Saturday, April 12, 2008

Adam Smith Did Not 'Create' Capitalism

James’ in a Blog Debate with others about Wal-Mart writes:

The creator of capitalism was Adam Smith, who described the Capitalist system in his book ‘The Wealth of Nations’. At the times Adam Smith wrote his book, the world still used the economic system of ‘Mercantilism’. Metal nails were still being used as currency in the Scottish town where Adam Smith wrote his book.”

James’ makes the same mistake as did Tracy Warner, referred to in my post this week:

Adam Smith Did Not invent Capitalism’.

Is this because they both cribbed from the same “Students’ Notes” source. Such sources regularly create victims of ‘Chinese Whispers’, the game played by children (I remember it from my boy Scout days), which traces the way a simple statement changes as it is passed on orally between people – ‘send reinforcements, were going to advance’ becomes ‘send three-and-four pence, we’re going to a dance’.

There is a serious point here, apart from Adam Smith never knowing the word ‘capitalism’ nor the phenomenon; it was unknown to the English-speaking world until 1854 ,when an English novelist first used it in his book, ‘The Newcomes’.

Economic systems are not ‘invented’ or 'created', least of all by a moral philosopher, talented as he was, who ‘did nothing, but observed everything’. Changes in a mode of subsistence are not ‘designed’, 'created', 'invented', or decided upon before hand. All attempts to do so are futile and doomed to failure, as we have seen recently in the communist attempts since 1917 and approaching their denoument in Cuba.

People from time to time design ‘perfect’ communities, little ‘utopias’, and better societies, and they all end in failure eventually, whether they are based around religious precepts – strict interpretations of religious doctrine (the Essenes), and mass conversions to supposedly divinely-inspired beliefs, - or around political and behaviour codes drafted by motivated ‘leaders’.

Some may last for the lifetimes of the ‘founders’, but most change as they drift away from the original aims and new generations are born and suffer from the drifting away of increasing percentages of their followers. In intensely combative ‘utopia’ movements of true ‘believers’, major schisms are normal (Stalin’s Purges and the Moscow Trials, or Hitler’s Night of the Long Knives, or Mao’s ‘Communes’).

The subsistence norm for hundreds of millennia was expressed in various forms of hunter-gathering, incorporating untold millennia of scavenging and pure gathering (Adam Smith’s ‘1st Age of Man’: see his Lectures On Jurisprudence and Wealth Of Nations). Nobody ‘invented’ or 'created' it; gathering was already of ancient vintage among primates and the hominids, and took local forms among the dispersed low population densities of each species.

Shepherding and Farming (the ‘2nd and 3rd Ages of Man’) appeared in parts of the world, leaving the rest in the 1st Age of subsistence, where a few thousand (hundreds?) remain still. Again nobody ‘invented’ these forms of subsistence. Where they were discovered, accidentally (‘some fell on stony ground’ but some didn’t), they emerged eventually, slowly and gradually, and by imitation from dispersals of small groups, including parallel practises and reversions, and when propelled by global events like the ending of the Ice Age.

Adam Smith saw the emergence (‘at last’) of Commerce (the ‘4th Age of Man’) as the main event in parts of the world (China, India, Europe), interrupted and subject to reversal (the Fall of 5th-century Rome) and re-appearance from the 15th century in Europe, accompanied by local politically motivated stagnation in China.

In this historical context, to acclaim Adam Smith as the ‘inventor’ of ‘Capitalism’, or indeed as the ‘conqueror’ of ‘Mercantile Political Economy’ (please: not ‘mercantilism’, a word he never used nor knew, it being first used in Germany in the 19th century), is plain daft.

We might note too that despite Adam Smith’s strictures (in Book IV and V of Wealth Of Nations) discrediting the futile and dangerous mercantile policies prevalent in his time, these were never totally removed and “the world still [uses] the economic system of ‘Mercantilism’. Indeed, the main instruments of Mercantile Political Economy remain in rude health in policies still pursued by numerous leading governments, US, EU, Asian, Russian and LA included) across the world, such as the protection of producers at the expense of consumers, balance of trade myths, suspicion of trading neighbours, tariffs, quotas, outright bans, acts of retaliation, sanctions, ‘wars’, and jealousies of trade, this latter, the title of an essay by David Hume in 1752 and still worth reading in 2008 (HERE).


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