capitalism

Adam Smith and economic freedom

As I finally catch up on the Great Books of the Western World reading project, I come now, somewhat out of order, to Smith. The introduction and first nine chapters of Smith’s The Wealth of Nations technically follow the Declaration of Independence, the Constitution, and the Federalist Papers in the Great Books of the Western World reading list, but I have been reading October’s readings side-by-side and finished Smith first. I have actually had the privilege of spending quite a bit of time reading, contemplating, and discussing Smith over the past few months as I have been engaged in a PhD seminar on “Wealth” as one of the great ideas.

One of the aspects of Smith’s thought that strikes me most each time I read him is what it is that is motivating him. One frequently hears the name of Smith abused in contemporary debates about economic systems. He is often referred to, by those who no doubt have never actually read his work but only seen him mentioned in textbooks, as the father of cold, hard laissez-faire capitalism. He seems most commonly to be seen as a sort of Ayn Rand figure who believed in the virtue of greed.

The reality, as we see in this selection from his most important work, however, is that Smith was motivated essentially by his compassion for the poor. Smith believed that through economic freedom a superabundance of goods and luxuries could be produced which would make a society richer in a general sense, thereby raising the standard of living for even the poorest members of that society. And while Smith may have erred in some of the details of his ideas, the wealth of those nations that have more or less followed his road map today is sufficient evidence in favor of the soundness of his thesis. With but few exceptions, even the poorest Americans and Western Europeans enjoy a lifestyle that far surpasses that of the poor in many other places in the world and that surpasses by a long shot nearly all of the poor anywhere in the world before the modern era. Smith is certainly a thinker with whom we should be more familiar and whose ideas deserve more respect and consideration than they currently receive.

Law and duty, grace and love

Immanuel Kant, in his Fundamental Principles of the Metaphysics of Morals, formulated an ethics of duty in which each person is to do only that which fits the criteria of his “categorical imperative”: “Act only on that maxim whereby thou canst at the same time will that it should become a universal law.” According to Kant, this is the means by which a consistent basis for action and thought can be developed. It is also the means by which we can fulfill the imperative to treat each person as an end rather than as a means to some other or higher end.

Perhaps the greatest challenge ever raised to Kant’s philosophy of ethics is the short exchange of letters he had with Maria von Herbert, a devoted follower of his philosophy. Following the Kantian ethic, Herbert had revealed to her lover, a partner with whom she was deeply in love, a truth about a previous act which she had previously hid from him. As a result of this revelation, her lover had left her. Herbert, in despair, then wrote to Kant asking for his advice. His reply is that she has fulfilled her ethical duty and should be satisfied with that even if the outcome was not what she had desired. Herbert wrote back, asking Kant if she could visit him, ostensibly so that she could see what it looked like for him to live out his philosophy and whether it made his life indeed a good one. He did not reply. Later, Herbert committed suicide. As Rae Langton points out in her recounting of these letters and assessment of their meaning, Kant “thinks we should rely on God to make it all right in the end. But God will not make it all right in the end.” In other words, the fundamental flaw in Kant’s philosophy is that, as with any ethic that is entirely rigid and refuses to accommodate itself to individual circumstances and the complexities of real life, it must invent an imaginary means by which everything will work out for the best in the end. The imaginary “invisible hand” invented by Adam Smith, which will ensure, in spite of the obviously troubled mathematics and physics involved, that a capitalist system creates the greatest wealth for the greatest number, is another example of such figments of the imagination and their necessity in rigid ethical systems. Just as Kant used his notion of God making everything right if everyone follows their duty to refuse to help Herbert, so Smith’s “invisible hand” continues to be used to justify refusing to render aid to the poor.

A similar idea is also found in a non-Western context in the Indian spiritual classic the Bhagavad Gita. In that work, Krishna, an incarnation of the god Vishnu, explains to Arjuna, a warrior who is wavering in the fulfillment of his duty on the battlefield, that God makes all things right in the end and that each person must fulfill their duty according to their station in life. With this as his argument, Krishna continually exhorts Arjuna to enter into battle and do his duty as a warrior. In fact, this idea of morality as duty is perhaps one of the most widespread and pervasive ethical ideas, present to a greater or lesser degree in nearly all systems of thought in nearly all times and places, and it suffers from the same flaws wherever and in whatever forms it exists.

Nikolai Berdyaev is one of the few modern thinkers who have offered a meaningful critique of this nearly omnipresent system of ethical legalism and proposed a viable alternative in a system that might be termed an ethics of mysticism. Drawing on the New Testament and the ideas of especially the Greek-speaking Church Fathers as well as modern existentialist thought, Berdyaev posited an ethics of creative participation in the divine plan for the cosmos. Rather than merely following a set of commands, according to Berdyaev, man is called upon to exercise his own inherent creativity to cooperate with God in the ongoing process of creation and redemption. Ironically, in positing such a system of ethics, Berdyaev is essentially calling upon all people to develop the “holy will” which Kant says is not bound to obey the law because “ought is here out of place, because the volition is already of itself necessarily in unison with the law.” In a similar vein of thought, Augustine once asserted, “love, then do what you will.” The fault of both Kant and Augustine was that neither explored this theme further but each instead, in opposition to the trajectory of the thought of St. Paul and many of the other great mystics of the Christian tradition (as well as other spiritual traditions), chose to formulate yet another ethical system of law and duty rather than grace and love.

Origins of modern capitalism

The emergence and consolidation of the new industrial order meant, first and foremost, that America was becoming a nation of wage earners for the first time. At the start of the nineteenth century. wage labor was but one of many competing forms or systems of organizing productive activity. Skilled artisans produced in small shops, textile operatives labored in large factories, rural men and women made goods at home through the putting-out system, farm families tilled their land, garment workers toiled in sweatshops, and African and African-American slaves performed forced labor on plantations or in rural industries and cities. While this diversity never completely vanished, it did change dramatically over the course of the century. According to the 1870 census, the United States remained a predominantly rural nation, but it had become a nation of employees. Some 67 percent of productively engaged people (involved in gainful occupations) — a majority of the population — now worked for somebody else, dependent upon another person or business for their livelihood. Self-employment was the exception, not the rule. By the century’s end, the “wages system,” as labor critics called it, was dominant.

Eric Arnesen, “Americans Workers and the Labor Movement in the Late Nineteenth Century,” in Charles W. Calhoun, ed., The Gilded Age: Perspectives on the Origins of Modern America, pp. 55-6