I’m generally averse to sweeping generalisations in philosophy and politics alike. Nevertheless, I’m going to start with one here – one that I think is simply beyond dispute. Namely, and specifically: love it or hate it, the phenomenon that we call “capitalism” may well have run its course.
I say this because right now there exists a widespread consensus across both left and right that capitalism isn’t working, and that we need to either change it or replace it with some other form of economic organisation. In this vein, on the left we’re seeing a remarkable revival of enthusiasm for “democratic socialism”. But on the right, which has traditionally championed capitalism, we’re seeing unprecedented skepticism about free trade and enthusiasm for protectionism. And on both sides, we see profound worries about the social and political effects of economic inequality.
As a result, whatever parties come to power in different parts of the globe in the coming years, I suspect we’re in for a big change. And whether one welcomes this or fears it, it’s incumbent on us to think about what may and should come next. For I worry that if we don’t, given the state of our politics, there’s a very good chance that what comes next will be regress rather than progress.
It’s with that in mind that I think we do well now, more than ever, to have a look back at capitalism’s ostensible founding father, Adam Smith. Smith has, for the better part of 250 years, been both celebrated and castigated for his role in launching the system that is presently under such fire. Now, whether that praise and blame is deserved is the subject for another piece. Here my aim is different. For now, I want to argue that a focused look back at Smith’s philosophical and political vision can provide us with a useful guide as we try to move forward economically and politically today.
I have three reasons for thinking this. One is properly economic and political, while the other two are more properly philosophical. On the economic and political front, Smith built his defence of commercial society on a set of very specific moral foundations that have only recently come to be appreciated even by scholars. Put simply: Adam Smith considered free markets and free societies to be good specifically for their capacity to alleviate poverty.
This of course isn’t the Smith that many have come to know and love (or, as it may be, revile). In the popular imagination, Smith’s reputation has long been tied to the idea of the “invisible hand”, a device that has been used to justify all sorts of economic and political arrangements. But in his first mention of it in print (one of only two, in fact), Smith shows that he understood the invisible hand to be a mechanism for the just distribution of necessary goods. This mention comes in 1759 in his first book, The Theory of Moral Sentiments. Here Smith uses his famous metaphor to describe the relationship of rich and poor in advanced commercial societies. In these the rich, driven by “natural selfishness and rapacity” seek to gratify “their own vain and insatiable desires”. Yet the end result of their selfishness is to “divide with the poor the produce of all their improvements”. The result is that the rich, for all their selfishness, are “led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among its inhabitants”.
Smith uses the invisible hand to help us see how complex, interdependent systems can generate certain morally-desirable outcomes – in this case, poverty relief – from less than morally-edifying dispositions – in this case, the narrow self-interest of the wealthy. In so doing, he subtly but decisively shifts the focus away from the problem of inequality to the problem of poverty. For, as he aims to show here and elsewhere, beneath the plain and palpable inequalities of rich and poor evident to even the most casual observer of society, less-evident mechanisms are working to alleviate poverty and raise the standard of living of the least well-off.
This shift in focus from inequality to poverty also animates Smith’s study of political economy in his more famous book, the Wealth of Nations. The Wealth of Nations is a book more often cited than read – and when read, read in excerpts rather than cover-to-cover. But when we open its cover, we see that the Wealth of Nations announces itself as the work of the former Professor of Moral Philosophy in the University of Glasgow. And reading the book’s first section, the “Introduction and Plan”, we see why a moral philosopher may turn to political economy. What makes the “wealth of nations” not just an economic good but a moral good, we there learn, is that the opulence of “civilized and thriving” nations serves to preserve such nations from those desperate and tragic conditions of poorer nations which “think themselves reduced, to the necessity of sometimes destroying” their unproductive and most vulnerable members.
For Smith then, commercial societies are good, first and foremost, because of their capacity to generate “that universal opulence which extends itself to the lowest ranks of the people”. In short, the mark of a flourishing society is not its capacity to make the rich richer but its capacity to render the least well off less destitute. Smith’s defence of free markets is then founded on an overriding concern for human welfare, and especially the welfare of the poor. In using the market mechanisms traditionally associated with the right to achieve the social goals traditionally associated with the left, Smith’s understanding of the intersection of morals and economics cuts across our contemporary polarised bifurcations. It also can help us clarify the problem that we look to economics to solve. For both of these reasons, I think we do well to revisit Smith if we hope to see clearly where we ought to go from here.
All that said, this is yet only one of three reasons why I think we do well to recur to Smith right now. The other two reasons however require us to shift focus, and specifically to shift from economics and politics to moral philosophy. They also require another sort of shift. To this point I’ve focused on Smith’s understanding of the benefits of market society. But Smith was also profoundly aware of market society’s costs; no myopic ideologue just out to sell his vision, Smith tells us the full story, warts and all. His critical comments are in fact so pointed that the unaware might assume them to be the words of Marx or Rousseau rather than those of capitalism’s founding father.
Smith’s account of the downside or negative externalities of market society turns on the idea of “corruption”. Corruption, he thought, was a direct and maybe even necessary condition of opulence in advanced civilised societies. Various aspects of this claim would be developed in each of Smith’s two books. Thus, in The Theory of Moral Sentiments, Smith explains that what drives our efforts to become wealthy isn’t simply a desire for money, but desire for the status that wealth brings. In the end, it’s not simply a bigger bottom line that we’re after when we struggle to “better our condition”. The truth is that “to be observed, to be attended to, to be taken notice of with sympathy, complacency, and approbation, are all the advantages which we can propose to derive from it”.
But this search for status comes at a profound physical and psychological and social cost, Smith insists. At a variety of places, he shows us people who have become so obsessed with wealth and status that they’ve forgotten why they wanted such goods in the first place. Miserable and exhausted, they wonder, on their death-beds, whether the game was worth the candle. Further, the costs of their pursuits, Smith shows, extend to others. These costs are especially evident in the way the self-obsessed forget about others. Thus, the deep irony: “This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments.”
The idea of corruption would reappear in Smith’s later book. The Wealth of Nations famously begins with a celebration of the wealth-creating engine of commercial society: the division of labour. Specialised labour, we learn in the first chapter of the first part of the book, is the essential key to the increased productivity that makes consumer goods affordable to all. But there’s another side to the division of labour – a side that only those readers with the persistence to read the Wealth of Nations to its end will see. Nearly a thousand pages after his initial praises of the division of labour, Smith lets the other shoe drop. In the course of his proposal for universal public education at state expense, Smith explains that the same specialised and repetitive labour that is so efficient on the factory floor leads to the “mental mutilation” of the labourer himself – and indeed to the point where such a worker becomes “as stupid and ignorant as it is possible for a human being to become”. Cheap commodities are genuine goods, especially for a poor worker. But are they worth it if they’re “acquired at the expense of his intellectual, social, and martial virtues”?
Thus a second reason to read Smith today. Smith forthrightly presents the material benefits and the moral ills of modern commercial society alike. In this regard, he offers not only a remarkable example of intellectual honesty and balanced assessment, but also helps us to identify with precision the specific ills endemic to market societies that any change in them ought to aim to remedy.
With this in place we can turn to the third reason why Smith remains valuable. To this point, we’ve presented Smith as offering something like a balance sheet when it comes to market society, with material opulence on one side of the ledger and moral corruption on the other. And if he had just left things here, we would seem to be left with a simple trade-off: virtue for prosperity. But Smith himself didn’t see us as condemned to this sort of tragic either/or choice. In fact, much of his work as a moral philosopher aimed to show how virtue might be recovered in modern market societies, even amidst their opulence.
And here, I think, is where the story gets really interesting. At the end of his life, Smith went back to his first book, The Theory of Moral Sentiments, and revised it, adding to it a large new section on virtue. This is interesting for a number of reasons, but especially because it comes after he had already written the Wealth of Nations and thought deeply about questions of virtue and corruption in commercial societies. As a result, we have to read Smith’s theory of virtue as part of his economics. And further: this connection of his theory of virtue to his economics also renders Smith’s theory of virtue somewhat unique in the history of moral philosophy. Plato and Aristotle and the Stoics and many other ancient thinkers all wrote extensively about virtue and the good life, of course. But they wrote for a world remarkably different from ours. Smith on the other hand offers us a theory of virtue crafted to help us navigate the unique challenges of the modern commercial world in which we today all live.
How then did Smith understand virtue and its role today? One clue comes in how he describes the very task of moral philosophy itself. Moral philosophy properly understood, he tells us, has two tasks. One is to account for the mechanisms of moral judgment: how it is “that the mind prefers one tenour of conduct to another, denominates one right and the other wrong”? But Smith later calls this question “a mere matter of philosophical curiosity” – one that may be “of the greatest importance in speculation”, but “is of none in practice”. The fundamental task of moral philosophy is thus to answer a different question, namely: “wherein does virtue consist?” Or, as Smith further says, “what is the tone of temper, and tenour of conduct, which constitutes the excellent and praise-worthy character?”
Smith’s emphasis on concepts of virtue and character and flourishing marks him as a modern heir of the ancient tradition of virtue ethics. This renders him somewhat unique in his age. But Smith was hardly a reactionary. Far from simply calling for a simple return to antiquity, Smith was concerned to show a certain characteristically ancient approach to ethics – an approach that focused on questions of living well and good character – could be of very great value to us if suitably tailored for our age.
How then did Smith understand the virtuous life, and how does that understanding respond to the moral challenges of modern commercial society? At the risk of saying too little where so much in fact needs to be said (and which I have indeed tried to say in much greater detail in several books), we might do best to cast a quick glance at the individual who Smith identifies as the peak figure of his ethics, the one he calls “the wise and virtuous man”. The wise and virtuous man is special for several reasons, not least of which is that he has managed to resist market society’s siren call of wealth and status. To use Smith’s own formula, the wise and virtuous person is driven less by the love of praise than the love of praiseworthiness; where others want to appear good, the wise and virtuous person wants to be good.
And not good in any ordinary sense. What distinguishes the wise and virtuous man is a desire “to assimilate his character to the archetype of perfection”. Now this sets the bar high – too high for flawed human nature ever to live up to in fact, Smith thinks. But herein lies the key lesson. When the wise and virtuous realise how short of perfect they in fact are, they experience “humiliation”. But this humiliation turns out to be the very key to their excellence insofar as it enables them to transcend the self-obsession characteristic of individuals in market societies, and which, as we know, too often leads such individuals to “despise” or “neglect” others, especially the least and lowest. But not the wise and virtuous person:
“He feels so well his own imperfection, he knows so well the difficulty with which he attained his own distant approximation to rectitude, that he cannot regard with contempt the still greater imperfection of other people. Far from insulting over their inferiority, he views it with the most indulgent commiseration, and, by his advice as well as example, is at all times willing to promote their further advancement.”
The highest peak of human excellence is achieved precisely by the one aware of their limits. And the effect of this awareness is to take the excellent person outside of themselves, and to lead them to dedicate themselves to the service of others, and specifically to “promote their further advancement”.
In the end, it’s this combination of wisdom and virtue that Smith thought his world most needed. It’s hard to imagine that our world might not benefit from it as well.