Wednesday, December 24, 2008

Intellectual Life Does not Influence Everyday Life That Much

Canadian Content Blog carries an article, “The evangelical roots of economics” from “Let there be markets: The evangelical roots of economics”, extracted from Gordon Bigelow’s piece in Harper's Magazine (HERE):

When evangelical Christianity first grew into a powerful movement, between 1800 and 1850, studies of wealth and trade were called “political economy.” The two books at the center of this new learning were Adam Smith’s Wealth of Nations (1776) and David Ricardo’s Principles of Political Economy and Taxation (1817):

"This was the period of the industrial transformation of Britain, a time of rapid urban growth and rapidly fluctuating markets. These books offered explanations of how societies become wealthy and how they can stay that way. They made the accelerated pace of urban life and industrial workshops seem understandable as part of a program that modern history would follow. But by the 1820s, a number of Smith’s and Ricardo’s ideas had become difficult for the growing merchant and investor class to accept.

For Smith, the pursuit of wealth was a grotesque personal error, a misunderstanding of human happiness. In his first book, The Theory of Moral Sentiments (1759), Smith argued that the acquisition of money brings no good in itself; it seems attractive only because of the mistaken belief that fine possessions draw the admiration of others.

Smith welcomed acquisitiveness only because he concluded—in a proposition carried through to Wealth of Nations—that this pursuit of “baubles and trinkets” would ultimately enrich society as a whole. As the wealthy bought gold pickle forks and paid servants to herd their pet peacocks, the servants and the goldsmiths would benefit. It was on this dubious foundation that Smith built his case for freedom of trade.

By the 1820s and ’30s, this foundation had become increasingly troubling to free-trade advocates, who sought, in their study of political economy, not just an explanation of rapid change but a moral justification for their own wealth and for the outlandish sufferings endured by the new industrial poor. Smith, who scoffed at personal riches, offered no comfort here. In The Wealth of Nations, the shrewd man of business was not a hero but a hapless bystander

This type of article which links books written in 1759 (Moral Sentiments) and 1776 (Wealth Of Nations) by Adam Smith with another by David Ricardo in 1817 (Principles of Political Economy and Taxation) with the collective views of a “growing merchant and investor class to accept”, only become acceptable by distance of the reader from the relevant events.

While many ‘merchants and investors’ were educated at the time (and many others weren’t) it is a bit of a stretch to accepts that they were familiar with Smith’s and Ricardo’s texts (the last author is especially suspicious of people such as busy ‘merchants and investors’ being familiar with his work – a most obscure text if ever there was one!).

I suspect that the influence of intellectuals is much less than commentators might think, perhaps in the belief that because we read these works still, it must have been the case that they were widely read by entrepreneurs too. It is more likely that if none of the above books were written, that events in markets, development, innovation and growth would have continued in much the way that they did anyway. There is an intellectual life and an everyday life; the latter may influence the former but the former is less likely to influence the latter.

The chattering classes who ‘translate’ notable texts, and who make notable text more familiar to the each other and to those who listen to them, also filter ideas in the process of their popularising versions of them, quite often at the expense of vulgarising their authors’ ideas, where they don’t suppress things they choose to ignore. Hence, Adam Smith’s holistic ideas were filtered down to a few words, such as ‘laissez-faire’ (which happened not to be his ideas at all – he never mentioned these words once), or ‘night watchman state' (spoken not by Smith but by the socialist firebrand, Ferdinand Lassalle, who actually mocked the idea of a smaller, leaner bourgeois state).

A century later, in fact, a further filtering took place around the metaphor of ‘an invisible hand’. In all these cases, the extent of the knowledge of many people who have heard the name ‘Adam Smith’, but never read his books, is limited to these three erroneous propositions alleged to be his, ‘laissez-faire', ‘night-watchman state', and ‘invisible hand’.

The idea that the “growing merchant and investor class” gave a moment’s thought to either Adam Smith or David Ricardo, frankly, is quite ludicrous. That the educated classes of religious orthodoxy and evangelical enthusiasm concocted a ‘plausible’ narrative as described by Gordon Bigelow is perfectly possible. That it had anything to do with Adam Smith’s ideas is quite irrelevant, as anybody turning the pages of either of his books would grasp in no time.

Incidentally, per capita incomes rose throughout the 19th century, despite the dreadful conditions of those urban labourers at the very bottom of the social heap and they continued to do so throughout the 20th century. If the urban poor were near destitute, the lot of the rural poor was even worse, as it is today for the same division of populations in the poorer countries of the world.

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