Adam Smith (1723-90)
It is time we re-appraised Adam Smith.
Markets are one way to handle conflict. You and I differ on the future value of something: so I am prepared to buy it because I think it will grow in value and you sell it because you think it will decline in value. This is how stock markets work. Indeed the history of humanity is as much characterized by trade as by war. Trade arises out of difference and thrives on it. Adam Smith is claimed by today’s neo-liberals (aka conservatives economically) as the precursor of modern global markets: passionately and with foresight arguing for the invisible hand of markets working without hindrance. In fact, he apparently only uses the term ‘invisible hand’ three times in his million or so words and only once close in meaning to markets working without hindrance. When talking about a merchant deploying his capital he says:
‘He is in this, as in many other cases, led by an invisible hand to promote an end, which is no part of his intention.’
It is interesting therefore that he was commemorated on his gravestone for two books with by implication equal impact: ‘The Theory of Moral Sentiments’ and ‘The Wealth of Nations’. He certainly saw that the two topics were interrelated. Indeed his earliest focus in the Theory of Moral Sentiments was on how we come to see what is right and wrong and his answer was not a purely economic or free market one. Instead he favorably quotes his teacher Hutchinson who said:
‘How selfish soever a man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others and render their happiness necessary to him.’
So often in conflict we miss this essential truth and miss the fact that like a married couple, we are entwined: one’s happiness depending on the other’s: and more surprisingly this is as true of Israelis and Palestinians, Black and White in South Africa or Catholics and Protestants in Northern Ireland. It just takes a long time and much blood to realize it.
Smith thought that we should judge the morality of others as if we were some sort of Impartial Spectator and then apply it back to ourselves. He sees us as capable of a spontaneous ‘sympathy’ (close to what we now call empathy) by putting ourselves in the position of another. Smith thought that we sympathized much more with benevolent actions than displays of hatred. He saw the mirror of society as dark and distorted and his Impartial Spectator is trying to do better than this and judge not what is praised in reality, but what is praiseworthy in a deeper sense. Smith may be naïve to think that human society is relatively egalitarian, but there is something rather wonderfully hierarchy- overturning about:
‘In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar suns himself by the side of the highway, possesses the same security upon which kings are fighting for.’
Of course as noted above, one way to solve conflict is through the market place and Smith is rightly credited with the first systematic investigation into the ‘chaos of industry and commerce’ in what was still a largely pre-industrial economy. Central to his views were the division of labor (‘the division of labor amongst different hands can alone account for this’), the size of the market that constrained it and speculation about the price of goods, in particular natural prices (or what we might call long term prices) and market prices. He thought the key freedom in society was the freedom to choose one’s occupation, as this would allow natural prices to come to equal market prices. He wanted government out of the way of this process not because of some fundamental aversion to government, but because:
‘Civil government so far as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor, or those who have some property against those who have none at all.’
Sounds more like Marx than someone Alan Greenspan who approve of?
Smith remained worried in later life that wisdom and virtue stood little chance against fashion and power:
‘The disposition to admire and almost worship the rich and the powerful (while to an extent natural and conducive to peace in society was) at the same time the great and almost universal cause of the corruption of moral sentiments.’
Smith’s thinking is therefore more paradoxical than is normally presented and we would do well in conflict thinking to leverage not only his better known emphasis on market forces as a tool in resolving difference (if you think this object is worth more than I do: then make me an offer!), but his insistence that the market operates within the bounds set by moral sentiments. We very much need this balance in our current world that careful reading of Smith can provide.
Footnote: Everyone at the time said what a fundamentally kind man Adam Smith was. It makes me think how unfashionable that word seems in our modern world. Who says of a great present day thinker or politician: ‘he was personally very kind’?
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