Adam Smith Was Not a Precursor of Karl Marx

It’s always pleasing to read letters in the Scottish press from residents debating some of the ideas of Adam Smith from people who appear to have read his works.

Two recent correspondents are Ellis Thorpe (Inverurie, Aberdeenshire) (‘I prefer Adam Smith's idea – tax on what I spend, so what I do pay is "little by little" and how much I pay is my own responsibility', Evening News, 28 April), and Alan Murphy (Edinburgh) (‘Adam Smith's classic Wealth of Nations certainly has something to teach us about taxation (Letters, 29 April). But he did not advocate taxes on spending. He saw them as unfair for the same reasons Ellis Thorpe approves of them: consumption does not always match income; the parsimonious can avoid paying. Worse still, those who live in another country to their source of revenue escape completely.’).

The background, briefly, is that in Scotland there is a debate over the Scottish National Party’s election proposal, which it is trying to implement now that it forms the newly elected Scottish Government in the Edinburgh Parliament, to abolish the local ‘Council Tax’ and replace it with a new local income tax.

The minutia of the political controversy, now in the muted rage stage, would take us beyond the remit of Lost Legacy (and probably beyond the attention spans of our readers), but I would like to comment on one of the statements made by one of the disputants now exchanging carefully aimed (and uniquely brief) arguments they are mustering in the Scottish press.

Alan Murphy writes:

“The pioneer of modern economics is often regarded as the patron saint of capitalism. Read him carefully and you may find a precursor of Karl Marx.”

Not knowing either gentleman – though I confess to having exchanged letters in The Scotsman from time to time with Ellis Thorpe on his views on Adam Smith, but not recently – it is not clear how solid is Alan Murphy’s knowledge of Adam Smith to make his assertion though he advises Ellis Thorpe to ‘read him carefully’.

Without knowing for sure, I would have thought it likely that Ellis Thorpe would be inclined to have a view on the assertion because he stood as a Labour Party candidate for the Scottish Parliament in 2003.

But Alan Murphy’s assertion can be taken several ways, either as a ‘tease’ to a Labour Party member (whom I agree has expressed not entirely ‘warm’ views about Adam Smith in correspondence with me, suggesting that Smith was a ‘bosses’ man’), or as a serious observation about Adam Smith as a ‘precursor’ (a ‘forerunner, herald or harbinger’) of Karl Marx.

The latter view, as a ‘precursor’ could be consequential or trivial: Adam Smith as ‘John the Baptist’ to Karl Marx (a monstrous libel), or Adam Smith among several other early economists that Karl Marx read, summarised, sifted through, and selected from, to draw up his unique blend of economics, political fantasy and future prospects.

I am writing a paper at present, to be presented to the History of Economic Thought conference this coming September in Edinburgh, entitled: ‘Adam Smith and the Labour Theory of Value’, which disposes of the common view among modern economists (few of whom read his works) that Adam Smith had a labour theory of value.

This decidedly breaks the widely proclaimed link between Adam Smith and Ricardo (who did have a labour theory of value) and Karl Marx, who turned it into a religion.

Adam Smith’s views on the ‘liberal reward of high wages’ and its role in ‘spreading opulence’ among the labouring poor and their families was based on ‘equity’ (what is only fair) and the ability of a growing commercial economy to pay higher wages as the demand for labour increased from the growth of an economy.

An opulent economy was characterised by low profit rates (but larger total profits from a larger total annual output of the ‘necessaries, conveniences, and amusements of life’, or GDP) and higher wages above basic subsistence (from the increased demand for labour in a growing economy).

This prospect contrasts with Karl Marx and his expectations of growing immiseration of labour, both those employed and in the unemployed reserve army of labour, all beset by the increased frequency of depressions.

Having read Adam Smith carefully, I do not concur with Alan Murphy’s assertion that he was a precursor of Karl Marx.