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| ADAM SMITH and JONATHAN SWIFT (LECTURE NOTES) | VIDEO | ||||||||||
Adam Smith 1564-1569 - Sir John Hawkins, the first English slave trader (2000 in the WIndies by 1600) EMPIRICISM - SMITH'S PLACE IN THE HISTORY OF WESTERN THOUGHT: Smith exhibits an extreme form of empiricism in both The Wealth of Nations and in The Theory of Moral Sentiments. He is rightly seen as one of the founders of the scientific approach to studying human behaviour and of society - which ultimately gives us the social science disciplines of anthropology, social psychology and economics. He is routinely described as the founder of economics - but there were others before him - especially the physiocrats (a dimension of the French philosophical tradition of the enlightenment age). The physiocrats investigated the the topic of why one object (eg a bar of gold) was worth more or less than another object (eg a loaf of bread). Their answer was Rental Theory of Value, a largely speculative and metaphysical doctrine seeing ‘value’ as a thing in itself, arising from the amount of displaced rent for farmland involved. Locke mentions a similar theory in his writings on the rights of property. Smith is not much interested in value theory (which is derived by deductive reasoning from the intrinsic and self-evident need for humans to eat, and therefore to have land to grow things. Smith’s method is inductive, from the amassing of data (such as was available to him) and he uses a comparative method to try and discern general laws of nature (‘human nature’). He is thus more like Newton than Decartes. He is a philosophical materialist and an empiricist; he is later described by Karl Marx as ‘a mechanistic materialist’ - this is fair enough since Adam Smith at several points in the WoN and TMSentiments describes people as being like machines, and of human society of consisting of ‘levers’ and ‘devices’ where one action creates another, etc. Strangely Bertrand Russell does not mention Smith at all, Smith is not even in the index of his HWP. Smith was very unfashionable in the first half of the 20th century (entirely forgotten if Bertrand Russell is anything to go by) because Smith was (rightly) one of the key thinkers of the British Empire and the world of Victorianism generally. In the second half of the 20th Century he became vert fashionable as the claimed intellectual precursor of the ‘neo-con’ or neo-liberal school of economics and public policy making - much admired by Margaret Thatcher and Ronald Reagan and their followers as their answer to the impact the economist Karl Marx (who we will look at later in this series) had on the socialist movement. I think it is right to oppose Smith and Marx; though not perhaps to the extent that Smith’s latter day popularisers might have done. It is not necessarily the case that Smith is a man of he political right - he can be cited (like Rousseau) as a figure of either the contemporary right or left. Smith for example was against the slave trade; and he was not a nationalist (either for his native Scotland - he welcomed the dissolution of Scotland into the United Kingdom as a larger free trade area). He thought that the logical place for the capital of the British Empire was New York. SMITH ON MORALITY (his view is satirized by Jonathan Swift) Morality was a matter of sense data and internal psychology (word not yet coined) which he calls ‘vanity’ or ‘self regard’. Unlike Rousseau, Smith thinks that self-regard (we migth say selfishness or egotism) was if not exactly a good thing, then something which should be accepted as a fact - and social structure and policy should go with the flow (ie assume people will be vain and selfish) and not try to rub against the grain. You can not enact laws to make people be good. Contrary to Rousseau he seems to think that society has little impact on human nature; but that laws which attempt to restrict people seeking their own self-interest will not work; or will create the opposite effect (‘the law of unintended consequences’). SMITH’S LIFE - THE UNION OF SCOTLAND AND ENGLAND Scottish, dominated by the fact of Scottish joining the UK causing dramatic increase in economic growth, especially in Glasgow. Gave desperately poor (Bankrupt) Scotland’s ‘joining’ the union access to the markets of England (much richer) without import tarifs. Gave access to the English (now British) colonies in north America and West Indies. At same there was lots of cheap labour in Scotland - flowing in from the highlands after the destruction of the feudal Clan (tribal) system (Tartan, etc) which was poor and agricultural, but stable. The new English landlords bought the Highlands and drove the peasants off the land - creating huge sheep runs (and also pheasant shooting ranges) - landless peasants were ‘planted’ in northern Ireland (Ulster) or sent to English colonies in North America. ‘British’ empire was often Scottish in personnel - many modern white Americans trace roots back to Scotland - hence Klansmen of the poor southern US whites - explicit reference back to the clans of the Scottish highlands and Ulster. Glasgow takes over from Bristol as the main city of the triangle trade. Making ships for the transatlantic trade made Glasgow shipyards - rapid industrialization, technological innovation - steel making for ships, scientific instruments, steam engine - James Watt the inventor of the steam engine was at Glasgow University at the same time as Smith was philosophy professor. ECONOMIC UNION - FREE TRADE ZONE - ACCESS TO MARKETS THE DARIEN DISASTER - BANKRUPT MERCANTILISM The Darien experiment before union (conquest?) with/by England the Scottish state had attempted to establish a colony in the New World - in Darien in Panama. It was done on a MERCANTILIST basis - ie directed by the state using a Royal Chartered Company (the kings of Scotland were the same persons as the Kings of England, even though there were separate parliaments and a border until the act of union between England and Scotland). Darien was a complete disaster - 2,500 colonists starved to death. There was no shortage of settlers though because of the large number of beggars and destitute ex-peasants who had come off the land in the Highlands as Jacobite resistance. Watkins film looks dated note - it is 50 years old - but it was one of the first ever drama documentaries - factual reconstruction of events - so it is important to look at that) http://www.youtube.com/watch?v=e2BVeAz4Vzg&feature=related GLASGOW - TRANSATLANTIC BOOMTOWN- NAVIGATION ACTS Mixed with merchants and seamen. The port was being held back the economic regulation of Mercantilism - the view that the purpose of economic activity was to create wealth and strength for the King (or perhaps the town corporation on the Dutch model; or the craft guild). Thus there were many restrictions on the hire of labour (there was a maximum number of apprentices you would hire, which was a constrain on the development of factories). There was the economic theory of the physiocrats that land was the source of all wealth, and that amassing land and become a land owning aristocrat was the purpose of economic activity. Finance and merchants were looked down upon - there had been the Catholic church’s ban on ‘usury’ (lending money for profit, with interest) which meant that banking was under developed and at one point confined only to non-Christians (in effect at that time, Jews). Despite the Glasgow of his day was undergoing very rapid economic growth - the whole place was a building site and money was constantly being raised/borrowed to build ships, hire a crew and go Africa to pick up slaves and deliver them to West Indies and North America and bring back to Glasgow sugar, cotton and tobacco. The triangle traffic - extremely profitable but held back by feudal customs and dues (eg about hiring captains and crew, about paying import duty - pace Boston Tea Party). The Navigation Acts were irksome (but also stimulated ship building). Goods from the colonies could only be carried in English (now ‘British’ ships; and the crews had to be at 2/3 British/Scottish - even though sailors were cheaper to hire elsewhere. It would have been cheaper to use (more advanced) Dutch ships with African crews, but this was not allowed and was a constraint on profit, slowing down economic growth Smith thought. Trade should be to enrich the individual merchant, Smith thought, not the state. But in so doing the State would be enriched by and by because of its ability to impose modest taxes on the larger volume of trade and greater profitability generally. THE BOOK ITSELF - THE WEALTH OF NATIONS - PREMISE WHAT IS ‘WEALTH’? Smith’s concept of ‘wealth’ is complex and goes beyond the amassing of money or gold - to include the good life generally including social peace, order, education, ability to appreciate art and generally to live as a gentleman (the ideal would be something like Joseph Addison). All this is achieved by civilization and by trade. He favours the accumulation of wealth, and thinks that rich people are very socially useful because they can only consume the same amount of things (eg food) as everyone else, more or less. The wealthy will have a surplus which they will use to employ others (making things for them) and this will spread wealth through society. They will also sponsor art (they have the money to fund musicians to write opera; and to give money to universities to pay philosophers. Smith himself (like Locke) was dependent on a very rich merchant backer who had him on the payroll. Poor people don’t commission opera or create philosophy chairs in universities - so the rich are to be preferred to the poor if you are interested in developing civilisation (of the type defined by European gentlemen such as Addison or Locke or Smith). He does not have Rousseau’s concern about inequality. He is more like Locke thinking that wealth and poverty is relative - that the poorest person in a rich society is better off than the richest person in a poor society - eg the poorest person in Britain today probably has access to a flushing toilet, televison and heating of some sort - not even the King in Adam Smith’s day had such luxuries, and these benefits are derived from economic growth (as we would say) or ‘the progress of opulence’ as smith would say. “The rising tide (of economic prosperity) lifts all boats, large and small”. WHY IS ONE COUNTRY MORE WEALTHY THAN ANOTHER? The first question set in the WoN – why is one object worth more than another? Locke pondered the same question in his constitutional writings. Property was derived from a man’s own work; and that meant farming and selling the produce of farm land. Glasgow was rich because of the New World – the West Indies. He was puzzled by India and China. He was aware that these had been great and powerful civilizations – but how had they declined. The model for decline in Europe was the barbarian invasions at the end of the Roman Empires, but there had been no such devastation in India, or China. Were the people merely lazy? What accounted for the relative wealth of one country as opposed to another. The answer is in POLITICAL ORDER. Countries were wealthy he found when the government did not prevent people from pursuing their own self-interest. When everyone follows their self-interest; this will promote the good of all; and will allow the whole nation to become wealthy (indeed the whole world). SMITH ON HUMAN NATURE - THE MIND IS A BALANCING MACHINE Human Nature (psychology) – Behaviour – his creed is Humanist in the sense of Machiavelli and Hobbes, that there is no real good or evil, and generally he is amoral morality which is central in theist views of society and politics, is completely absent – people are just what they are, they do not act for a moral purpose. People are conflcted and complex. The central conflict is between what he calls ‘self love’ (something life selfishness) and ‘vanity’ – which is a desire to be admired by others. Thus if we drink use all the milk in the communal kitchen in your shared student flat; then you will satisfy your ‘self-love’ but everyone is going to dislike you. This presages modern psychology with ideas such as the ego and the id (Sigmund Freud, later). If you give to charity, it assuages your vanity; but your self-interest (or self love) prevents you from giving too much to charity. It is a balance; a self-correcting mental mechanism; a machine like an internal gyroscope. Why was China stagnant? What was the lesson for England/America?
THE HIDDEN HAND OF THE MARKET This view of human nature leads directly to his famous formulation of the hidden hand of the market. Here Smith is like Newton, he is seeking for universal laws – Newton in the world of natural objects, Smith in human nature. Smith believes that the Hidden Hand is a universal principle, similar to Newton’s laws of motion (law of gravity). You can thwart the law of gravity by pumping water up hill – but this is hard work and ultimately doomed. To defy the law of the market – the law of free market economics, is a similarly doomed enterprise – though political authorities will do so (because of the vanity of the King or the politicians). They do this by for example fixing the price of goods and services, or adding taxes or customs duties. These political acts are contrary to the law of the hidden hand and are ultimately doomed. Thus for Adam Smith a law like the minimum wage (now) or the Navigation Acts (then) will promote poverty rather than wealth because consumers will buy cheaper goods made by people working for wages lower than the minimum wage – thus fixed wages, or increased wages decreed by the government for reasons of ‘vanity’ (eg political popularity) will merely create unemployment. This government interference, government regulation not only will not work, but it will distort the operation of the market, make the economy less efficient and cause stagnation. Since in his four fold theory of social development society is dependent on economics, the society will stagnate – that is why (in his survey) one country is richer than another – that the rulers have attempted to deny the free operation of the hidden hand of the market. Left to their own devices people will so whatever they can to make a living, and hey will use whatever advantages they have to hand – and this causes rapid economic growth and social development. THE LAW OF UNINTENDED CONSEQUENCES The law of unintended consequences – private vice can produce public good (hypocrisy being a good example; greed another in so far as it forces people to seek to maximize economic efficiency). Good intentions often bring bad outcomes – for example you create more university places to create economic growth; but the main result is to lower wages in the retail sector (Good to Bad) or you develop weapons systems and the cold war, but you come up with the internet (Bad to Good). So you may give money to a beggar to help him; in fact it harms him because it confirms him in his status as a beggar (satirized by Addison – Sir Andrew Freeport) The law of direct and indirect consequence – and the fluid object (this anticipates Hegel and German idealism). There are no static objects to be contemplated – each object is in a chain of causality – something is causing it to be/ and then in turn this thing will cause something else to be and so on. There can be chains of ‘cumulative causality’ – (vicious circles and virtuous circles) and these are very important for understanding how economics, markets, the hidden hand and comparative advantage (key concept) work. Smith is a mechanistic materialist – everything is a machine – the human mind, society, etc. CONCLUSIONS/ POLITICAL PRESCRIPTIONS
He is somewhat teleological, and believes in progress (culturally characteristic of Hannoverian Britain). Society, association is for Smith a machine which will naturally evolve towards wealth and prosperity (progress) as whole, though particular people within that machine might temporarily become less wealthy. A peasant might become destitute because the food he grows can be grown more cheaply elsewhere and then sold on the free market. But ultimately that peasant will find something to do, and it will be a better use of his time than whatever he was doing before. So the Hidden Hand will naturally tend to towards economic growth and greater wealth eventually for all people. In his system of economics (sometimes classical economics)
There is no incentive for division of labour, promotion of skill or migration of labour - so the Hidden Hand can not work. In fact slavery is a good example the law of unintended consequences - it seems that free Labour will create rapid accumulation of wealth; in fact it leads to stagnation and poverty. As ever with Smith and his humanism, this is a matter of conformity to universal human nature, and not morality.
Trade promotes interdependence between people and eventuially whole countries as the process of division of labour progresses on an international basis - ‘globalisation’. The general bourgoise manners of the shopkeeper or the salesman become the norm, which require good timekeeping and good manners. The chains of which Rousseau speaks are very much to be welcomed, because they bring a kind of security and they can be renounced at any time if they are too irksome under the doctrines of contract. Peace is central - violence is the main enemy of opulence - so he takes much from Hobbes (unusual for a liberal, and separates him from Locke and democratic liberals). Robinson Crusoe - Man Friday and the cannibals. There is a superb statement of this point of view in the important film about journalism and the media and economic theory‘Network’ (1977): http://www.youtube.com/watch?v=RzSj1yNZdY8 JONATHAN SWIFT A Modest Proposal was published 50 years before the Wealth of Nations, but it captures the emerging intellectual approach of Smith’s economics perfectly - it takes it to the point of reducto ad absurdum (classical rhetoric) whereby persons operating as soulless calculating machines will conclude that their relative economic advantage is in breeding children to eat them as food, and in fact to butcher their own children to sell the meat? Why not do that? That will be the topic for discussion in the seminar, where we will have A Modest Proposal as a text in front of us.
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