Adam Smith’s Brutish World

Adam Smith held the Chair of Moral Philosophy at the University of Glasgow, but to call him a moral philosopher is to engage in irony, for he started Western civilization’s development of an economic system that eschews morality altogether. Since 1776, when The Wealth of Nations was published, the economic system derived from it has regularly enabled the unscrupulous to amass great wealth while impoverishing the human mass. Surely a truly scientific system, which current economists claim free-market economics is, would have demonstrated its wealth-creating effects world-wide in 231 years. In the 1890s, Marconi invented the precursor of the radio, and within 100 years, radio-like devices have become so widespread that one can hardly imagine a world without them. The failure of the free-market capitalistic system to produce anything like the results of scientific endeavors, its failure to provide large groups of people, even in the most prosperous capitalistic nations, with the ability to afford even basic human services, and its failure to stem the periodical impoverished of entire societies when the bottom of the so-called “business cycle” is reached demonstrates conclusively its unscientific nature. What is most astonishing is that economists fail to note these dismal results and continue to advocate this economic system. No economist with a truly scientific mind would hold this view; he would view these dismal results as a failure to confirm the theory and therefore reject it as false. So one has to wonder why economists don’t reject it.

In his Theory of Moral Sentiments, Smith argues that sympathy is required to achieve socially beneficial results, but it is impossible to find sympathy in the workings of free-market capitalism. The Economist recently pointed out that “Some economists believe that recessions are a necessary feature of economic growth. Joseph Schumpeter argued that recessions are a process of creative destruction in which inefficient firms are weeded out. Only by allowing the “winds of creative destruction” to blow freely could capital be released from dying firms to new industries. . . . [and that recessions purge[s] the excesses of the previous boom, leaving the economy in a healthier state.” The noteworthy thing about this passage is that people are never mentioned; the passage is about “the economy.” But this economy is illusory. Nothing is produced in it, nothing is exchanged in it, and nothing is saved in it, for it lacks people. It consists entirely of numbers, and numbers often tell tall tales.

Numbers have to be gathered, and how they are gathered is the result of human decisions. It is never certain that the manner in which they are and have been gathered is not fraught with error. Once gathered, numbers have to be interpreted in terms of other human decisions. And again, it is never certain that the interpretations do not yield erroneous results.

How can one explain how the study of this illusory economy has taken on such importance and how much it influences the lives of people who are not constituents of it? The fault lies with Adam Smith, who turned economics on its head. Free-market capitalism is an upside-down system. For economics both etymologically and practically deals with household wealth, not the wealth of nations. A nation does not feel pain, hunger, bruise, bleed, or work, but its people do. Some would say that this illusory numerical economy provides a picture of the economy as a whole, and in some sense it does. But is it an accurate or even useful picture?

Since Ancient times, people have known that what is true of the whole is not necessarily true of the part. A machine, for instance, can be large, but its parts can be small. Similarly this picture of the economy as a whole can convey an appearance of wealth while its neglected parts can be impoverished. Those who make the assumption that the attributes of the whole can be attributed to the parts commit what has been known as the fallacy of division for centuries. To avoid being the accusation of committing this fallacy, economists simply presume that the parts are irrelevant, so that the system is immoral, unjust, and ineffective for people simply makes no difference. Consider Joseph Schumpeter’s claim above. His only concern is the release of capital from inefficient uses. He cares not a scintilla for the suffering and economic loss of the masses of people who are impoverished by depressions. Not only does sympathy play no role in this thinking, he appears to be a person without even an iota of moral sentiment.

Yet social institutions exist for the benefit of society’s members. When ordinary social institutions stop benefiting their members, the institutions cease to exist. Their members withdraw. The economic system is a social institution just like every other. The difference is that economic systems are imposed upon people and not voluntarily joined, so it is impossible for people to withdraw from them. But the illusory numerical economy studied by economists, having excluded its effects on people from study, fails to exist for the benefit of people. Whereas an economist sees “the economy’s” per-capita income number, a person sees the number on his/her paycheck. Whereas an economist sees “the economy’s” inflation rate, a person sees the number of items he/she is able to put in his/her grocery cart. Whereas an economist sees “the economy’s” employment rate, a person sees the people he or she knows who are out of work. So it is incredible that economists should think that news-releases, lectures, and position papers citing their numbers to support their claims about how well “the economy” is doing could ever be convincing. One wonders, “How could intelligent people be so dumb?” The average person couldn’t care less about GNP, GDP, core inflation, how many jobs have been created, the DOW, or the number of people filing for unemployment insurance. No amount of rhetoric about how much better off we all are because of “free-trade” and “globalization” will ever convince the people who only want those economists to show them the money, and I believe that every economist who makes those claims knows that he will never be able to. So any economist who preaches “the economy’s” numbers is preaching in an empty cathedral, and I often wonder how many of those economists would continue to support this economic system if their own incomes were limited to what they could earn while being pain the national minimum wage. While our economists have been mesmerized by an illusion, people experience the effects of this illusion in the real-world economy. “The economy” is an empty shell, a whole without parts, a conceptual oxymoron.

Adam Smith turned economics on its head, reversing two millennia of human effort to raise mankind above the status of brutes. The goal of both Western secular philosophers and religious leaders was to moralize mankind. Yet the effects of the economic system introduced by Adam Smith has been to covert societies into states that resemble the states of nature described by Hobbes, Locke, and Rousseau in which each person is at war with every other. This cannot be conceived as human progress.

So what is to be done? The answer is not difficult. Economists should deemphasize their attention on “the economy” as a whole and instead study how economic policies and practices affect the lives of people. Any policy or practice which affects their lives adversely must be restricted, modified, and, perhaps, abandoned. The goal must be the continual improvement of the lives of people generally. Any policy or practice that does not advance this goal can not be considered useful. Furthermore, the immorality must be excised from the system. Deception, lying, cheating, and exploitation must be forbidden if mankind is ever to attain the moral goal of rising above the brutes.

Does this mean that capitalism, itself, must be abandoned? Perhaps not, but it remains to be seen if a moral capitalism can function effectively. Without its in-built immorality, capitalism may collapse all by itself.

As this economic system has spread world-wide, people everywhere it wields its influence fall deeper into this abominable state of nature. Wars, which have always been instruments of economic policy, are more widespread, more destructive, more violent, and more murderous. Events which can be characterized as genocide continue unabated despite all the lip-service rhetoric we have heard since the holocaust. In a world of opulence, famine is persistent, and crime is endemic. In the two hundred plus years since Adam Smith published his wealth of nations, the moral status of humanity has not risen a millimeter; it may even have deteriorated.

Until the failures of laissez-faire capitalism are recognized and it is either modified or discarded, the hymnal hope of “peace on earth, good will to men” will never even be approached, no less attained.