What conservatives ignore in Adam Smith's message is killing our economy
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In virtually all current political debate concerning the requirements of American prosperity, the classic argument of Adam Smith remains the fashionable mainstay of conservatives. It was Smith, after all, who reasoned capably and persuasively that a system of private property, although naturally unequal, would nonetheless permit the poor to live tolerably.
Rejecting Jean-Jacque Rousseau’s fully contrary position that, in commerce, “the privileged few...gorge themselves with superfluities, while the starving multitude are in want of the bare necessities of life,” Smith saw in capitalism not only rising productivity, but also the ultimate condition for political liberty.
Significantly, perhaps, Adam Smith published his “Inquiry into the Nature and Causes of the Wealth of Nations” in 1776. A revolutionary book, “Wealth” did not aim to support the interests of any one class over another, but rather the overall well-being of an entire nation. Smith discovered, of course, “an invisible hand,” an utterly unsought convergence whereby “the private interests and passions of men” will lead to “that which is most agreeable to the interest of a whole society.”
Through capitalistic modes of production and exchange, therefore, reasoned Smith, an inextinguishable social inequality might still be reconciled with broad human progress.
But today’s conservative defenders of Smith usually ignore, either deliberately or unwittingly, the full depth of his rather complex thought. A system of “perfect liberty,” as Smith called it, could never be based upon any encouragements of needless consumption. Instead, he argued, the laws of the market, driven by competition and a consequent “self-regulation,” strongly demanded a principled disdain for all vanity-driven consumption.
“Conspicuous consumption,” a phrase that would be used more effectively by Thorstein Veblen at the start of the 20th century, could thus never be the proper motor of economic or social improvement.
To be sure, Adam Smith understood the dynamics of conspicuous consumption, but (and this part is widely disregarded) he also loathed them. For him, it was only reasonable that the market regulate both the price and quantity of goods according to the final arbiter of public demand. Yet, he continued, this market ought never to be manipulated by any avaricious interferers.
More precisely, Smith excoriated all who would artificially create or encourage contrived demand as mischievously vain meddlers of a “mean rapacity.”
An economic recovery built on the sand
Today, of course, with engineered demand and hyper consumption as both permanent and allegedly desirable market features, we have lost all sight of Smith’s “natural liberty.” As a result, we try, foolishly and interminably, to construct our economic recovery and vitality upon sand. Below the surface, we still fail to recognize, lurks a truly fundamental problem that is not economic, fiscal, or financial. Instead, as Adam Smith would have us understand, it is a plainly psychological or human dilemma.
Wall Street’s persisting fragility is largely a mirror image of Main Street’s insatiable drive toward hyper-consumption. This manipulated drive, so execrable to Adam Smith, has already prompted certain learned economists to warn repeatedly against saving too much. Upon reflection, could any advice be more ironic?
Whether Democrats or Republicans, most voters believe that our national economic effort must be oriented toward buying more, as they have been led to believe by pundits and economists alike. No one seems to inquire: Exactly what sort of society can we expect from an economic system that is based upon imitation and conformance?
Contrived demand has not always been a basic driver of our economy. Before television, and before our latest social networking gadgets, such demand could not have had nearly such overwhelming power and effect.
Writing in the middle of the 19th century, the American transcendentalist philosopher, Ralph Waldo Emerson, spoke presciently of “self-reliance.” Foolish “reliance upon property,” Emerson had understood, is the unwanted result of “a want of self‑reliance.”
Now, living apprehensively amid a literally delirious collectivism, the ever-fearful American wants, more or less desperately, to project a “successful” image. This projection, in turn, remains founded upon material acquisition of “all the right things.”
In the final analysis, as Adam Smith himself would have understood, it will be the relentlessly conformist call of American mass society that critically undermines our core economy.
Time to move away from mass consumption
To create a robust economy, and a stable stock market, we Americans will finally have to reorient our larger society away from its long-corrupted ambience of mass taste.
In that expansive part of America that still knows very little of Wall Street, there is now great fragility and a palpable unhappiness. Taught again and again that respect and success will lie securely in high salaries, and corollary patterns of high consumption, the compliant American mass dutifully celebrates “fitting in.”
At the same time, the majority of this nation’s people seem to widely avoid real literature and difficult ideas. Not surprisingly, our universities, for the most part, now appear more genuinely concerned with popular magazine ratings and “branding,” than with serious learning.
In his “Theory of Moral Sentiments,” appearing in 1759, Adam Smith noted that human beings are not made happier by their possessions, but that the rich, in seeking the “gratification of their own vain and insatiable desires,” simultaneously “advance the interest” of society as a whole. Without intending any such general benefit, the wealthiest members of the nation “are led by an invisible hand” to bring forth reductions in social inequality.
None of this should ever be understood to mean, however, that the preferred path to economic growth and stability ought to come from any specifically engineered patterns of hyper-consumption.
Even if we can accept Smith’s entire core argument about the “invisible hand,” America’s best path to economic well-being can only lie in a steady retreat from mass societal consumption, and in sturdy new personal affirmations of “self-reliance.”
Louis René Beres is a professor of International Law at Purdue University. The author of ten major books and several hundred scholarly articles on world affairs, his columns appear in many major American and European newspapers and magazines.