A year of reading Adam Smith
The founding father of liberal economics was also a brilliant philosopher, historian and prose stylist. After many months spent in his company, the reader learns of a very different Adam Smith from the one he thought he knew
The flight lounge was Kuala Lumpur, the crisps were jackfruit, and my companion was Scottish and had been dead for over 200 years. In March last year, I had left home in Delhi for a short trip to Vietnam. It was the first stop on a series of travels in the East and West. My cut-price ticket allowed for no checked-in luggage; what I had on me was all I had.
Even pared to the bare essentials, however, there was room for the 1,200 pages of Adam Smith’s The Wealth Of Nations. This is one of the foundational texts of the modern world. Every right-leaning person keeps quoting stuff about free markets at you from this book, but no one actually seems to have ever read it in its entirety. Journeys are a good space for intellectual challenges. While in the skies and then abroad, I wanted to break not the sound, but the Smith barrier.
Thankfully, the gamble proved to be a good one. High up in the peace of the clouds and down in the clamour of airport lounges, in the little cafés of Ho Chi Minh City where people sip jasmine tea and drink coffee from phins, recumbent at night in the silence of a little hotel room, I read Smith’s magnum opus with pleasure—and a steadily escalating admiration for his intellectual ability and rhetorical flair.
Two weeks later, one journey had ended, but another was just beginning: one of the great intellectual love affairs of my life. Over the next year, in Delhi and Varanasi, Stuttgart and New York, Prague and Paris, Athens and Rome, I read as much of Smith, and about Smith, as I could.
The first thing that strikes the reader about Smith is that he is so much more than even his admirers and proponents make him out to be. Often, his arguments can’t be reduced to a precis: As with the great novelists, you have to immerse yourself in his long, delicately weighted sentences and paragraphs to catch the full drift of his meaning. Then, when you hear other people paraphrasing Smith, you always find yourself saying, “Yes, but…." He is like that charismatic friend that everyone in a group fights over, everyone thinking “I know him best".
Second, what is so engaging about Smith is not just his matter (which, as I will show, is even more considerable than is commonly granted) but his manner. He is a writer of great clarity and courtesy. Brilliantly and convincingly, he first recapitulates the arguments of his opponents—the cheap point-scoring of our television debates would not have been his thing—before just as dexterously undermining and refuting them. Once you pick up the sound of his voice, you hear it in your head all day long like a tune.
Third: his philosophy. Smith comes across as exceptionally well-adjusted. He is a realist who never seems to lapse into cynicism or dogma, a worldly man who insisted nevertheless that life demands from us some grand ideal and commitment, even sacrifice. He seeks the continuous advance not just of markets but also morals; not just knowledge, but self-knowledge. When you read him, you feel that somewhat like Gandhi, he seems to know you even better than you know yourself.
And last—and this is something no scholar of Smith ever tells you—the great Scotsman can often be laugh-aloud funny, as piquant as an Indian grandmother observing modern life from a charpai (cot). Has anybody ever managed to match the truth and tartness of Smith’s characterization of love as “the passion [that] appears to everybody, but the man who feels it, entirely disproportioned to the value of the object"? There is a discussion of value here, as befits someone known for his attention to costs and benefits, but one also senses a distinct sympathy and even admiration for the deluded.
That cracking sentence appears not in The Wealth Of Nations, but in The Theory Of Moral Sentiments (hereafter, TMS). Yes, you must read both these books, or none at all. And TMS, Smith’s other masterwork and one that describes the peculiarities and potential of man as a social and ethical creature, was long given short shrift by economists, who built their representations of Smithian thought—and applications of it for economic debates of the present day—entirely upon the argument of The Wealth Of Nations. It was written when he was just 36 (he published The Wealth Of Nations when he was 53), and Smith remained so engaged with its argument that he revised and expanded it through his lifetime, publishing a final edition just before his death in 1790. One might even say, as a riddle, that Smith’s first book was also his last.
Yet it is the book in the middle that immediately caught the imagination of the world—and not without reason. The Wealth Of Nations is still the core of Smith’s intellectual achievement, a seminal moment in the human effort to understand how our material lives cohere and interlink on the macro level. And it is especially worth reading today, when capitalism—Smith himself never actually used this word—is under attack from many sides. Partly this is because it seems to have been taken over (as Smith himself feared) by elites who want more to capture than to produce wealth. But also, a combination of rising inequality, static real wages, and an explosion of human desires linked to mass media and consumer culture have made both white-collar and blue-collar workers in the developed world unbalanced and resentful. In fact, the journey from poverty to (relative) prosperity described in The Wealth Of Nations is a story Indians today can appreciate better than most Europeans, for it is the great Indian story of the last 25 years (and one that Mint has chronicled extensively over the last decade).
The core of The Wealth Of Nations is devoted to Smith’s magnificently comprehensive description and original and frequently counter-intuitive defence of what he called “commercial society". This was the newly emerging 18th century world order in which the eternal human need “to truck, barter and exchange" (Smith loves sonorous and evocative verbs) was taking a new form, very different from the top-heavy economic order of the feudal world with its lords and vassals.
Smith, at heart an egalitarian if not exactly a democrat, greatly approved of this transition and gave it the intellectual steel frame it needed. With a wealth of rigorous and ringing detail, he showed that simple price signals in a market could deliver justice, and stimulate an economic energy that no regent or government could fashion or force. If economic actors were allowed to work in their self-interest, the “invisible hand" of the market would likely allocate goods and prices in a way that could serve the interests of all. A liberal new economic order would provide rich rewards for the exercise of the virtues and habits that Smith admired the most: prudence, thrift and industry (Smith is actually not a big one for spending money and—readers of TMS will find—is even sceptical of the idea that great wealth is conducive to happiness).
But there is more to Smith’s theory than just a defence of the profit motive as an engine of growth. As the great Smith scholar Ryan Patrick Hanley neatly puts it, Smith saw that “commerce substitutes interdependence for direct dependence and makes possible the freedom of the previously oppressed". In commercial society, the shape of material life begins for the first time to lean towards economic independence and political freedom even for the meanest labourer. The gates of commercial society open out, eventually, on to the garden of freedom (a difficult, challenging freedom) and democracy.
Sadly, though, over the course of 200 years after his death, for a wealth of reasons, Smith was co-opted as the father of pure capitalism, insisting, apparently, on the primacy and inevitability of self-interest in all human dealings, and on the need for governments to allow the market mechanism to determine how resources in a society are allocated (and by extension, how social problems are resolved). Smith’s famous sentence about butchers, bakers and brewers working not out of a sense of benevolence for others but from a regard to their self-interest was taken as the touchstone of his thought.
But no one who reads The Wealth Of Nations can fail to see that this is a very distorted (one might even say self-interested) view of Smith. Amartya Sen, who has done as much as any other modern scholar to draw attention to the complexities of Smith’s world view and rescue him from the clutches of free-market fundamentalists, gets Smith’s view of the powers and limits of the market exactly right in his contribution to a comprehensive new book of essays called Adam Smith: His Life, Thought And Legacy (Princeton University Press, 2016). “It would be hard to carve out from Smith’s works," writes Sen, “any theory of the sufficiency of the market economy (as opposed to the necessity of markets). He sought substantial supplementation of the market mechanism, though he would not endorse any proposal to supplant it."
Even the invisible hand of market forces needs visible hands to supplement its work in a just society. One of the surprises of The Wealth Of Nations, I found, is how often Smith sides with the interests of labourers against those of merchants and manufacturers, and proposes and delineates a system of moral reasoning that will frame and discipline the very markets whose virtues he extols.
In July, I moved on to TMS. I had by now become convinced of Smith’s great qualities not just as an intellectual guide, but as a travel companion. Every time I packed a suitcase, he was the first thing I threw into it after my toothbrush and notebook. Whenever my days became disordered and giddy, whenever I woke up with a hangover or drooped with a sense of inertia, I had only to read two or three pages of his even, tranquil prose to set the world in order again (“Happiness," he states quite simply at one point, “consists in tranquility and enjoyment").
Smith was 36 when he published this precociously wise book, the same age that I was now when I was reading it. It took me many more months to read than The Wealth Of Nations. Realizing that when I was done there would not be much more of Smith left to read.
Trade and economic activity barely appear in TMS. Rather, Smith is found here contemplating another kind of economy: the economy of our emotions and the moral commerce of our lives in society.
For Smith, man is fundamentally a social being, embedded in multiple networks that answer not just his material needs but his need to be loved and respected. Or, as the Smith scholar David Schmidtz puts it, “a human life is a social life".
Yet this does not take away from the inescapable truth, Smith observes, that we are violently self-centred. We feel our own pleasure and pain, our own joy and sorrow, much more deeply than that of others. A cricked neck troubles us much more than a war in which thousands lose their lives. Our instinctive reaction to any new development is to think, “What does this mean for me?" If possible, we would always privilege our own self-interest over that of others—until we come to realize that others must feel exactly the same way about themselves.
Where do we go from here? It follows that to form a truthful understanding of reality, we need to be able, habitually, to see ourselves as “an impartial spectator" would. “The natural misrepresentations of self-love," writes Smith, “can be corrected only by the eye of the impartial spectator."
Here we arrive at one of Smith’s greatest concepts, perhaps even more central to his thought system than of the invisible hand (which phrase, after all, appears only twice in his work). The impartial spectator is something more than just a conscience; it is an emotional rudder that keeps us balanced. By listening to the whispers of this invisible companion, we work out just how morally complex and quirky and fallible we are; true selfhood requires continuous self-command.
Our moral sentiments are full of strange biases, just as any landscape has slopes and ditches. Many of Smith’s insights—for instance, that pain leaves a much more lasting impression on us than pleasure—have today become the province of behavioural economics. To take another example, he observes that we are instinctively much more sympathetic to the woes of the rich than those of the poor, and mourn the overthrow of a king, although most of his material privileges remain unaffected, much more than, say, the tragedy of someone going hungry. What we need to do is to acquaint ourselves with the general terrain of our moral nature, and then use self-knowledge to compensate for our weaknesses and oversights.
Virtue, for Smith, inheres not so much in what we believe, but in how—and how much—we act. And here Smith issues a clarion call, a sentence one never forgets once one has read it, “Man was made for action," he writes, “and to promote by the exertion of his faculties such changes in the external circumstances both of himself and of others, as may seem most favourable to the happiness of all." Man’s actions must be guided both by the invisible hand of the market, showing him opportunities for work and profit, and by the ethical promptings and expanding social imagination of the impartial spectator, “the great inmate, the great demi-god within the breast". The market can be man’s friend, but he diminishes himself when he makes it his god.
It seems clear, when one has finished reading Smith, that it will not do to call him an economist. He is certainly one—maybe even the father of economics—but he is so much more than that, and this very word is, like one of those human biases he describes, an unreliable road into his thought. He is also a moral philosopher, a historian, a literary critic, a student of linguistics. Even his economics might more properly be called “humanomics"—this is the phrase used by the economic historian Deirdre McCloskey, who in the last decade has published a thrilling trilogy about how the modern world came to generate so much wealth.
On the last day of February, I sat in my balcony in New Delhi, drinking coffee, and put my marks on the last page of TMS. It was over. A whole year had passed with Smith by my side. I felt enormous gratitude for everything he had given me. But perhaps there was some wealth I had generated for him as well, across a gulf of two centuries. After all, doesn’t he say in TMS that “the chief part of human happiness arises from the consciousness of being beloved"?