On the Wealth of Nations

by P. J. O'Rourke

  Taxes drive people crazy. Smith as much as admitted it when he declared, rather crazily, 'After all the proper subjects of taxation have been exhausted … they must be imposed upon improper ones.'70

  'Advice, n. The smallest current coin.'

  – Ambrose Bierce, The Devil's Dictionary

  Not all of Adam Smith's policy recommendations were worthless or self-canceling or cracked. He dismissed government ownership of businesses in one sentence: 'The state cannot be very great of which the sovereign has leisure to carry on the trade a wine merchant or apothecary.'71

  He cleared the fog about national debt, which isn't a Keynesian stimulus to the economy or a Milton Friedmanish drag upon same, but a moral outrage. It allows government to indulge in sneaking:

  Every new tax is immediately felt more or less by the people. It occasions always some murmur, and meets with some opposition … Debt is not immediately felt by the people, and occasions neither murmur nor complaint.72

  And larceny:

  When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid.73

  And counterfeiting. Because the devaluation of currency that results from such defaults should properly be called …

  … an injustice of treacherous fraud.74

  This inevitably leads to inflation, which …

  … occasions a general and most pernicious subversion of the fortunes of private people; enriching in most cases the idle and profuse debtor at the expence of the industrious and frugal creditor.75

  So every time you cash your social security check you're buying a golf course for Donald Trump.

  In 'Of the Expence of Defence' Smith advised us to be glad that defense is expensive: 'In modern war the great expence of fire-arms gives an evident advantage to the nation which can best afford that expence.'76 This is why the Berlin Wall came down. The Star Wars missile defense didn't work, but only the United States could afford to build one to find that out. The USSR was not in an economic position to threaten America with Mutual Assured Bankruptcy.

  Adam Smith would have been a first-rate National Security Advisor in the Reagan administration. But even the best advice can't always be given twice. 'The invention of fire-arms,' wrote Smith, 'an invention which at first sight appears to be so pernicious, is certainly favourable both to the permanency and to the extension of civilization.'77 The Tigris–Euphrates river valley is the cradle of civilization. The Iraqis can afford guns.

  A policy advisor, even more than the politicians he advises, should know his place. And that place should be nowhere near the economy. At the end of book 4 of Wealth, Smith observes, 'The sovereign is completely discharged from a duty … for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people.'78 And Smith goes on to say all that ever needs to be said about the duties that government does have:

  First, the duty of protecting the society from the violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it … ; thirdly, the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain.79

  And yet, on that third point, if the works and institutions aren't for the interest of any individual, why are we individuals paying to erect and maintain them? This brings us – and Adam Smith – back to politics.

  CHAPTER 12

  Adam Smith's Lost Book

  Adam Smith didn't write his book on politics. There were a number of reasons that the third part of Smith's betterment trilogy, his work on 'jurisprudence', was never finished. He was busy making revisions to The Theory of Moral Sentiments. He became a government official in Scotland. He died.

  But I wonder if there wasn't another reason. Smith was a moral philosopher. It may be that at some point he realized politics isn't a good place for philosophy and is no place for morals. Could it have been while he was writing book 5 of The Wealth of Nations? Smith's old footnote on himself in Moral Sentiments about being concerned with 'a matter of fact' rather than 'a matter of right' could never be applied to a consideration of politics. Politics is all about right, which is to say wrong.

  Political systems are founded upon paradoxes too deep for philosophy. Adam Smith was aware of this when he was writing Moral Sentiments in the 1750s. He alluded to it in the first chapter: 'A prison is certainly more useful to the public than a palace; and a person who founds the one is generally directed by a much juster spirit of patriotism, than he who builds the other.'1 Yet no father says to a newborn baby, 'Someday you may be warden of Leavenworth.'

  The best intentions of political systems are refuted by dilemma. Political leadership is charged, Smith wrote, with 'promoting the prosperity of the commonwealth, by establishing good discipline, and by discouraging every sort of vice and impropriety'.2 To neglect this 'exposes the commonwealth to many gross disorders and shocking enormities, and to push it too far is destructive of all liberty, security, and justice'.3

  Politics is unreceptive to the obvious and simple system of natural liberty. Imagine the politician who stood on the hustings and said, 'Oh, do what you want.'

  As for the more successful kind of politicians, Smith addressed their character in a section of Moral Sentiments added in 1790:

  They have little modesty; are often assuming, arrogant, and presumptuous; great admirers of themselves, and great contemners of other people … Their excessive presumption, founded upon their own excessive self-admiration, dazzles the multitude … The frequent, and often wonderful, success of the most ignorant quacks and imposters … sufficiently demonstrate how easily the multitude are imposed upon by the most extravagant and groundless pretensions.4

  But – and in politics there is always a but …

  … when those pretensions are supported by a very high degree of real and solid merit, when they are displayed with all the splendour which ostentation can bestow upon them, when they are supported by high rank and great power … even the man of sober judgment often abandons himself to the general admiration.5

  What may have been most defeating to Smith about politics was the conundrum of justice and injustice in even the most justifiable political systems. In The Wealth of Nations, Smith stated the requirements for a political order that promotes well-being:

  Commerce and manufactures can seldom flourish long in any state which does not enjoy a regular administration of justice, in which the people do not feel themselves secure in the possession of their property, in which the faith of contracts is not supported by law, and in which the authority of the state is not supposed to be regularly employed in enforcing the payment of debts.6

  Justice is necessary for protecting property. But property is necessarily unjust – 'Wherever there is great property, there is great inequality.'7 Smith wrote that we can dispense with law. 'Where there is no property, … civil government is not so necessary.'8 But then we will get the opposite of law (and property) in the lawless proprietorship of feudalism or Mao. So political systems must be established to preserve the injustice of property by administering justice.

  Adam Smith was not an absurdist. Political critiques are better left to a Jonathan Swift or a Bernard Mandeville. In the early 1700s, Mandeville wrote The Fable of the Bees, a poem and commentary in which, Mandeville stated, 'I flatter my self to have demonstrated that … what we call Evil in the World, Moral as well as Natural, is the grand Principle that makes us sociable Creatures.'9

  The worst of all the Multitude

  Did something for the Common Good.

  …

  … whilst Luxury

  Employ'd a Million of the Poor,

  And odious Pride a Million more:

  Envy it self, and Vanity,
/>
  Were Ministers of Industry;

  Their darling Folly, Fickleness,

  In Diet, Furniture and Dress,

  That strange ridic'lous Vice, was made

  The very Wheel that turn'd the Trade.

  …

  Thus Vice nurs'd Ingenuity,

  Which join'd with Time and Industry,

  Had carry'd Life's Conveniences,

  It's real Pleasures, Comforts, Ease,

  To such Height, the very Poor

  Liv'd better than the Rich before,

  And nothing could be added more.10

  One of Mandeville's other works was A Modest Defence of Public Stews; or, An Essay upon Whoring. He was even more poker-faced than Swift in his efforts pour épater les bourgeois. This caused Smith to have a sense of humor failure in Moral Sentiments: 'There is, however, another system which seems to take away altogether the distinction between vice and virtue, and of which the tendency is, upon that account, wholly pernicious: I mean the system of Dr. Mandeville.'11

  A 'system which seems to take away altogether the distinction between vice and virtue' – what is that but Poli Sci in thirteen words?

  One answer to the political quandary is a populist extension of Smith's obvious and simple liberties. Modern political cynics can at least cite Winston Churchill's dictum from his speech to the House of Commons in November 1947: 'Democracy is the worst form of government, except for all those other forms that have been tried.' But in Smith's time democracy hadn't been tried. Adam Smith had no such touching faith to fall back upon.

  There is nothing theoretically wonderful about rule of the people, by the people. For example, in one of Smith's lectures on moral philosophy, he theorized that slavery could never be abolished in a republic because, 'The persons who make all the laws in that country are persons who have slaves themselves.'12

  Most of the eighteenth century's information about democracy was more than two thousand years old. Like any educated man, Smith knew the history of the Peloponnesian Wars. It's a long story that can be briefly told. Democratic Athens screwed up. Smith didn't consider the more recent experiments in democracy to be encouraging. He looked at Calvinist Protestants in Switzerland and concluded that their 'right of electing their own pastor … seems to have been productive of nothing but disorder and confusion, and to have tended equally to corrupt the morals both of the clergy and of the people'.13 (John Calvin had the anti-Trinitarian Michael Servetus burned at the stake in 1553.) Nor was Smith impressed by what he'd seen so far of democracy in the American colonies. He noted the 'rancorous and virulent factions which are inseparable from small democracies',14 and predicted that if the Americans won their independence, 'those factions would be ten times more virulent than ever.'15 He thought America's internal disputes 'would probably soon break out into open violence and bloodshed'.16 Smith was wrong – about 'soon'. It would be eighty-five years before the bombardment of Fort Sumter.

  However, if one can't place one's faith in a majority of people, then one has to place one's faith in a minority of them. And Smith did: 'Upon the power which the greater part of the leading men, the natural aristocracy of every country, have of preserving or defending their respective importance, depends the stability and duration of every system of free government.'17 This trust in a 'natural aristocracy' led Smith into a dangerous, even Latin American, line of reasoning:

  Where the military force is placed under the command of those who have the greatest interest in the support of the civil authority, because they have themselves the greatest share of that authority, a standing army can never be dangerous to liberty … The security which it gives to the sovereign renders unnecessary that troublesome jealousy, which, in some modern republics, seems to watch over the minutest actions, and to be at all times ready to disturb the peace of every citizen.18

  It's impossible to imagine Adam Smith writing such nonsense about morality or economics. He's got the invisible hand carrying a swagger stick. He's put the Impartial Spectator in a stately home on broad acres. Smith understood how natural liberty works in our ethics and our wallets, but he didn't have a clue how it could operate in the voting booth. When he concocted a recipe for politics he replaced organic natural liberty with processed and genetically modified 'natural aristocracy'.

  It's no use criticizing Smith. After 230-odd years of experience we still don't know much about democracy. We have discovered that it works. If you compare the countries that have the greatest degree of democracy with the countries that have the greatest degree of other things we prize, they are the same countries. But an examination of any democratically elected government leads to deep puzzlement about why democracy works. And every democratic election produces a dismal display of how democracy works. Maybe we the people, with all our idiocies, cancel each other out. Maybe politically empowered people are different from other pests and predators – the only thing worse than a lot of them is a few.

  Small doses of politics can make life better, in the way that taking small doses of poison every day was said to make King Mithridates of Pontus immune to poisoning. But politics, as an enterprise, does not lend itself to being part of a project for the betterment of human life. Politics is a different project altogether. Smith knew this. He argued for the distinction between morality and politics in The Theory of Moral Sentiments:

  What institution of government could tend so much to promote the happiness of mankind as the general prevalence of wisdom and virtue? All government is but an imperfect remedy for the deficiency of these.19

  He argued for the distinction between – and the disentanglement of – economics and politics in The Wealth of Nations:

  The mean rapacity, the monopolizing spirit of merchants and manufacturers, who neither are, nor ought to be, the rulers of mankind, though it cannot perhaps be corrected, may very easily be prevented from disturbing the tranquillity of any body but themselves.20

  And of politics itself, he declared:

  The violence and injustice of the rulers of mankind is an ancient evil, for which, I am afraid, the nature of human affairs can scarce admit of a remedy.21

  CHAPTER 13

  An Inquiry into Adam Smith

  Adam Smith did admit of one remedy to the violence and injustice of the rulers of mankind – for mankind to rule itself. He didn't propose democratically selecting our own leaders. They turn out to be violent and unjust anyway. And foolish. They have a dilly of an ego. They have a dally with their staff. They dillydally on issues of national urgency. They listen to their harebrained spouses, obey their raving political advisors, and they get their pictures taken with Gerry Adams and Jack Abramoff. What Smith wanted us to do was use our mental and physical capabilities to render the rulers of mankind as unnecessary and as inconsequential as possible, to leave them in their drafty castles throwing chicken bones on the floor.

  In this and other ways Smith's philosophy was solidly based upon and securely fastened to reality. His thoughts could be used. The Theory of Moral Sentiments and The Wealth of Nations leave the reader with workable rather than ontological (whatever that may mean) ideas. It is as if my Introduction to Philosophy class had dropped Kant's Critique of Pure Reason and taken up a critique of my little sister's attachment to that long-haired creep with a motorcycle.

  But Smith was a philosopher. Moral Sentiments and Wealth may offer a program for practical thinking, but they do not offer a practical program. They certainly do not offer a practical political program, as Smith's advice on politics showed.

  Philosophy is, I crib from Webster's Third New International, definition 4a, 'the sum of an individual's ideas and convictions'. (And, incidentally, you have to read down to 4a before you arrive at a useful definition of philosophy.) There is no need for us to examine the sum of the ideas and convictions of the man who repairs our car, unless he's been convicted of grand theft auto or has an idea that molasses should go in the carburetor. The mechanic's – or even the president's – private life shouldn't much concern
us. But a philosopher is different. We have a legitimate interest in knowing what sort of existence the sum of Adam Smith's ideas and convictions resulted in. A man's life doesn't confirm the truth of his thoughts. Men's thoughts about Charlize Theron demonstrate that. But a life is an exhibit of evidence – Exhibit 4a, if you will – in the trial of those thoughts.

  This evidence is of special importance in the case of a philosopher who espouses freedom and has the freedom to exercise his own espousal. For example, Jean-Jacques Rousseau, so admired by eight or nine generations now of romantics and radicals, should be indicted. The author of The Social Contract kept an illiterate laundress as his mistress and treated her like hell for thirty-three years. Their five children were put in orphanages at birth. Rousseau didn't bother to name them. Smith himself once admired Rousseau, telling a visitor that 'Rousseau conducts the reader to reason and truth by the attractions of sentiment and the force of conviction.'1 But Smith also wrote a letter from Paris to David Hume about 'this hypocritical Pedant', telling Hume, 'I am thoroughly convinced that Rousseau is as great a Rascal … as every man here believes him to be.'2 It is doubtful that Smith allowed himself to be conducted by Rousseau to reason or to truth or to anywhere else without keeping a close eye on the path down which he was being led. It was Rousseau, and definitely not Smith, who wrote, 'Everything is at root dependent on politics.'3

  Who Adam Smith Really Was, and to What Extent It's None of Our Business

  We have good reason to learn about the life of Adam Smith, but there are two problems. The first problem is Smith. He didn't keep a diary. He was a fitful correspondent without much interest in collecting the letters he received. He burned his scholarly notes. He had no toady to write down his every aperçu. He didn't blog.