Saturday, January 22, 2011

Adam Smith on History, Not the Future

Robert Skidelski writes in the Project Syndicate Blog (HERE):

On “Life After Capitalism”

“In 1995, I published a book called The World After Communism. Today, I wonder whether there will be a world after capitalism.”


Comment
One thing is for sure when we read pieces like this speculating or predicting the future, they have a low probability of the future ever turning out like such authors envisage. Adam Smith, for instance, was careful not to make many predictions; he looked backward to explain how the present arrived, taking a long-view of the past.

He saw the Britain he lived in as the Age of Commerce. He had no vision or inkling of a future capitalism (he didn’t know of the word). He was somewhat dismayed when the past had not followed the line of logical progress that he had envisaged for societies. Agriculture had not followed his hypothesis that agriculture should first ‘improve’ completely before manufacturing expanded, while the self-evident failings of the joint-stock company structure represented by the corruption-ridden East India Company were, in Smith’s view, enough to deter such institutions from taking root, though they were the means by which capitalism thrived from the 19th century.

Robert Skidelski, a highly literate and civilized intellectual (author of an impressive biography of Keynes), ventures to present our unequal society as being unsustainable, contrary to the evidence of millennia after those small settlements that emerged from the Ice 11,000 years ago, in the near Middle-East fertile crescent, to finally leave the property-less Age of Hunting for the property-driven Ages of Shepherding and Farming, became and remained unequal. They passed from time-to-time through many changes, but did not change their increasing inequalities, despite occasional reversions to a near equality of destitution from war and banditry.

However, what Smith, in another context, identified ‘a lot of ruin’ in a nation, was experienced many times in countless episodes – once a sustainable subsistence become possible, localized difficulties did not obstruct its spread across Europe to Roman times. Meanwhile, the Age of Commerce had arrived (‘at last’, Smith told his students in his Lectures On Jurisprudence).

“Capitalism may be close to exhausting its potential to create a better life – at least in the world’s rich countries.
By “better,” I mean better ethically, not materially. Material gains may continue, though evidence shows that they no longer make people happier. My discontent is with the quality of a civilization in which the production and consumption of unnecessary goods has become most people’s main occupation.


Comments
Who decides what at are “unnecessary goods”? Surely not distinguished Professors in line for well-above average pensions? Try cutting their support staff, or, in my experience, their free parking privileges – even when I suggested, uncharacteristically in a bout of neoclassical price rationing, that scarce spots be auctioned to the staff who valued them most.

I recall reading a 3-volume biography of President Johnson (by Robert Caro?) about an electricity law he sponsored to compel the electricity generating companies to widen the distribution of their transmission lines to take-in those homes miles from the shortest distance between the main towns, and the effect this had on the millions of homes up-country where the women hand-washed the dirty clothes of the men-folk at some great personal physical cost to their health, ageing and degree of fatigue (the author was hardly, to coin a phrase, whitewashing President L. B.Johnson, but it was enough to shame the arrogance of male porcine chauvinists). Are washing machines a necessity or a luxury we can do without? Depends if you do the washing.

The fact is that since the first claim was staked on property in the forest societies, our ancestors all came into inequality, which was and remains the price paid by societies that produce the ‘necessaries, conveniences, and amusements of life’ (Adam Smith).
Those that consider it appropriate to try to stop this process would have to exercise a wholly unacceptable destruction on an enormous scale involving billions of people to drive the survivors back to the living standards of the first age of man. Not that this is Robert Skidelsky’s intention – he’s far too enlightened to contemplate that as an acceptable outcome, especially as there is so much more to do to lift what is still “a large part of the world out of poverty”. He asks: “Do we spend the next century wallowing in triviality?”

Prolonging the pampered life of a super-rich person by highly-expensive surgery on the frontiers of medicine may seem a needed correction to the distribution of health measures across parts of the world where millions don’t live long enough to reach maturity, their short-lives hardly fulfilling or comfortable, but the political arrangements necessary to do something about the former would not do anything about the latter. The world needs more capitalism, not less.

But socialism, in its classical form, failed – as it had to. Public production is inferior to private production for any number of reasons, not least because it destroys choice and variety. And, since the collapse of communism, there has been no coherent alternative to capitalism. Beyond capitalism, it seems, stretches a vista of…capitalism.”

Comment
Maybe, yes.

“Adam Smith, for example, recognized that the division of labor would make people dumber by robbing them of non-specialized skills. Yet he thought that this was a price – possibly compensated by education – worth paying, since the widening of the market increased the growth of wealth. This made him a fervent free trader.”

Comment
It wasn’t the division of labour that made people “dumber” – his example of the pin factory was used to illustrate the fact of rising labour productivity, but his more important example, continued in the same chapter of Wealth Of Nations, was to show the growing complexity of the long supply chains needed to produce a day labourers “common woolen coat”, which showed how the division of labour had enhanced the supply of the “necessaries and conveniences of life” that could be found in the same labourer’s home, certainly when compared to an “African prince” who held the “live of ten thousand” naked hunter-gatherers at his disposal.

Moreover, Smith shows in Book V of Wealth Of Nations that the cause of mindless stupidity was the non-education of the children of each generation of labourers, set to work for a few pence a day from 6-years old without any schooling in “reading, writing, and account”, and then face a lifetime of continued ignorance, and prey to whatever “enthusiasm”, political or theological, the prospect of which might frighten enough ‘fearful’ and richer, readers into authorizing “little schools” on the Scottish model in the 60,000 parishes in Britain that could do something about those children (the majority) bereft of the necessaries or conveniences of education.

“Today’s apostles of free trade argue the case in much the same way as Adam Smith, ignoring the fact that wealth has expanded enormously since Smith’s day. They typically admit that free trade costs jobs, but claim that re-training programs will fit workers into new, “higher value” jobs. This amounts to saying that even though rich countries (or regions) no longer need the benefits of free trade, they must continue to suffer its costs.”

Comment
Not quite But first of all the poorer regions certainly “need the benefits of free trade”, currently effectively locked out of the richer countries (the EU and US predominantly) from life-saving food markets protected by tariffs and pampered rich-world agri-business interests.

The development of the poorer countries, forces “richer” countries to change from manufacturing to “services”, in exchange for low-cost manufactures from formerly poorer countries. They also “waste” scarce capital on protecting agriculture, from funding wars, and with unaffordable non-targeted welfare schemes. In the 18th century, wars were about dynastic succession; in the 21st century, wars are about exporting Western models of government and associated regime changes
.
Capitalism’s defenders sometimes argue that the spirit of acquisitiveness is so deeply ingrained in human nature that nothing can dislodge it.”

Comment
Adam Smith was of the view that the “urge to self-betterment” was a powerful motivator. That motive is unlikely to alter quickly, if at all. Any culture, and any religion or political passion that seeks to eliminate or punish that motivator is not likely to succeed this side of tyranny.

“Indeed, the “spirit of capitalism” entered human affairs rather late in history. Before then, markets for buying and selling were hedged with legal and moral restrictions. A person who devoted his life to making money was not regarded as a good role model. Greed, avarice, and envy were among the deadly sins. Usury (making money from money) was an offense against God.”

Comment
What the preachers preached was never really practiced by the people in the institutions that organized the sermons; every religion and political passion becomes compromised by its adherents falling well short of their ideologies.

“It was only in the eighteenth century that greed became morally respectable. It was now considered healthily Promethean to turn wealth into money and put it to work to make more money, because by doing this one was benefiting humanity.

Comment
“Greed” never became “morally respectable”, except within the range of “free speech” (Bernard Mandeville). The same “free speech” led Marx to formulate his “M-C-M” hypothesis, that’s all. 19th-century literature was not unique in its tales of “greed”, proceeded as it was by Shakespeare, Defoe, etc., and the machinations of Roman and Greek times. “Greed” was (is) acceptable to the greedy as tyranny is to tyrants; it was ever thus.

Perhaps socialism was not an alternative to capitalism, but its heir. It will inherit the earth not by dispossessing the rich of their property, but by providing motives and incentives for behavior that are unconnected with the further accumulation of wealth

Comment
Well, we’ll see. Robert Skidelski is an honest and moral, man. However, that praiseworthy condition is no protection from disappointment, nor from inconceivable future tyrannies.

Socialist motivation in rebellions is to capture the levers of state power and, usually violently, redistribute the fruits of state resources to themselves and their constituencies, the people in which are not expecting to be cut off from continuing rises in their living standards.

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3 Comments:

Blogger Stephan said...

Oops. A true believer in capitalism delivers his sermon about the public good of inequality. First I would check whether I've spelled the first name of my chosen deity correctly! Second I would research whether society is better off with lots of inequality or a more egalitarian approach. The empirical evidence points to egalité.

9:22 pm  
Blogger Gavin Kennedy said...

Stephan

Many thanks for your robust comment (I missed the point of your first comment on 'my chosen deity').

I am always wiling to be corrected. I should make it clear that I do not "believe" in capitalism, any more than I "believe" in "shepherding", "agriculture" or "hunter-gathering", or, indeed "socialism".

Nobody introduced these forms of subsistence; no 'leaders', 'conspirators', 'princes', or 'governments' designed what evolved without intention, any more than anybody 'designed' gravity or elements. 'Deities', of multi-various, forms are figments of the imagination.

I do not find 'inequality' makes us "better off" on some scale. It has been with our species since we left the forest, so to speak. I do know that we are "better off" from our ancestors so doing, otherwise we would not be having this discussion in this medium.

Liberty is something I understand, compared to its earlier and present alternatives. Whether it will ever be a universal experience is another matter.

Living half my time in France, I appreciate 'egalite' as an idea, though I am not being cynical when observing the early substitution of tyranny for it in the land of Condorset (an early victim).

Gavin

10:11 am  
Blogger Stephan said...

Gavin,

Many thanks for your kind answer. My point about "chosen deity" was on a minor issue you might like to correct given you're an Adam Smith scholar. It should read "Adam Smith on History, Not the Future" Yes? I know a cheap joke ;~)

In regard to inequality. Correct. It will be with us also in the future. But we're not human agents helplessly struggling. There's something like society and we can ameliorate the shortcomings of capitalism. I think you don't like Karl Polanyi but I do.

For empirical evidence I would refer to the splendid book of Kate Pickett and Richard Wilkinson: The Spirit Level: Why Greater Equality Makes Societies Stronger.

PS: I really admire your spirited fight to protect the legacy of Adam Smith. Although I think it represents a fight which was lost many years ago. Nevertheless I find it fascinating how one metaphor can develop such a living on its own without any context to the creator.

6:15 pm  

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