Saturday, June 11, 2011

A Thinker Isn't Thinking Before Speaking

Ed Kaitz writes in American Thinker (HERE): a general attack on President Obama’s policies of which I have no comment, as I avoid commenting on the politics of countries other than the one I vote in (i.e., Scotland). However, I am always interested in the views of people anywhere in the world on Adam Smith’s writings, which were written in Scotland.

‘Obama’s Lip Service to Adam Smith’

‘Adam Smith's central insight remains true today: there is no greater generator of wealth and innovation than a system of free enterprise that unleashes the full potential of individual men and women.’

… In his 1759 publication Theory of Moral Sentiments Adam Smith -- like James Madison a few decades later -- noted that "mere justice is, upon most occasions, but a negative virtue, and only hinders us from hurting our neighbor." Smith was well aware of the twin dangers to the individual of allowing government to break free of the essential constraints built into the negative liberty tradition. What exactly are those dangers?

… First -- on the economic side of the coin -- Smith argued in his 1776 masterpiece Wealth of Nations that "the species of domestic industry [an individual's] capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawmaker can do for him." In other words, rather than Mr. Obama's "national commitments" and "investments" Smith understood that free individual choice at the local level was the real "engine of industry.’

… Smith was at pains to point out that politicians who attempted to instruct individuals on "how to employ their capitals" would be assuming an authority that could not "safely be trusted" and "which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it . . ."

…Second -- on the moral side of the coin -- Smith argued that since genuine human benevolence, charity, and altruism had to be grounded in free will then "even the most ordinary degree of kindness and beneficence . . . cannot be extorted by force." In other words, when politicians speak of "what the federal government must do on your behalf" they are merely using coercion to destroy what makes us moral beings.

Always be careful of making generalized conclusions about the direct relevance of what Adam Smith said in regard to your own modern policy conclusions. This applies with particular force to Ed Kaitz’s piece in the American Thinker, of which publication and its regular readers I know nothing about.

Take the first paragraph: ‘no greater generator of wealth and innovation than a system of free enterprise’. As a first-level summary generalization this statement is true, but Smith in Wealth Of Nations warned the French Physiocrats of taking this too far (as those with political agendas today often do): Dr Quesnay and some Physiocrats demanded that the ‘perfect system of natural libertywas necessary for a nation to prosper’ and offered the historical observation (which Ed Kaitz, and others, who wrongly equate Smith with absolute laissez-faire, would do well to ponder) that:

If a nation could not prosper without the enjoyment of perfect liberty and perfect justice, there is not in the world a nation that could ever have prospered’ [WN IV.IX: 304 – McCulloch edition, 1863 – apologies, I am in France and I do not have the Oxford University, 1976 edition, with me; look up ‘Dr Quesnay’ in the Index.]

In short, perfection is unlikely, as well as unnecessary, in the real world.

Also, Smith’s attributed reputation among a large section of US public opinion for being an advocate (an ‘Apostle’ no less) is much exaggerated. He never used the words ‘laissez-faire’, though he was familiar with its French use, and much of what he wrote about practical policy shows he was far from an overly zealous advocate of laissez-faire. He wasn’t against all public intervention on some sort of principle; he opposed Mercantile-sponsored State intervention on behalf of those ‘merchants and manufacturers’ who lobbied parliament for protection from competition among each other and their customers.

Indeed, the merchant who is credited with calling for ‘laissesz-faire’, asked for it for himself and fellow merchants, not for his customers, as did those 19th-century mill and mine owners who lobbied for ‘laissez-faire’ against parliamentary laws limiting hours of work per day and against atrocious working condition for women and children. When today’s lobbyists on behalf of major corporations call for ‘laissez-faire’ they should be treated with suspicion (they also support tariff protection too).

Take the second paragraph: ‘mere justice is, upon most occasions, but a negative virtue, and only hinders us from hurting our neighbor’, which is a perfectly sensible and consistent statement in Moral Sentiments (1759).

It is not clear what point Ed Kaitz is making here, apart from seeming to limit the significance of Smith’s teaching on justice as a virtue in Moral Sentiments. Other virtues (propriety, prudence, approbation, gratitude, beneficence, duty, benevolence, etc.,) are positive and the moral individual practices them at all times, and their absence is regretted, but non-practitioners are not exposed to punishment (but they are the disapproval of their 'impartial spectators'), whereas justice is negative because the individual practices it merely by not harming others – he or she does not have to do anything positive to practice it – but is actively punished by the system of justice for its breaches. Just practising justice by not harming others, leaves the individual only partly a moral being if he or she does not practice the positive moral values too. A moral person is an accountable person.

Of course, today justice has a much wider application, including re-distributive actions funded by taxpayers, enforced by the government (in economics this is because of the 'free rider' problem). A country that has no view on the virtues of ‘crossing the road’ to help a person in distress (the Biblical parable of the 'good Samaritan') , or ignoring the plight of the very poor (the Sermon on the Mount), is to fail to practice modern ideas of justice.

In the third paragraph, Ed Kaitz, in the part quotation of ‘every individual, it is evident, can, in his local situation, judge much better than any statesman or lawmaker can do for him’ comes from the (in)famous paragraph introducing the metaphor of ‘an invisible hand’ (the most widely misunderstood paragraph in all of Adam Smith’s writings; WN IV.ii.1-9: 452-56; and see Lost Legacy passim).

Smith was contrasting the positive effects of individuals, in the case some, but not all traders, who were led by their insecurity to avoid the extra risks of foreign trade (the actual object of the IH metaphor), which unintentionally added to ‘domestick revenue and employment’, which increased, what we call today, domestic gross national product (the whole is always at least the sum of its parts). He suggested this process was more successful than what could be achieved by the State in trying to bring this outcome about, a not unreasonable observation, given what Mercantile governments failed to achieve in the 16th-18th centuries, and what we can observe them failing to achieve in modern times.

However, be careful here. On the wider issue, there are clear benefits from foreign trade that raises the domestic quality of life. Smith contested the mercantile view that only exports were valuable and imports were losses. (see Book IV of Wealth Of Nations).

The last paragraph contains a somewhat misleading inference: ‘when politicians speak of "what the federal government must do on your behalf" they are merely using coercion to destroy what makes us moral beings’.

This is not what Smith argued. He was emphatic: the positive virtues cannot be enforced, whether by governments, churches, or vigilantes (of left or right, religious or secular). You cannot force people to be prudent, and well mannered, and so on, and punish them for disobeying such edicts. Indeed, harassing people for breaches of the positive virtues is a breach of the negative virtue of justice, and if justice is beached by local coercion (chasing out of town, burning their houses, shooting at them, etc., for not attending the local church, of being a different skin colour, etc., it would require the legal coercion of the State to prevent such conduct, and punish offenders).

This sort of State intervention does not ‘destroy what makes us moral beings’. Ed Kaitz is not thinking when he writes such ideas in The American Thinker! Adam Smith never wrote anything remotely akin to such thinking.

I suggest Ed sticks to Smith’s actual ‘profound Scottish wisdom’ and not to his questionable version of it as seen in the above extracts.



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