Tuesday, January 07, 2014

Once More on Laissez-Faire and Adam Smith

Letter to The Scotsman (Edinburgh):
Ellis Thorpe  (Scotsman, 4 January) “alludes” to “Adam Smith and laissez-faire” as if the two are synonymous.  Smith never mentioned “laissez-faire” in anything he wrote; he was a Professor of Moral Philosophy and very precise in his language.  Moreover, “laissez-faire” was about one-sided freedom sought by merchants for themselves.
When the French Minister for Finance, Colbert, (1680), asked M. le Gendre, a “plain spoken” merchant”, what he could do for them, he replied “laissez nous faire” (‘leave us alone”).  Nothing was said about their customers, or their employees.
Similarly, the “laissez-faire” slogan was picked up by 19th century French, English economists and political agitators in such campaigns as the merchant-led, Anti-Corn Law League (1840s) that resulted in wage cuts to reflect the fall in corn prices, and by mine and mill owning industrialists campaigning against laws (1840s-1870s) reducing 12-14 hour working days and the employment of children.
“Laissez faire” was wrongly associated with Adam Smith in the 19th century and the invention stuck, particularly at Cambridge, where Marshall, Pigou and Keynes taught that association as if it were true.
Adam Smith argued philosophically for “natural liberty” – for everyone, not just for special interest groups. Moreover, Smith never argued “self-interest is always enlightened”. 
Far from it: In Wealth Of Nations (1776) he gave over 60 examples of where an individual’s “self interested” actions had harmful affects on others.  When this occurred, Smith supported legislation against bankers and those he called “projectors” –  spend thrifts and “prodigals” - given to reckless, selfish actions, even where doing so breached their “natural liberties”. Smith’s abundant strictures against selfish, self-interested merchants and manufactures are evident to anybody who reads his Wealth Of Nations (1776) or his “Theory of Moral Sentiments” (1759).
Ellis Thorpe imputes his own anachronistic ideas to Adam Smith.
Gavin Kennedy (Professor Emeritus, Heriot-Watt University)


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