Strike The Root

There are a thousand hacking at the branches of evil to one who is striking at the root.

  The Kidnapping of Adam Smith

by Roland Watson 

Happy birthday to Adam Smith, economist and philosopher extraordinaire! Born 279 years ago, his baptism is recorded as taking place on the 5th June 1723 in a parish within the area of Kirkcaldy--a small town in Fife which produced a big man. 

I need not repeat the moments of a man who produced works of great depth of thought. Though often quiet at the fashionable dinners of the Edinburgh intelligentsia, this silence masked a profundity of economic understanding which has stood the test of time and still yet requires an answer from those who believe in a form of economic planning bereft of dynamism and liberty. When he did speak, it would be at great length and verging on a monopoly of the verbose, but I will attempt no such marathon today and rather attempt to highlight a few things of recent import. 

Two Different Scots

By some strange providence, the Adam Smith Institute runs a site called Tax Freedom Day which calculates the equivalent day of the year in which the average British taxpayer starts earning money for his own use and not that of the government. You guessed it, that day is the 5th of June for 2002. If, as some suspect, tax revenues are beginning to decrease as a function of increasing tax rates, it would be portentous indeed if the tax tide began to turn on the birthday of the great British economist! 

This economic truth regarding taxation seems not to have dawned on the mental horizon of the Chancellor of the Exchequer, Gordon Brown. We are reliably informed that he read Smith's "The Wealth of the Nations" during his Budget preparations a few weeks back. Having put the book down, he then strode up to the House of Commons and swung the cosh of more tax rises against the collective temples of the British taxpayer. Alas, he may as well have been reading "Noddy in Toyland" for all the good it did. 

Which brings me to a strange phenomenon that has been sighted in Britain recently. It is the attempt by socialists to claim Adam Smith as one of their own. This is probably an understandable tactic in an era of vanishing Marxist heroes. Since free market capitalism rained on their parades in Red Square, the upward look of Lenin, Marx and Engels towards a mythical workers' utopia is now (and was) as laughable as a Trabant taking on a Porsche. One can detect the subtlety of a covert comeback under the banner of anti-globalisation and environmentalism, but the attempted kidnapping of Smith is as steeped in mirth if Islam tried to claim St. Paul. 

Property

In a recent newspaper article by a certain Jimmy Reid (a self-confessed Marxist), it was with a degree of incredulity that I read his own attempt to recruit Adam Smith to the Marxist cause. This was based on one quotation from the "Wealth of the Nations":

Civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all.

Thanks to the wonders of free market technology, I searched my electronic copy of the book to find and get the background of the quote and it turned out to be more a case of taking the text out of context to make it a pretext. Adam Smith did indeed make such a remark but there is no sense of bitterness or protest to be found in it as he was simply stating a bare fact of life concerning the preservation of the right to private property. Indeed, if some context is required, it is the poor who seem to come worse off when he says a few pages before:

The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy, to invade his possessions. It is only under the shelter of the civil magistrate that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security.

Indeed, the rich of Smith's day are not the rich of today. The above quote equates property ownership with wealth ownership, rich versus poor, owners of property against owners of none. This is not a valid equation today as we see ownership of property rocket in Britain today. This is a misquote in more ways than one.

What excited Reid to author such a piece was probably the lecture given at Edinburgh University only four days earlier in which our aforementioned Chancellor held forth on the subject of “Can Both the Left and Right Claim Adam Smith?” The reason for his cosying up with "The Wealth of Nations" now becomes evident. What is also evident is that Gordon Brown is a politician and not an economist. Why politicians should be put in charge of national fiscal policy is beyond me since not one of them could be called an economist by profession (Brown read History at Edinburgh University). They are primarily representatives of their local constituencies. Gordon Brown was not elected to Parliament on the strength of his apprehension of macroeconomics, but on his perceived ability to defend the cause of local and parochial issues in his corner of Fife.

The fragility of this charade is complete when we note the apparent ease with which favoured politicians move from the Treasury department to the Transport department to the Health department. Are these disparate subjects so easily mastered? Are conversion courses not required? I think not, and the decisions we see politicians make for their brief tenures proves it. 

Monopolies

So, in trying to get to the nexus of the current debate on who owns Adam Smith, it became evident that the centre of the storm rages over huge profit-making multinationals versus alleged exploitation of workers. Mr. Reid makes the following erroneous statement regarding Smith:

He had no experience of monopoly companies, and transnational corporations straddling the world were undreamed of in his lifetime.

In actual fact, there were the Glasgow Tobacco Lords on Smith’s own doorstep. By 1758, Scottish tobacco imports from America were greater than all the ports of London and England put together. Three families, the Cunninghames, Glassfords and Spiers ran more than half the market between them. In terms of proportion, they were as big and influential as many of the multinationals today. Neither must we forget the government-granted monopoly of the East India Company and the abuses and inefficiencies that arose from that (Smith suggests their incompetence turned a Bengali dearth into a famine). Indeed, Smith spends some time on the East India monopolies and takes them to task on several occasions. For transantional read Empire, for monopoly read State privilege.

Reid would have us believe that Britain at that time consisted of small to medium enterprises all playing on some kind of level playing field – a kind of “noble savage” capitalism. This error, I suspect, is meant to make us conclude that Smith would fulminate against today’s big companies with big ambitions. He may or may not have, but not for the egalitarian reasons so beloved of Marxists. He says:

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self evident that it would be absurd to attempt to prove it.

Smith has no problem with large companies with large profits, so long as they realise they exist within the paradigm of the customer is king. Nevertheless, the reality of the times and the abuse of merchant cartels are acknowledged by him:

But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.

This being not so much a matter of worker exploitation but the denial of free access to markets and the logic of supply and demand which ultimately benefits both consumer and worker. 

Conclusion

So, thus satisfied that Adam Smith continues to lodge with the libertarians, I offer one final quote from Smith to dismiss the Marxist clamour for government interventionism:

The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security is so powerful a principle that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often incumbers its operations; though the effect of these obstructions is always more or less either to encroach upon its freedom, or to diminish its security.

Well said, Sir!