Tuesday, December 29, 2009

Review Commentary No. 2: Milgate and Stimson's "After Adam Smith": a promising good read





Gavin Kennedy

Review Commentary No. 2: Murray Milgate and Shannon C. Stimson, 2009. "After Adam Smith: a century of transformation in politics and political economy", Princeton University Press, Princeton, ISBN 978-0-691-14037-7
a promising good read

Chapter 2 has the intriguing title, ‘Adam Smith’s Political Odyssey’.

There has long been controversy over Adam Smith’s politics: was he a Whig or a Tory?

If we could divine his politics, some people think today, we could translate his 18th-century politics into 21st-century political affiliations. But as we don’t really know about his politics, this has proven an improbable fantasy, which has not prevented people from ascribing to Adam Smith their own political preferences, or, ironically, their pet hates, in inappropriate modern terms. None of this has prevented wild speculation.

Milgate, the economist, though more probably Stimson, the political scientist, cites Ronald Meek (an influential Smithian scholar at Glasgow University in the 1970s-80s) as noticing that the range of assertions about Smith’s politics find him described, variously, as having Whig, Tory, republican, conservative, liberal, and even Marxist leanings, while Ian Mclean (Oxford University) welcomes Smith as a “would be”, or “would have been”, social-democrat like Britain's New Labour under Tony Blair and Gordon Brown.

Strangely, in a minor footnote reference (p 28, n 37), the authors ascribe to myself an attempt to “appropriate the politics of the Wealth Of Nations to the consideration of the present”, in my Adam Smith’s Lost Legacy, (2005, Palgrave-Macmillan), an assertion which I find difficult to understand.

Lost Legacy is about separating Adam Smith’s authentic legacy (the works he wrote, not what epigones have claimed he wrote) from those today who would misspeak (present tense of Hilary Clinton’s “misspoke”) about their politics as emanating from Adam Smith.

In a section, “Distinguishing Smith from His Interpreters”, Milgate and Stimson observe, what must be true, that “the characterisation of Smith’s politics has largely been left as much to the imaginations of others as to anything to be found in his own published writings” (p13). A discussion follows of the written views of Elie Halévy (1928) that Smith was not a Whig politically, and Joseph Cropsey (1976), who argued that Smith laid down the “necessary conditions for the existence of commercial society”, which Cropsey interprets as akin to modern “liberal capitalism” and compatible with the institutions of democracy.

The dangers of accepting these ideas is that we are prone to making errors, especially in the absence of evidence that Smith made specific proposals for adoption in Britain. One is bound to insert here the observation that in Smith’s circumstances, as he saw them, he had to take care not to be read as challenging the existing political order. Arguing from Scotland for republicanism, or any major institutional changes, in a constitutional monarchy, in a country already notable for two violent attempts to incite rebellion against the crown (1715 and 1745), was not a prudent option, and alien to Smith’s temperament. Also, he wasn't sympathetic to the Jacobites, though he was ympatheitc to plight fo some of them individually when they were exiled.

Smith’s close attachment to liberty is a more solid argument for his politics. He outlined his modest case in his Lectures on Jurisprudence (see LJ(A) v5-v12 and v31-40 see also Adam Smith’s Lost Legacy, 2005, pp 81-83).

He did not argue for universal suffrage and when speaking of democracy in Wealth Of Nations he was offhand and occasionally disparaging about the “virulent” factionalism exhibited in practice.

Projecting back modern ideas and associations of liberty and democracy to Smith’s politics is a mistake which I acknowledged in a review of my Lost legacy by Professor Edward Harpham (International Adam Smith Review, no 3, 2007). Liberty for Smith was more important than universal suffrage and democracy. The highly limited suffrage (Smith did not have a vote) was sufficient to curb the absolutist tendencies of King’s in 18th-century Britain by his requiring the consent of the House of Commons to raise finance.

Milgate and Stimson make much of Smith’s recognition of the “pernicious effects of the division of labour” in Book V in contrast to his unqualified optimism about the phenomenon in Book I.

I think there is another perspective about this supposed contradiction and I offer it as a counter-point to the “civic tradition in political thought” (p 21), asserted by modern scholars, and indeed, by those who read Smith as foreshadowing Marx and others on alienation. Milgate and Stimson conclude that “a governmental responsibility existed to attenuate these effects of the division of labour” because serious consequences would follow “unless government takes some pains to prevent it” (WN V.1.782).

Having stated the problem is graphic and eloquent terms, Smith’s remedy is clearly outlined: the foundation of little schools in every parish; in short, mass education funded by local taxes and partly paid for by parents.

Now that is a powerful argument with a heavy price on richer families across the country and it required all the eloquence that Smith could muster (he was a brilliant rhetorician). He rose to the occasion and people read those pages today and are still moved in some measure by them, which was precisely Smith’s intent. Those well enough off to pay taxes would not voluntarily do so unless there was a pressing case made in favour of them.

What more pressing a case could be made than caressing the anxieties and latent insecurities of those risk-averse “superior” orders with the consequences for social instability of allowing the “lower orders” to sink into crass ignorance stupidity? He explains this in is last paragraph of the section, not often quoted as much as the earlier rhetoric:

The state, however, derives no inconsiderable advantage from their instruction. The more they are instructed the less liable they are to the delusions of enthusiasm and superstition, which, among ignorant nations, frequently occasion the most dreadful disorders. An instructed and intelligent people, besides, are always more decent and orderly than an ignorant and stupid one. They feel themselves, each individually, more respectable and more likely to obtain the respect of their lawful superiors, and they are therefore more disposed to respect those superiors. They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition, and they are, upon that account, less apt to be misled into any wanton or unnecessary opposition to the measures of government. In free countries, where the safety of government depends very much upon the favourable judgment which the people may form of its conduct, it must surely be of the highest importance that they should not be disposed to judge rashly or capriciously concerning it” (WN V.i.f.61: 788).

Smith’s meaning is often more clearly understood from following his rhetorical style of argument than it is in taking isolated quotations on their own.

Which brings us to Milgate and Stimson’s treatment of the invisible hand metaphor. I was disappointed here, as readers of Lost Legacy will anticipate, and I shall not miss the opportunity to explain why. Our authors wish to explain why there are differences between Smith’s treatment of moral and civic concerns in Moral Sentiments and Wealth Of Nations by comparing the “parallel passages on the invisible hand in both books" (p 22-24).

In Moral Sentiments, the invisible hand brings about “nearly the same distribution of the necessaries of life which would have been made had the earth been divided into equal proportions among all its inhabitants” (TMS 1759 IV.1.10: 184-85) compared to Wealth Of Nations where the invisible hand ensures, that “every individual necessarily labours to render the annual revenue of the society as great as he can” (WN IV.ii.9: 456).

In the case of the “proud and unfeeling landlord” and in spite of their “natural selfishness and rapacity”, whatever their “vain and insatiable desires”, they are “led by an invisible hand” to distribute “the necessaries of life” to “all the “thousands whom they employ” about their landed estates and their palaces to achieve a remarkable result: “they divide with the poor the produce of all improvements”.

Similarly, those who direct their capital so that “its produce may be of the greatest value” unintentionally “render the annual revenue of the society as great [they] can”; they too are “led by an invisible hand”.

I shall develop a long thesis about the invisible hand metaphor – most readers of Lost Legacy should be familiar with my cautions about accepting modern interpretations of its significance to Adam Smith – but I shall simply observe what is missed by most, including sadly, Milgate and Stimson: that the landlords have no choice but to feed the “thousands whom they employ”, not because of the power of the invisible hand (a mere metaphor, which like all metaphors doesn’t actually exist) leading them, but because if they didn’t feed them “the thousands the employ” would die in a season and the landlords were never dumb enough not to know that.

As for those individual merchants who were risk-averse to the risks of foreign trade, even with the protection of monopoly privileges and the British Royal Navy, who preferred to trade locally at lower risks to their fortunes, they were not ‘led by an invisible hand' to strive to increase the value of their capital. This process follows the arithmetic rule (not algebra nor calculus) that the whole is the sum of its parts. While their risk-tolerant colleagues, of which there were many, who did trade abroad, also strived to increase the value of their capital too – they did so mainly “for their own security”, leading me, and a few others, to ask, albeit from the back of class, what exactly did the invisible hand bring to the party?

Besides mystification of perfectly clear explanations for the conduct of both rapacious landlords and some, but not all, risk-averse merchants, what exactly does the metaphor add to the sum of knowledge about economics?

Instead of the plain, vanilla obvious answers, many theorists import into their thinking poetic-sounding literay metaphors about invisible hands that have no representative term in the simplest of supply and demand curves, and don’t make it to the mathematical equations of general equilibrium.

We shall move on.

(To be continued)


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