For over a century now, professional economists have taught that the ideas on which the US economy was built were those of Adam Smith.
I am going to debunk that, and I expect it will cause some people to freak out. For some reason there are many educated people in the US who take it as a personal affront to attack Adam Smith. It’s not that hard to understand–they have had “successful” (read: well remunerated) professional careers based on the fundamentals they were “taught” (read: indoctrinated with) in college. Adam Smith, as the Brahma of modern “scientific” economics, is one of those fundamentals. So allow me to begin by presenting what one of the recognized giants of professional economics thought about Adam Smith.
Joseph Schumpeter, one of the most influential economists of the twentieth century, in his last book (which was never finished) History of Economic Analysis (pdf), conceded the importance of Smith’s work, while also eviscerating it (pages 171-184). Schumpeter basically damned Smith’s actual ideas with faint praise, while acknowledging that Smith obtained enormous influence as a peddler of specific economic doctrines. (Much like Milton Friedman and his neoliberal Freedom to Choose of our current national nightmare.)
Schumpeter begins his evaluation of Smith by noting that Sir James Steuart‘s An Inquiry into the Principles of Political Economy (1767) had “more originality and deeper thought than does the Wealth of Nations.” So, why do we remember Smith today, and not Steuart? Schumpeter concluded that Steuart “was never much of a success in England,” as a result of the elite disfavor Steuart faced for being a Jacobite (an adherent of restoring the Catholic Stuarts to the throne of the United Kingdom). In fact, Steuart was forced to live in exile from 1745 to 1763.
Schumpeter then noted that Adam Smith’s greatest contemporaneous academic achievement was not Wealth of Nations,but A Dissertation on the Origin of Languages, which was appended to the 1767 third edition of the Theory of Moral Sentiments. “Moreover,” wrote Schumpeter, “Smith’s philosophy of riches and of economic activity is there and not in the Wealth of Nations…. the Wealth of Nations contained no really novel ideas and… it cannot rank with Newton’s Principia or Darwin’s Origin as an intellectual achievement…”
Schumpeter concluded that Adam Smith’s undeniable success in Great Britain was due to English elites’ favor for “the policies he advocated–free trade, laissez-faire, colonial policy, and so on.” In other words, Adam Smith was crowned with success for being a prominent apologist for the exploitative brutality of the British empire:
….it was Adam Smith’s good fortune that he was thoroughly in sympathy with the humors of his time. He advocated the things that were in the offing, and he made his analysis serve them. Needless to insist on what this meant both for performance and success: Where would the Wealth of Nations be without free trade and laissez-faire? Also, the ‘unfeeling’ or ‘slothful’ landlords who reap where they have not sown, the employers whose every meeting issues in conspiracy, the merchants who enjoy themselves and let their clerks and accountants do the work, and the poor laborers who support the rest of society in luxury–these are all important parts of the show. It has been held that A. Smith, far ahead of his time, braved unpopularity by giving expression to his social sympathies. This is not so. His sincerity I do not for a moment call into question. But those views were not unpopular. They were in fashion.
In fact, as Smith biographer Salim Rushid details, Adam Smith very carefully and deliberately went about currying favor with Scottish and English ruling elites. Rushid writes”
Smith’s involvement in politics was neither marginal nor ineffective. Strange as it may sound, in today’s parlance he would have been called “street-smart.” He was considered a good judge of what would sell; despite the radicalism of his personal sympathies, Smith tailored his views and his life to be acceptable to the established order. There is little surprise in finding that this cultivation bore fruit and that Smith’s ideas proved serviceable in the defense of conservatism.
Elsewhere, Rushid writes, that during his time: “Adam Smith was not hailed as a new prophet except by some few, but very influential, persons such as Lord Shelburne and William Pitt.” Adam Smith was merely a paid apologist for the ruin and misery Great Britain imposed on millions of colonial people in Ireland, Africa, China, India, and elsewhere. As Philippine economic historian Erle Frayne Argonza wrote in September 2008:
To continue on the theme of laissez faire, a doctrine started by the French physiocrats and systematized further by the Scots, let it be known that the principle of ‘free trade’ generated by physiocracy was largely a doctrinal defense of slave trade…Adam Smith was an ‘intellectual prostitute’ whose services were procured by the British East India Company, precisely for the purpose of crafting in theoretical form the ‘free trade’ doctrine that was to justify, though subtly, the slave trade of that historic juncture.
Schumpeter also very briefly, and very significantly, noted: “that which I cannot help considering relevant, not for his pure economics of course, but all the more for his understanding of human nature–that no woman, excepting his mother, ever played a role in his existence…” In 2012, Katrine Marçal, lead editorial writer for the Swedish newspaper Aftonbladet, published Who Cooked Adam Smith’s Dinner? (English translation: Pegasus Books, 2016), based on one of the most famous sentences in Wealth of Nations: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” One reviewer, Ed Walker, Assistant Attorney General of Tennessee for consumer protection and securities, explained how the question posed by Marçal devastated Adam Smith’s economic ideas, and all systems of economics based on them.
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