Chomsky Fuming About Distortions of Adam Smith's Legacy

‘Education is Ignorance’ by Noam Chomsky (1995) (The full interview is here)
David Barsamian interviews Noam Chomsky on Dandelion Salad, 4 January (Excerpted from Class Warfare, 1995, pp. 19-23, 27-31):

DAVID BARSAMIAN: One of the heroes of the current right-wing revival… is Adam Smith. You’ve done some pretty impressive research on Smith that has excavated… a lot of information that’s not coming out. You’ve often quoted him describing the “vile maxim of the masters of mankind: all for ourselves and nothing for other people.”

NOAM CHOMSKY: I didn’t do any research at all on Smith. I just read him. There’s no research. Just read it. He’s pre-capitalist, a figure of the Enlightenment. What we would call capitalism he despised. People read snippets of Adam Smith, the few phrases they teach in school. Everybody reads the first paragraph of The Wealth of Nations where he talks about how wonderful the division of labor is. But not many people get to the point hundreds of pages later, where he says that division of labor will destroy human beings and turn people into creatures as stupid and ignorant as it is possible for a human being to be. And therefore in any civilized society the government is going to have to take some measures to prevent division of labor from proceeding to its limits.

He did give an argument for markets, but the argument was that under conditions of perfect liberty, markets will lead to perfect equality. That’s the argument for them, because he thought that equality of condition (not just opportunity) is what you should be aiming at. It goes on and on. He gave a devastating critique of what we would call North-South policies. He was talking about England and India. He bitterly condemned the British experiments they were carrying out which were devastating India.

He also made remarks which ought to be truisms about the way states work. He pointed out that its totally senseless to talk about a nation and what we would nowadays call “national interests.” He simply observed in passing, because it’s so obvious, that in England, which is what he’s discussing — and it was the most democratic society of the day — the principal architects of policy are the “merchants and manufacturers,” and they make certain that their own interests are, in his words, “most peculiarly attended to,” no matter what the effect on others, including the people of England who, he argued, suffered from their policies. He didn’t have the data to prove it at the time, but he was probably right.

This truism was, a century later, called class analysis, but you don’t have to go to Marx to find it. It’s very explicit in Adam Smith. It’s so obvious that any ten-year-old can see it. So he didn’t make a big point of it. He just mentioned it. But that’s correct. If you read through his work, he’s intelligent. He’s a person who was from the Enlightenment. His driving motives were the assumption that people were guided by sympathy and feelings of solidarity and the need for control of their own work, much like other Enlightenment and early Romantic thinkers. He’s part of that period, the Scottish Enlightenment.

The version of him that’s given today is just ridiculous. But I didn’t have to any research to find this out. All you have to do is read. If you’re literate, you’ll find it out. I did do a little research in the way it’s treated, and that’s interesting. For example, the University of Chicago, the great bastion of free market economics, etc., etc., published a bicentennial edition of the hero, a scholarly edition with all the footnotes and the introduction by a Nobel Prize winner, George Stigler, a huge index, a real scholarly edition. That’s the one I used. It’s the best edition. The scholarly framework was very interesting, including Stigler’s introduction. It’s likely he never opened The Wealth of Nations. Just about everything he said about the book was completely false. I went through a bunch of examples in writing about it, in Year 501 and elsewhere.

But even more interesting in some ways was the index. Adam Smith is very well known for his advocacy of division of labor. Take a look at “division of labor” in the index and there are lots and lots of things listed. But there’s one missing, namely his denunciation of division of labor, the one I just cited. That’s somehow missing from the index. It goes on like this. I wouldn’t call this research because it’s ten minutes’ work, but if you look at the scholarship, then it’s interesting.

I want to be clear about this. There is good Smith scholarship. If you look at the serious Smith scholarship, nothing I’m saying is any surprise to anyone. How could it be? You open the book and you read it and it’s staring you right in the face. On the other hand if you look at the myth of Adam Smith, which is the only one we get, the discrepancy between that and the reality is enormous.

This is true of classical liberalism in general. The founders of classical liberalism, people like Adam Smith and Wilhelm von Humboldt, who is one of the great exponents of classical liberalism, and who inspired John Stuart Mill — they were what we would call libertarian socialists, at least that ïs the way I read them. For example, Humboldt, like Smith, says, Consider a craftsman who builds some beautiful thing. Humboldt says if he does it under external coercion, like pay, for wages, we may admire what he does but we despise what he is. On the other hand, if he does it out of his own free, creative expression of himself, under free will, not under external coercion of wage labor, then we also admire what he is because he’s a human being. He said any decent socioeconomic system will be based on the assumption that people have the freedom to inquire and create — since that’s the fundamental nature of humans — in free association with others, but certainly not under the kinds of external constraints that came to be called capitalism.

It’s the same when you read Jefferson. He lived a half century later, so he saw state capitalism developing, and he despised it, of course. He said it’s going to lead to a form of absolutism worse than the one we defended ourselves against. In fact, if you run through this whole period you see a very clear, sharp critique of what we would later call capitalism and certainly of the twentieth century version of it, which is designed to destroy individual, even entrepreneurial capitalism.
There’s a side current here which is rarely looked at but which is also quite fascinating. That’s the working class literature of the nineteenth century. They didn’t read Adam Smith and Wilhelm von Humboldt, but they’re saying the same things. Read journals put out by the people called the “factory girls of Lowell,” young women in the factories, mechanics, and other working people who were running their own newspapers. It’s the same kind of critique. There was a real battle fought by working people in England and the U.S. to defend themselves against what they called the degradation and oppression and violence of the industrial capitalist system, which was not only dehumanizing them but was even radically reducing their intellectual level. So, you go back to the mid-nineteenth century and these so-called “factory girls,” young girls working in the Lowell [Massachusetts] mills, were reading serious contemporary literature. They recognized that the point of the system was to turn them into tools who would be manipulated, degraded, kicked around, and so on. And they fought against it bitterly for a long period. That’s the history of the rise of capitalism.

The other part of the story is the development of corporations, which is an interesting story in itself. Adam Smith didn’t say much about them, but he did criticize the early stages of them. Jefferson lived long enough to see the beginnings, and he was very strongly opposed to them. But the development of corporations really took place in the early twentieth century and very late in the nineteenth century. Originally, corporations existed as a public service. People would get together to build a bridge and they would be incorporated for that purpose by the state. They built the bridge and that’s it. They were supposed to have a public interest function. Well into the 1870s, states were removing corporate charters. They were granted by the state. They didn’t have any other authority. They were fictions. They were removing corporate charters because they weren’t serving a public function. But then you get into the period of the trusts and various efforts to consolidate power that were beginning to be made in the late nineteenth century. It’s interesting to look at the literature. The courts didn’t really accept it.

There were some hints about it. It wasn’t until the early twentieth century that courts and lawyers designed a new socioeconomic system. It was never done by legislation. It was done mostly by courts and lawyers and the power they could exercise over individual states. New Jersey was the first state to offer corporations any right they wanted. Of course, all the capital in the country suddenly started to flow to New Jersey, for obvious reasons. Then the other states had to do the same thing just to defend themselves or be wiped out. It’s kind of a small-scale globalization. Then the courts and the corporate lawyers came along and created a whole new body of doctrine which gave corporations authority and power that they never had before. If you look at the background of it, it’s the same background that led to fascism and Bolshevism. A lot of it was supported by people called progressives, for these reasons: They said, individual rights are gone. We are in a period of corporatization of power, consolidation of power, centralization. That’s supposed to be good if you’re a progressive, like a Marxist-Leninist. Out of that same background came three major things: fascism, Bolshevism, and corporate tyranny. They all grew out of the same more or less Hegelian roots. It’s fairly recent. We think of corporations as immutable, but they were designed. It was a conscious design which worked as Adam Smith said: the principal architects of policy consolidate state power and use it for their interests. It was certainly not popular will. It’s basically court decisions and lawyers’ decisions, which created a form of private tyranny which is now more massive in many ways than even state tyranny was. These are major parts of modern twentieth century history. The classical liberals would be horrified. They didn’t even imagine this. But the smaller things that they saw, they were already horrified about. This would have totally scandalized Adam Smith or Jefferson or anyone like that….

Comment
Later in the interview Chomsky replies to a question about why he is ‘very patient’ with people who ask ‘inane questions’:

“Chomsky: First of all, I'm usually fuming inside, so what you see on the outside isn't necessarily what's inside. But as far as questions, the only thing I ever get irritated about is elite intellectuals, the stuff they do I do find irritating. I shouldn't. I should expect it. But I do find it irritating.”

I sometimes know how he feels but I am more irritated by those who repeat the usual nonsense about Adam Smith without the slightest shred of evidence or familiarity with what he wrote. I find this boils down to two responses when their errors are pointed out: one, the most common is denial; they persist in believing what they believe about Adam Smith.

Two recent examples include Gregory Clark who claimed that because his errors about Adam Smith were widely believed by modern economists it was acceptable (scholarship?) to repeat them and to attribute the errors to Adam Smith; the other (too many examples to cite) is to acknowledge that they know about the errors but they repeat them as shorthand for what lay-readers recognise!

However, the entire tone of Chomsky’s response in the interview is anger, leavened by his assumed mollification that he, unlike others, truly understands what is going on, and has been going one for a long time. He has intellectualised the vast conspiracy underway that the self-appointed few have uncovered.

On Adam Smith’s legacy he is correct: it has been stolen by modern economists to service their ends of legitimising their equilibrium mathematical models. Why they need to do this is a subject that psychology might have something to contribute, or perhaps anthropology. I would not make a political case for the abuse of Adam Smith’s legacy by some scholars. The whole world is not out to ‘get us’. With the example of religion available, I would not expect scholars to be surprised at the misapplication of perfectly sensible ideas transmuting into oppressive and inane practices by the relevant priests, mullahs and monks.

Many examples of the discrepancies between Wealth Of Nations and what is said or quoted about it, referred to by Chomsky’s answers above I recognise and agree with, though I think he is being a bit over-paranoid about an index in the edition of Wealth Of Nations he uses (from Chicago, the source of much misinformation about Adam Smith, despite George Stigler, pompously claiming that ‘Adam Smith was alive and well in Chicago’ (in particular, in the environs of 59th street).

I am not sure what benefit there would be in going into the extra material with which Chomsky drapes his more valid points about the stolen legacy of Adam Smith. Chomsky lives in the USA, hence the main focus of his despair at the state of the world is directed at corporate capitalism – the list of their infamies are long and vile – but I think we need some perspective here.

Meanwhile, across the world outside the USA during these apparently awful events there was a world of even more awful events, apparently unnoticed by Chomsky as worthy of his bile. Slavery was alive and well in the Arab Middle East, Czarist Russia, the Emperor’s China. While middle America was forming in the 19th century, a whole village in Ireland was kidnapped by Barbary slavers and whisked off the North Africa and never seen or heard of again. I am sure they would have been joyful to come under the awesome perfidy of 19th century American capitalism, perhaps even American slavery.

One could go on and on with equal or worse events elsewhere (Marxist bolshevism, Nazism, Fascism, East European absolutism) but I won’t. I will put it all down instead to Chomsky's selective self-loathing of America for reasons beyond me to fathom.

So read the entire interview (here.) It won’t cheer you up.

But be grateful for Chomsky's correct appreciation of Adam Smith's actual views.