, Smith and Hume shared deep concern for the heavy price paid for division of labor and specialization in a commercial (modern) economy. Together they mourned the loss of pre-modern virtues, but they diverged in their estimation of the value of what was gained with this cost. And their images of pre-modern man were even more radically different. Where Ferguson saw mainly virtue, Smith and Hume could not so easily dismiss the vices. This divergence was due to their very different experiences of the Scottish Highlanders.
In 1745, some of the Highland clans were persuaded to follow the mad scheme of the Stuart pretender, Bonnie Prince Charlie, to regain the British Crown. The Stuarts were the royal family of pre-union Scotland—the Scottish king James VI succeeded Queen Elizabeth I as James I of England. Following the English Civil War, the empowered English Parliament displaced the Stuarts in favor of the House of Hanover (the Georges). Later, Union in 1707 placed Scotland under the House of Hanover as part of Great Britain. Undaunted in their comfortable exile in Italy, two generations of Stuarts schemed to reclaim the British throne. The young and charming Prince Charles connived with France to get himself smuggled into the Scottish Highlands, where he persuaded some of the reluctant clans to support his cause with an army of conquest. They met with surprising success at first, taking Edinburgh, then sweeping south through England to the very outskirts of London. There the rebellion collapsed of its own lack of purpose and planning, and the Highlanders retreated to Scotland, where they were murderously vanquished by an English-led army at Culloden in 1746. The Highlanders fought to the last with honor and courage, but to the English and the Lowland Scots, they were savages. And in the aftermath of Culloden, they were systematically hunted down and treated savagely. These events were collectively and bitterly remembered as “the 45.”
While Smith and Hume and most Scottish Enlightenment intellectuals experienced the 45 very directly, Ferguson missed the trauma because he was chaplain of the Black Watch regiment in Flanders (modern Belgium). The Black Watch was a Highland regiment in service of the Crown overseas. Here is Herman’s account of how profoundly different was Ferguson perspective as a result.
[Ferguson’s contemporaries] considered Prince Charles’s Highland followers uncouth barbarians, and looked forward with undisguised relish to the demise of their society and culture. As chaplain, Ferguson had come to know the Highlanders firsthand and understood that for all their crude habits and harsh aggressiveness, they were men of honor, with an undeniable sense of courage, loyalty, and generosity toward friend and foe alike. In fact, they reminded Ferguson of no one so much as the warriors of the Homeric poems, and the ancient Spartans and Roman legions. The very qualities that his Moderate friends admired in their beloved Greeks and Romans, Ferguson found alive and well in the Scottish Highlands. The destruction of their way of life meant the destruction of something precious, Ferguson decided, and Scotland and the Scots would be the poorer for it.
Ferguson expanded his argument far beyond Scotland and into the very nature and history of civil society itself. … The result was a volatile mixture of typical, cold-eyed Scottish political and social analysis, and flights of almost romantic poetry in praise of primitive peoples everywhere, but particularly in the ancient world and among the Native Americans. Ferguson found in them what he had found in his Highland regiment: honor, integrity, and courage, which commercial society, with its over-specialization and mental mutilation, destroyed.
Emerging in Ferguson’s work, as a counter to his ever so practical and forward-looking fellow Scots, is a love affair with the idea (in contrast to the reality, Smith and Hume would say) of primitive, pre-modern people. He scaled new, more extreme heights of romance about the past. Since the humanist Renaissance, intellectuals had tended to idealize the ancient Greeks and Romans. Reality of life in ancient times was obscured by the passage of a millennium and poorly portrayed in the classical literature they devoured. Humanist intellectuals could indulge the illusion that the ancients were superior in intellect and character to their contemporaries in Western Europe. Ferguson, like Jean-Jacques Rousseau of the French Enlightenment, extended this longing for a lost past into the romantic idea of the “noble savage,” uncorrupted by civilization, which was the cause of humanity’s downfall.
The word “savage” has two very different connotations. The meaning close to its origin in the French word “sauvage” is “wild, in a state of nature, untamed.” The meaning most commonly used in modern English is “dangerous, even cruel in the extreme.” To Ferguson, the Highlanders were savage in the first sense, but to Smith and Hume and others, they were savage mostly in the second sense (though not nearly so savage as the retribution they received at the hands of the “civilized” English and Lowland Scots). The dual meaning of the word “savage” itself reflects the intellectual fork in the road that was reached in the Enlightenment, one to the left with firm belief in the fundamental goodness of human beings when uncorrupted by society, one to the right with equally firm conviction that human beings tend toward self-interested, even evil, behavior unless instructed and pushed toward the good by that same society. We have been exploring these two paths ever since, as I hope to show in the next post on the French Enlightenment and its consequences.
The difference in the perspectives of Ferguson and Smith also illustrates John Locke’s essential point about the limitations our experience places on what we know and how we interpret what we know or think we know. Ferguson and Smith both looked at the Highlanders and saw quite different people, because their experience of the Highlanders had been so different. This contingent, relative nature of our knowledge is deeply disconcerting for those looking for eternal and universal truths in their understanding of history and current society. Yet this was the obsession of the Enlightenment in Scotland and elsewhere. Hoping to imitate the success of Newton in describing the physical mechanics of the universe, they were forever trying to generalize from the growing knowledge base of their time to law-like, universal and timeless conclusions about human nature and how it drives human history and destiny. The task has proved far more difficult, the goal much more elusive than the Enlightenment thinkers had anticipated.