Monday, August 25, 2008

The Mystery of Adam Smith's '1755 Paper'

Remy Briand and Madhusudan Subramanian post an article on investment prospects in ‘Emerging Markets: a 20 year perspective’ in (Sept/Oct) (HERE):

Emerging Markets: a 20 year perspective’, which you have to read to get its professional investor flavour (vicariously, of course).

It opens, however, with a well known quotation from Adam Smith:

Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things." — ."

No references to Adam Smith occupy any of the 5 pages of the article, and in that sense the quotation is disengaged from the article. I assume it was picked by the authors because it reads well and supposedly sends a powerful message to their readers.

However, the emerging markets that they are interested in do not qualify as having taken Smith’s advice – they tend to be state dominated in partnership with “family-controlled conglomerates that benefit from political connections”, which does not stop them being a ‘buy’ prospect, provided you have strong connections with a winning family (political or commercial).

The ‘1755 paper’ as it is known is most interesting, not least because it was only seen by Dugald Stewart (Smith’s first biographer) and not by others who could verify its contents and, perhaps more importantly, explain its context.

The occasion was Stewart’s eulogy following the death of Adam Smith (in 1790) and his reading of an appreciation of Smith’s work and life to the Royal Society of Edinburgh in 1793 (he read his eulogy in two parts, one in January and the other in March: the February meeting was postponed without explanation).

A partial explanation for the postponement was the rising concerns of the British Establishment for their safety in light of the events in revolutionary France with the trial of the French King in December 1792 and his execution in January 1793.

There were also a series of events in Edinburgh early 1793 in which various radicals were placed under observation and then on trial for sedition. In short, the atmosphere was not conducive to the proper business of an eulogy for a academic moral philosopher - even meetings were viewed with distrust.

Stewart quotes from Smith’s paper which was actually delivered in 1755 to his club in Glasgow and appears to be ‘expressed with a great deal of that honest and indignant warmth, which is perhaps unavoidable by a man who is conscious of the purity of his own intentions, when he suspects that advantages have been taken of the frankness of his temper’.

Stewart used the occasion to place on record in front of his peers (Smith was a founder member of the Royal Society of Edinburgh in 1783 – he had been elected to the Royal Society of London in 1773) a strong rebuttal of the mysterious circumstances that led him to write with ‘indignant warmth’ about unexplained matters that had ruffled his normal kindly disposition. Fellows of the RSE are assumed to have known what the dispute was about even though it had occurred 38 years earlier. It must have been some row!

But the paper was not published by Stewart – he thought it would be considered ‘improper’ to ‘revive the memory of private differences’, yet clearly everybody knew about them.

The paper, with a few quotations from it (including the one quoted above), was placed among Stewart’s papers and never saw the light of day. Unfortunately, Stewart’s son appears to have burned it among other papers when he was suffering from mental illness.

So, not knowing what the paper contained remains a major problem for Smithian scholars. I have discussed its possible contents and context in the appendix to my book, Adam Smith’s Lost Legacy, 2005, Palgrave Macmillan, pp 241-48.

I don't suppose Remy Briand and Madhusudan Subramanian are aware of this background, nor am I convinced that they quoted the sentence above because it had anything to do with the cotnents of their article. States and powerful family conglomerates don't do 'peace, easy taxes, and a tolerable administration of justice'.



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