Thursday, December 25, 2008

Adam Smith Favoured Publicly Funded Public Works

Nissim Mannathukkaren, Assistant Professor with Dalhousie University, Canada, posts on Pragotiti (‘progress and people’) HERE:

Whose media? Which people?”

“What the urban middle classes and the elite want is not democracy but Adam Smith’s night watchman State which does nothing more than the strong and efficient protection of the life, limbs and property of the people (read the classes)

As I mentioned yesterday, the phrase the “night watchman State” did not come from Adam Smith – he never used such a phrase; his ideas of the duties of the state went well beyond the ‘first duty’ of security – and, anyway, the phrase itself was not used until the 1850s, and then not by an adherent of Smith’s political economy.

The ‘night watchman state’ was first uttered by Ferdinand Lassalle, a firebrand, leftwing socialist, in his disparagement of bourgeois state intervention, taunting them because they did not advocate taking full advantage of the awesome state power of 19th-century European states to take over much of the commercial activities of their economies.

How then did it become associated with Adam Smith? Well, possibly, via the usual route of assimilation by those who hadn’t read their Adam Smith too closely, if at all, and from their not appreciating what he was talking about in what quick readers of Book V of Wealth Of Nations thought were his ‘modest’ proposals for government.

Defence expenditures (the first duty of the sovereign) were the largest single budget expenditure in the 18th century (the seven years war cost £125 million). It continued to rise until after the Napoleonic Wars (the on-and-off 23years war). Justice (the second duty) was also expensive, especially as the number of possible crimes codified into law rose dramatically in the last quarter of the 18th century (and led to the colonisation of Australia from 1788 for convicts).

But the real potential source of approved growth lay in the third duty, that of expenditures on public works and public institutions that facilitated commerce or were advantageous for social stability.

Roads, harbours, canals, and bridges formed a massive agenda for public expenditure and if carried out diligently would have added tens of millions to public expenditure annually for much of the next 50 years. To which, in time, would have spread expenditurs from what was called ‘police’ to city water, sewage and refuse disposal, and public health (he also suggested palliative care of leprosy victims and other ‘loathsome diseases’ in Wealth Of Nations - glimmers of a public health service?

Of public institutions, the main one was the ‘education of youth’. The public provision of ‘little schools’ in every parish (about 60,000 of them) alone would have been a massive budget line for the buildings and state subsidies of teacher remuneration, supplemented by fees charged to all parents, except the most destitute.

Smith already supported the public funding of the Royal Mint and the Post Office, plus various government inspectorates to ensure quality in certain outputs (bullion assaying; hallmarks; stamping of certain cloths, etc.,), and government officers of customs and excise, tax collectors and civil servants.

‘The dignity of the sovereign’, or the expenses of government, was a separate budget line too, and was bound to grow as governments grew larger across the economy at both national and local levels, as seen in the magnificent 19th century town halls and public buildings erected across the UK.

So, if ‘even Adam Smith’ had a large, and potentially growing, public expenditure agenda, it was consistent with his central theme that these expenditures were to ‘facilitate commerce’, and not to manage it or ‘crowd it out’, or replace it.

If anything, Smith’s admonition to his readers was to facilitate commercial markets where possible (clearly, in time, capital would become, and became, available for privately-financed, infra-structure projects), and also to utilize publicly-funded activities where necessary.

As always, Adam Smith was not an ideologue.

Postscript: a merry Christmas to all readers who catch this post today; and season's greetings to everybody else later.

Meanwhile, I have nine more exam scripts to grade ... before the usual family dinner.



Blogger David R. Larson said...

Amazing! I had no idea that so many are so wrong so much of the time. Sorry you had to mark papers today; hope it is being a good holiday anyway.

Just getting going here. Raining. How strange!

Thanks again for this blog.

1:34 pm  
Blogger Unknown said...

Hello Gavin,
I shall read up more on this and If you are right, I thank you for pointing it out to me.


3:56 pm  
Blogger Alexandra Nguyen said...

Thanks so much for writing this post! I was reading a few quotes by Adam Smith and wanted to know more about his stance on public works and government-funded institutions. This was really helpful in clarifying everything and giving me more information about the subject.

6:59 am  

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