Sunday, December 14, 2008

Adam Smith and the 'Hand of God'





Gavin Kennedy

Ralph Martire, executive director of the Center for Tax and Budget Accountability, a bipartisan fiscal policy think tank, writing in the State Journal-Register (Illinois) HERE (10 December), brings a divine hand of god into his argument, not by direct quotation from Adam Smith but via Sir Isaac Newton (1643-1727):

Growth in wages a key to economic recovery”

“The free market wage failure in America is a failure under classic, capitalist theory. And by classic, I mean original, as in Adam Smith.

Modern proponents of free markets at all costs have a tendency to forget the strong moral — in fact religious — underpinnings of capitalism. “The Wealth of Nations,” Smith’s seminal work, was published back in 1776, and was greatly influenced by the thinking of Sir Isaac Newton, “Mr. Natural Law” himself. As Newton believed the properties of natural science were put into place by the Almighty, Smith saw the hand of God behind economic principles.

Which is why Smith could base most of his theory on people acting out of self-interest, while simultaneously believing there exists a fundamental aspect of every person that causes him to be concerned about “the fortune of others and render their happiness necessary to him, though he derives nothing from it.”

Extending that divinely imbued concern for others to the economic principle of wages wasn’t a stretch for Smith. Recognizing that business owners have the advantage over workers when setting wages, he nonetheless posited that wages wouldn’t fall below an amount sufficient to cover living expenses. Smith maintained that even for low-end workers, a husband and wife will always “earn something more than what is precisely necessary for their own maintenance.”

That divinely inspired sense of concern for others was just as important for capitalism to work as envisioned by Adam Smith, as was the motivation of individuals to act in their own self-interest. Unfortunately, the modern school of capitalist thought has not only elevated unabated self-interest to the top of the heap — it has completely eliminated concern for others from the equation, with predictable consequences….

… That means the federal government should borrow a page from Adam Smith, and implement policies that give businesses the incentive to increase the wages paid to workers, so they finally earn “something more than what is precisely necessary for their own maintenance

After admitting that there is nothing in his article that is by direct quotation from Adam Smith to infer that “the divine hand of God” was “behind economic principles”, Ralph Martire, a tax consultant (step up from Matthew, a mere the tax collector, and a disciple of Jesus in the New Testament) asserts by tenuous association of Adam Smith with Isaac Newton.

The inspiration for Adam Smith's ideas about Natural Law (often confused with laissesz-faire) was not Newton (whom he admired) but Samuel Pufendorf, whose philsophical ideas were part of the Scottish teaching of moral philosophy via Carmichael and Hutcheson, and whose influence on Smith on Natural Law, including free commerce, was definitive; see Smith's 'History of Astronomy' begun in 1724 while he was at Oxford qualifying to be ordained into the Church of England, a quest he gave up in 1746). The 1872 edition of Moral Sentiments (published by Kessinger Publishing Rare Reprints: Google it) contains Smith's 'History of Astronomy', which is worth reading).

Please be clear, I am not arguing about whether there is a religious dimension to capitalism or not; I am arguing that the religious dimension alleged to be in Adam Smith’s works and thinking is grossly exaggerated, even quite wrong.

I have not detected a strong religious (Christian) element in Wealth Of Nations and my current research into assertions of Smith’s overt religious (including Deist) elements in Moral Sentiments suggests a weak case supporting such assertions too. Partly, the problem is compounded by many religious people of all creeds claiming a monopoly of moral behaviour; the rest of humanity is dismissed as immoral or amoral (some religious zealots, down the ages and even today, think it is their mission to kill apostates).

Adam Smith’s analytical writings on how commercial economies operated do not include a role for divine intervention; even his singular mention of the popular metaphor ‘an invisible hand’ in Wealth Of Nations was not related to anything of heavenly origin; it was related to the simple reaction of some but not all earthly humans to the personal emotions of risk avoidance when contemplating whether to invest their scarce capital at home or abroad.

Those who invested abroad felt less insecure than those that invested at home, and of those that invested at home they added to gross domestic annual product (as we would express it today) by doing so, on the arithmetical principle of the whole is the sum of its parts. This made the invisible hand a metaphor for a very worldly phenomenon.

Ralph Martire sees in Smith’s observations on the subsistence level of lowly-paid labourers and their families a “divinely inspired sense of concern for others”. However, moral philosophers, according to Smith's own definition of their role, were people who ‘did nothing, but observed everything’.

Smith’s unsentimental observations on all kinds of events, histories and behaviours, have been remarked on (for example, on slavery, the role of women in poor families, young boys employed in workshops, girls not educated formally, soldiers on duty, inferiors obsessed with superiors (‘celebrities’), and people awaiting their fate under justice, etc., etc.,).

These observations of Smith's were not ‘divinely inspired’ so much as the normal observations of an educated humanist. If divine inspiration was a necessary condition for a sense of ‘humanity’ there was precious little of it about among people in the 18th century, and even less in the millennia following the fall of Rome (I am not so sure we are basking in mass ‘humanity’ in the 21st century).

Should Richard Martire wish to advance a theory that the ‘hand of God’ is present in the mode of subsistence then that is his absolute right to do so. It is not his right to attribute authoritatively to Adam Smith a theory which Smith did not express, and by extention, attribute the theory to the working of actual economies in the real world.

NB: a correspondent has suggested that my accounts of Adam Smith’s views on (pagan) religion may cause offence to Christians among Lost Legacy’s readers. I assure him and all readers that I respect the right for people to hold and practise their belief systems (and not just those of the numerous Christian churches and sects) and do not mean to offend particular individuals.

My concern is solely with assertions, assumption, and claims that are made from time to time that Adam Smith shared particular religious beliefs on the basis of weak evidence, and the disregard of stronger evidence against, particularly in the context in which Smith had to write and disseminate his moral philosophy and political economy.

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