Saturday, May 27, 2006

Smith on Morality

Would Adam Smith Approve?: Lay, Skilling, capitalism and morals by Lawrence Kidlow

Here is a typical sentence from Lawrence Kidlow, an accomplished US columnist, that manages to state convincingly something that is not quite true – and in a real sense is absolutely misleading – yet is half true, but not in the way it is presented:

A couple hundred years ago, in his "Theory of the Moral Sentiments," Adam Smith contended that capitalism requires a moral and ethical center if it is to function effectively and to the benefit of all.”

My problem with this sentence is that Adam Smith did not write about ‘capitalism’, a system as yet in 1759 when he wrote ‘Moral Sentiments’, based on lecture notes he had delivered in his Edinburgh public lectures from 1748-51 and at the University of Glasgow from 1751. He certainly wrote about morality and how it evolved in human society, and how it was a necessary social habit, under the rule of law, if society was to survive as a harmonious success and not become a vicious failure.

But his insights and his vision (the ‘impartial spectator’, the mediation of conflicting interests, the unintentional petty foibles of humans that worked to stabilise the love of justice that prevented society dissolving ‘into atoms’) were not aimed at any particular social or economic system.

True, he saw them at the most advanced in the ‘Age of Commerce’, his ‘Fourth Stage of Society’, but this had nothing specifically to do with a society, the capitalist economy, first mentioned as such in 1854 (Thackery), and not recognisable to an 18th century Moral Philosopher, who, along with his contemporaries, had no notion of what was about to happen some decades after he died in 1790.

Smith’s Moral Sentiments are universal; they apply to all societies; if their bounds are breached then man would enter the company of other men as if entering a lions’ den (Smith took the metaphor from Montesquieu). So by extension, Lawrence Kidlow is right: ‘Moral Sentiments’ applies to our capitalist centuries too, but he is wrong to root that application in the writing of Adam Smith.

He is partly right in the following:

Indeed, ownership is a self-help virtue, and it is held in much higher cultural esteem than the vice of government-dependant welfarism. This investor culture has at its core the very same ethical foundation that Adam Smith wrote about in 1759.”

The aspect in which I consider him wrong his in his cleavage to separate the investor culture, where morality must obtain if it is to survive – an investor community of cheats, liars and fraudsters would collapse in corruption and its sources of people’s savings would diminish (honesty, trust and the delivery of promises are part of morality), from that part of society which depends upon ‘government-dependent welfarism’.

The same habits of morality must also apply in the operation of state welfarism, if it is to survive (with all its blemishes) without collapsing in expense, mass fraud, cheating and petty thieving. To assert that welfarism is more susceptible to fraud, cheating and crime is overdoing it, when compared to the investor community.

Just as the men of Enron are not typical of the investor community (though their crimes are of a higher magnitude), so are the petty criminals on welfarism. In fact, because those on welfare programmes live check by jowl with a criminal class (drugs, prostitution, household thefts, and so on – the poor are often the worse sufferers from living among thieves) they are often mixed with the morally deviant in the public image.

I think it is in this area that Lawrence Kudlow strays from accuracy in his portrayal of the moral basis of investment (much of what he says I agree with).

So when he concludes that “Looking down from his perch in heaven, Adam Smith would be very proud”, I am inclined to believe that Adam would also be frustrated that Mr Kidlow didn’t quite get his main point about the need for morality in any society; but then Adam, by now, must have got used to his successors’ way with his ideas, tending as they do to stretch them beyond the context in which he originally placed them.

Read Lawrence Kidlow’s article at: either Human Events Online: The National Conservative Weekly Washington DC, or National Review Online, New York


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