Wednesday, October 05, 2011

Stuart Bramall's Review of an Abridgement of Wealth Of Nations (Part2)

Dr Stuart Jeanne Bramhall writes part 2 of a review of an abridged version of Wealth Of Nations, by Laurence Dickey, Professor of History, University of Wisconsin-Madison (Hackett Publishing 1993) on Alternet (HERE)

This is Part 2 of my review of Adam Smith’s Wealth of Nations. I think neoliberals skip the final chapters – the ones where Smith argues in favor of government regulation.”

An unnecessary exposure of Stuart Bramhall’s limited mind-set. The main problem is that most economists ‘skip’ all of Wealth Of Nations, not just Books IV and V, and rely on a modern invention of Smith’s views following Paul Samuelson’ popularising a myth about what he actually wrote when he used a metaphor of ‘an invisible hand’ (once) in Book IV, and, from this single instance, created a misleading account of his views on markets. ‘Neoliberals’ are counter-poised by Stuart Bentham to ‘left’ progressives, but the left Marxist Oscar Lange also made the same mistake as Samuelson on the IH metaphor, except Lange saw ‘socialist’ Soviet planners as replacing the IH.

"The Invisible Hand”: Falsely Attributed to Adam Smith

“Book II also emphasizes what Smith calls “frugality” or the “mediocrity-of-money” as essential to this capitalization as the division of labor. Neoliberals often make Smith out as an advocate of laissez-faire economics, in which economic imbalances and social injustice is addressed by the “invisible hand” of competitive market forces.

Smith never spoke of ‘the “invisible hand” of competitive market forces.” A mythical attribution; see above comment and Lost Legacy passim.

However, it was actually one of Smith’s contemporaries J Harris who made this argument. Although Smith doesn’t refer to Harris by name, he’s clearly refuting his views in arguing the need of limited government intervention to address social injustice. Smith clearly believes this intervention (on which he elaborates in Book V) is essential to ensure “doux-commerce.” This he defines as an economy based on “frugality,” in which rich people invest their profits in increasing productive labor, rather than luxuries, corruption and vice, which contribute nothing to a society’s economic well being.” …

An interesting assertion about ‘Harris’ of which I am unaware.

Book IV – is an attack on mercantilism, which Smith despises. “Monopoly,” according to Smith, “is the sole engine of the mercantile system.” Smith, who makes the strong argument that money has no intrinsic value of its own, blames mercantilism on an overemphasis on accumulating gold and silver reserves (money), at the expense of genuine productive capacity and overall economic wealth. He’s highly critical of European nations for being obsessed with a positive balance of trade (to build up their gold and silver reserves). He’s also critical of the wrongheaded way they go about it, through the granting of monopoly rights and protective tariffs, and quotas, which always negatively impact domestic production."

Including in his critique, are the trade guilds, enshrined in laws from Elizabethan times. Analogous, in many ways, to modern trade unions in their restrictive practices that stifle innovation or delay its applications.

Smith is a strong “free trade” advocate, and his famous description of the free market, which neoliberals frequently quote out of context, comes from Book IV: “Every man, as long as he doesn’t violate the laws of justice, is left perfectly free to pursue his own interest in his own way, and to bring both his industry and capital with those of any other man, or order of men.”

Stuart Bramhall reads too much into Smith’s statement of a principle of the philosophical doctrine of ‘natural liberty’ as taught by Grotius and then by Pufendorf, which passed into Scottish moral philosophy from Carmichael and Hutcheson at Glasgow, and then to Smith. Natural liberty is a principle applying to mankind long before the age of commerce. It was not a description of the ‘free market’, and certainly did not apply to mercantile political economy, nor did Smith say it was. It was a standard against which this or that arrangement could be judged, and was open to challenge in certain specific instances, as when Smith justifies the building of party walls, and the prohibition of small value bank paper lending.

Smith lays out his views on government intervention in Book IV, which he elaborates in Book V.
According to Smith, a sovereign (government) has three duties:
1. To protect society from violence or invasion
2. To protect, as far as possible, every member of society from injustice or oppression from every other member of society (His use of the word “oppression,” rather than “violence,” is interesting. From the context, it’s clear that Smith is referring to economic oppression and social injustice)

No, it refers to injustice generally.

Book V – is about social injustice and elaborates on the interventions Smith would allow the government to make in the affairs of society and economy. ..

… “He talks educating common people being more important than educating the rich in civilized society. According to Smith, rudimentary education is essentially in preventing formation of “religious sects” that often lead to social unrest. At same time, he emphasizes importance of privately funded advanced education (for the wealthy). He gives numerous examples of private funding improving quality of teaching (it forces teachers to work harder).

Smith was concerned about the appalling lack if educational provision in England, in contrast to the long established “little schools” operating in Scotland, in which all male children attended school from 6 to at least 8 (some like Smith until 14) to learn ‘reading, writing and account’. He recommended this for England, to be paid for partly by government, partly by charity, parents, at by poor parents a nominal small charge.

This provision would reduce the dangers of sedition and religious ‘enthusiasm’ - aimed at frightening the affluent with the spectre of social disorder into paying for it. He linked this spectre to the effects of the division of labour, though the ignorance of the majority was due to their existing illiteracy and innumeracy.

Many Scottish parishes paid for the education at Scotland’s four universities of boys of all social classes if they showed promise, not just the ‘wealthy’. Smith’s mother was not ‘wealthy’; Smith was very bright.

It was not ‘private funding’ that kept Scottish teachers diligent so much as the pay of faculty depended on their reputation with students for their attendance; poor teachers were abandoned by students who paid their fees directly to them, not the universities. A different system operated in England’s two universities where faculty were paid for their teaching, but not by the direct student method (see Book V on Smith’s hostile view of the English system – he spent 6 unhappy years at Oxford). Smith certainly would have approved of a ‘voucher system’, whatever modern teacher unions would say.

"Book V delves at length into the effect of military spending on economic wealth. It talks about the extremely risk of a standing army destroying democracy (he gives Rome and Cromwell’s parliament as an example). He allows that with advanced military technology, a standing army is preferable, because members of a militia have other occupations and don’t have time for the extensive training that is necessary. However he argues that military spending must be strictly limited and never paid for by borrowing. He predicts that indebtedness for military spending will eventually cause the economic ruin of all European countries.”

In all, I think Stuart Bramhall is sloppy and in pursuit of a political agenda. This may be unfair to Laurence Dickey, whose abridgment may have been lost in Bramhall’s review, who is certainly partial to a view of Smith somewhat short of understanding of Adam Smith. The modern epigones of Adam Smith are not excused for their attributions to Adam Smith of political agendas and their passing off of anachronistic thinking. Smith rightly, was nor concerned with ‘democracy’ (he did not have a vote) but he was concerned with liberty, a far more important principle in the 18th century than democracy.

I advise sticking Stuart Bramhall, and all Lost Legacy readers, to stick to the unabridged Wealth Of Nations, and its sister volume, Moral Sentiments.



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