THE _WEALTH OF NATIONS_ AND ITS CRITICS
In February 1776 Hume wrote to Smith: “By all accounts your book has
been printed long ago, yet it has never been so much as advertised. What
is the reason? If you wait till the fate of America be decided, you may
wait long.” Declining health made him anxious to accelerate his friend’s
return. “Your chamber in my house is always unoccupied.” In the same
letter there are a few words about the war with the American colonies.
The two friends were at one in condemning the war and the colonial
policy which provoked it. But Smith was more deeply moved by the
impending disaster, and was eagerly endeavouring to induce the
Government to adopt means of conciliation before it was too late. He was
therefore—so the Duke of Buccleuch had informed Hume—“very zealous” in
American affairs. “My notion,” writes Hume, cool as ever where only
national interests were concerned, “is that this matter is not so
important as is commonly imagined. If I be mistaken, I shall probably
correct my error when I see you, or read you. Our navigation and general
commerce may suffer more than our manufactures. Should London fall as
much in size as I have done, it will be the better. It is nothing but a
hulk of bad and unclean humours.”
At last, on the 9th of March, _An Inquiry into the Nature and Causes of
the Wealth of Nations_ was published in two sumptuous quarto volumes.
The price was thirty-six shillings, and the first edition, probably of a
thousand copies, was sold out in six months; though the second, a
reprint with some few corrections and additions, was not issued till
1778. The publishers were Strahan and Cadell. Smith is said to have
received £500 for the first edition, the sum paid by the same firm to
Steuart for his _Principles of Political Economy_ (1767). The first
volume of Gibbon’s _History_ came out at the same time. Hume was
immensely taken with both performances. He told Gibbon that he should
never have expected such a work from the pen of an Englishman. To Smith
he wrote:—
“Euge! Belle! Dear Mr. Smith,—I am much pleased with your performance;
and the perusal of it has taken me from a state of great anxiety. It
was a work of so much expectation, by yourself, by your friends, and
by the public, that I trembled for its appearance, but am now much
relieved. Not but that the reading of it necessarily requires so much
attention, and the public is disposed to give so little, that I shall
still doubt for some time of its being at first very popular. But it
has depth, and solidity, and acuteness, and is so much illustrated by
curious facts that it must at last take the public attention. It is
probably much improved by your last abode in London. If you were here
at my fireside, I should dispute some of your principles. I cannot
think that the rent of farms makes any part of the price of the
produce, but that the price is determined altogether by the quantity
and the demand.”
On the publication of the book Sir John Pringle observed to Boswell that
Dr. Smith, who had never been in trade, could not be expected to write
well on that subject any more than a lawyer upon physic. Boswell passed
this on to Johnson, who replied: “He is mistaken, sir; a man who has
never been engaged in trade may undoubtedly write well upon trade, and
there is nothing which requires more to be illustrated by philosophy
than trade does.” Johnson added, as if he had already turned over with
profit the pages of the new book, that trade promises what is more
valuable than money, “the reciprocation of the peculiar advantages of
different countries.” Gibbon was no less delighted than Hume with the
new philosophy. “What an excellent work!” he exclaimed; “an extensive
science in a single book, and the most profound ideas expressed in the
most perspicuous language.” Gibbon’s judgment has been confirmed by the
tribunals of Time, and the world places the _Wealth of Nations_ in the
small library of masterpieces that receives, as the years roll by, so
surprisingly few accessions.
In a science like political economy, every new teacher endeavours to
correct the mistakes of his predecessors, to supply their deficiencies,
and generally to teach the science in its last stage of perfection. Some
of Smith’s successors were themselves men of genius, and proved equal to
the task of displacing their master for a few years. But those who have
seen the rise and decline of Mill may well ask with Wakefield, who had
seen Smith superseded by Malthus and Ricardo and M’Culloch: How is it
that the _Wealth of Nations_, all these things notwithstanding, is still
read and studied and quoted as if it had been published yesterday? How
is it that British statesmen from Pitt to Gladstone should have sought
authority in the same pages? After all, the question we are asking is a
wider one. Why is this one of the great books of the world? We would
like to say simply: It is the world’s verdict; take it or not as you
like; but whether you like it or not, it stands. One cannot argue with
universal consent. Still something may be due in extenuation of fame. In
the first place, Adam Smith writes as one who has applied his mind to
definite problems without neglecting a wider field of letters and
learning. The store is rich and the steward is bounteous. So far from
being an isolated study of abstract doctrines, political economy is
treated from first to last as a branch of the study of mankind, a
criticism of their manners and customs, of national history,
administration, and law. Even when silencing a battery or throwing up a
counterwork he is very seldom disputatious or doctrinal. “He appears,”
says Wakefield, “to be engaged in composing not a theory, but a history
of national wealth. He dwells indeed on principles, but nearly always,
as it seems, for the purpose of explaining the facts which he narrates.”
There is no scarecrow of thin abstractions and deterrent terminology
flapping over the pages to warn men off a dismal science. The laws of
wealth unfold themselves like the incidents in a well-laid plot. It was
left for his successors to show how dull economics might be, and how
suitable for the empty class-room of an endowed chair.
Hume, as we have seen, on reading the _Wealth of Nations_ foretold that
its curious facts would help to gain the public ear. Adam Smith was full
of out-of-the-way learning. He collected stories of all the adventures
in the New World, and loved to sift the wheat from the chaff of a
traveller’s tale. Consequently his book abounds in oddities about his
own and bygone ages, and a few of these with necessary abbreviations may
be retailed:—
There is at this day a village in Scotland, where it is not uncommon,
I am told, for a workman to carry nails instead of money to the
baker’s shop or to the alehouse.
In North America, provisions are much cheaper and wages much higher
than in England. In the province of New York, common labourers earn
three shillings and sixpence currency, equal to two shillings sterling
a day.
Till after the middle of the fourteenth century, an English mason’s
wages were much higher than those of a parish priest. In spite of a
statute of Anne there are still [1776] many curacies under £20 a year.
A middling farmer in France will sometimes have 400 fowls in his yard.
Between 1339 and 1776 the price of the best English wool has fallen
from 30s. to 21s. the tod, after allowing for the changes in the
currency. The price of a yard of the finest cloth has fallen, after
making the same allowances, from £3, 3s. 6d. to £1, 1s. since 1487.
The first person that wore stockings in England is said to have been
Queen Elizabeth. She received them as a present from the Spanish
Ambassador.
What was formerly a seat of the family of Seymour, is now an inn upon
the Bath road. The marriage bed of James the First of Great Britain,
which his Queen brought with her from Denmark as a present fit for a
sovereign to make to a sovereign, was a few years ago the ornament of
an alehouse at Dunfermline.
The wool of the southern counties of Scotland is, a great part of it,
after a long land carriage through very bad roads, manufactured in
Yorkshire, for want of a capital to manufacture it at home. In
England, owing to the laws of settlement, it is often more difficult
for a poor man to pass the artificial boundary of a parish than an arm
of the sea or a ridge of high mountains.
There is no city in Europe in which house rent is dearer than in
London, and yet I know no capital in which a furnished apartment can
be hired so cheap.
At Buenos Ayres forty years ago 1s. 9½d. was the ordinary price of an
ox.
A piece of fine cloth which weighs only eighty pounds, contains in it
the price not only of eighty pounds weight of wool, but sometimes of
several thousand weight of corn, the maintenance of the different
working people, and of their immediate employers.
In the white herring fishery it has been common for vessels to fit out
for the purpose of catching not the fish but the bounty. In 1759, when
the bounty was at fifty shillings the ton, each barrel of sea sticks
cost Government in bounties alone, £113, 15s.; each barrel of
merchantable herrings £159, 7s. 6d.
The _Wealth of Nations_ is a book to be read as it was written. More
than half its nutriment and all its fascination is lost if you cut away
the theory from its historical setting.[29] Osteology is fatal to
economics. That is why the _Wealth of Nations_ is far better suited to
beginners than an ordinary child’s primer. But as the Lectures on Police
were the author’s own first draft, the reader of these pages is already
cognisant of a great part of the _Wealth of Nations_.
It remains to indicate some of the principal accessions to Smith’s
scheme of political economy after he left Glasgow. The task has been
made easy by Mr. Cannan. In the first place, the chapters on Wages,
Profit, and Rent in the First Book, and on Taxation in the last, mark a
wonderful development and improvement of the imperfect and rudimentary
treatment accorded to these subjects in the Lectures. Then again,
chapter ix. of Book IV. on the French economists and their agricultural
system is entirely new. The system of the _économistes_ is described in
that chapter as one which, with all its imperfections, was perhaps the
nearest approximation to the truth that had yet been _published_ on the
subject of political economy. We are told that its adherents, a pretty
considerable sect, had done good service to their country by influencing
in some measure the public administration in favour of agriculture. They
all followed “implicitly and without any sensible variation the doctrine
of Mr. Quesnai,” whose _Economical Table_ they regarded with
extraordinary veneration, ranking it with writing and money as one of
the three great inventions made by mankind.
Quesnai’s _Table_ showed three sorts of expenses: Productive expenses,
Expenses of revenue, and Sterile expenses, with “their source, their
distribution, their effects, their reproduction, their relation to each
other, to population, to agriculture, to manufactures, to commerce, and
to the general riches of the nation.” In the _Wealth of Nations_ this
idea is followed out and improved; for the author, having shown in his
First Book how the average produce of labour is regulated by the skilled
dexterity and judgment with which it is generally applied, shows in his
Second that it is further regulated “by the proportion between the
number of those who are employed in useful labour, and that of those who
are not so employed.” It would be absurd to call him a plagiarist; it
would be equally absurd to deny that the French School had opened his
eyes to the necessity for analysing the distribution of wealth no less
carefully than its production. As the division of labour came from the
Greek, so the distribution of the annual produce of wealth into wages,
profit, and rent, came from the French philosophers. And we cannot
forget that Quesnai’s death alone prevented Smith from dedicating his
book to the inventor of the Economic Table.
Equally important from the standpoint of theory, and far more so from
that of the legislator and statesman, are the chapters upon taxation.
There the lectures, though they made a distinct advance upon Hume, were
rudimentary. But modern ingenuity cannot improve upon the four practical
maxims or canons of taxation:—
1. The subjects of every State should contribute in proportion to
their respective abilities.
2. A tax should be certain, and not arbitrary.
3. A tax should be levied at the time and in the way most convenient
to the taxpayer.
4. Every tax ought to be so contrived as both to take out and to keep
out of the pockets of the people as little as possible over and above
what it brings into the public treasury.
Axiomatic as these rules appear to us, in Adam Smith’s day they were new
and startling: they had never been formulated or practised in any
country. Smith was “the first that ever burst” upon the silent sea of
taxation. He put into the hands of statesmen, who had hitherto been
groping and blundering in the dark, a perfect touchstone by which to
test projects old and new of raising revenue. The idea of considering
the taxpayer was itself a novelty. It is true that the criterion of
ability had been adopted in the Elizabethan poor-rate, but there was no
other trace of it in the fiscal system of Great Britain, which was on
the whole, even at that time, the best in Europe.
Smith treated taxation as one of the causes that impede the progress of
wealth. It is characteristic of the man that he does not regard any tax,
even the land-tax, as good in itself, but only praises it comparatively
as a lesser evil. Burke himself was not a more consistent or persistent
preacher of economy. Not that Smith was jealous of expenditure on roads
and communication, public instruction, and other services which were
plainly beneficial to the whole society, and could not be left to
private enterprise. He has no pedantic objection to the State managing a
business that it is capable of managing well. He mentions without
disapproval that the republic of Hamburg makes money out of a
lombard,[30] a wine cellar, and an apothecary’s shop. But the
post-office “is perhaps the only mercantile project which has been
successfully managed by every sort of Government.”
Of all taxes he most dislikes taxes upon the necessaries of life. Yet he
does not deny that if, after all the proper sources of taxation have
been exhausted, revenue is still required, “improper” taxes must be
imposed. To preserve their land from the sea, and their republic from
its enemies, the Dutch had had recourse to very objectionable taxes, and
he does not blame them if they could in no other way maintain that
republican form of government, which he regards as “the principal
support of the present grandeur of Holland.” But he makes it very plain
indeed in his last, and perhaps his greatest, chapter “Of Public Debts,”
that the miseries and embarrassments of Europe are due in the main to
profligate expenditure of all kinds, and especially to the immense sums
wasted on wars that ought to have been avoided.
Therefore a new commercial policy would not suffice. New principles of
foreign and colonial policy must be introduced, and we must sweep away
for ever the cobweb occasions and pretexts that had drawn us into so
many futile conflicts. But he was equally anxious to promote economy in
time of peace. He was alarmed at the progress of the enormous debts
“which at present oppress and will in the long-run probably ruin all the
great nations of Europe.” He saw that when war has once been begun, no
limit can be set to expenditure. But some limit, he thought, could and
should be set to debt; and therefore he pleaded for a policy of strict
economy in time of peace, and pleaded so effectively that it was adopted
by Pitt in the breathing-space between the American and the French wars.
But for that policy, which reduced armaments to a point considered by
some dangerously low, Great Britain could hardly have stood the stress
and strain of her long-drawn conflict with Napoleon.
To thriftlessness in time of peace Smith attributes some of the peculiar
evils that attend modern warfare. His remarks sound strangely familiar
in our ears, as though they had been written by a philosopher of
yesterday about the events of the day before:—
“The ordinary expense of the greater part of modern governments in
time of peace being equal or nearly equal to their ordinary revenue,
when war comes they are both unwilling and unable to increase their
revenue in proportion to the increase of their expense. They are
unwilling, for fear of offending the people, who by so great and so
sudden an increase of taxes, would soon be disgusted with the war; and
they are unable, from not well knowing what taxes would be sufficient
to produce the revenue wanted. The facility of borrowing delivers them
from the embarrassment which this fear and inability would otherwise
occasion.... In great empires, the people who live in the capital, and
in the provinces remote from the scene of action, feel, many of them,
scarce any inconveniency from the war, but enjoy at their ease the
amusement of reading in the newspapers the exploits of their own
fleets and armies. To them this amusement compensates the small
difference between the taxes which they pay on account of the war, and
those which they had been accustomed to pay in time of peace. They are
commonly dissatisfied with the return of peace, which puts an end to
their amusement, and to a thousand visionary hopes of conquest and
national glory.”
Indeed, he adds, the return of peace seldom relieves a nation from the
greater part of the taxes imposed during the war. They are still
required to pay the interest on the newly created debt.
Of all Smith’s theories, or rather opinions—for after all, the question
is a mixed one of morals and expediency which cannot be answered by
abstract formulas of right or rules of logic—not the least important or
characteristic is his doctrine of empire and imperial expenditure. The
view now cherished and practised in the great bureaucracies of Europe,
and often advanced by socialists under the plausibly scientific
phraseology of a theory of consumption, that national profusion is a
good thing in itself, was not then propagated or defended by responsible
persons. But, though thrift was on their lips, their hands were often in
the public purse; and it could not be said that warnings against the
outlay of national resources upon useless or mischievous objects were
unneeded. Appropriately enough, the very first time, so far as we know,
that the _Wealth of Nations_ was cited in Parliament, it was cited as an
authority against the policy of accumulating armaments in time of peace.
In his speech on the address (November 11, 1783) Fox is reported to have
said: “There was a maxim laid down in an excellent book upon the Wealth
of Nations, which had been ridiculed for its simplicity, but which was
indisputable as to its truth. In that book it was stated that the only
way to become rich was to manage matters so as to make one’s income
exceed one’s expenses. The proper line of conduct, therefore, was by a
well-directed economy to retrench every current expense, and to make as
large a saving during the peace as possible.”[31]
But Smith took no narrow or penurious view of national economy. He did
not prize thrift for its own sake. Such a charge might possibly be
brought by an unfriendly critic against Ricardo or Joseph Hume, but
assuredly not against Adam Smith. Like Burke and Cobden, he valued
frugality in nations as a safeguard against wrong-doing, a prime source
of security and independence, and a perpetual check upon the lust of
conquest and aggrandisement that so often lurks under the respectable
uniform of a missionary civilisation. As he describes the discoveries of
the New World and the beginnings of modern empire, a poignant epithet or
a burning phrase tells the lesson of many a romantic scramble for the
fleece that was so seldom golden, of many a credulous hunt for a
fugitive Eldorado.
After showing that the gold and silver mines of their colonial empires
had neither augmented the capital nor promoted the industry of the two
“beggarly countries” of Spain and Portugal, he carefully distinguishes
between the natural advantages of a colonial trade and the artificial
disadvantages caused by the policy of monopoly, that is by the
endeavours of the mother country to restrict that trade to her own
merchants. If the governments of Europe had been content to found
colonies, and see that they were well and justly administered, the full
benefit of opening up new countries, and of interchanging their
products, would have been felt. But unhappily every country that had
acquired foreign possessions sought to engross their trade, thus
injuring its own people and the colonial or subject race by checking the
natural growth of commerce, and forcing it into unnatural channels. This
so-called mercantilist policy was therefore just as disastrous to
commerce as to morals.
“To found a great empire for the sole purpose of raising up a people
of customers, may at first sight appear a project fit only for a
nation of shopkeepers. It is, however, a project altogether unfit for
a nation of shopkeepers; but extremely fit for a nation whose
government is influenced by shopkeepers. Such statesmen, and such
statesmen only, are capable of fancying that they will find some
advantage in employing the blood and treasure of their
fellow-citizens, to found and maintain such an empire.”
Far worse in their results than the regular conquests of government,
were the irregular acquisitions of companies formed for trading
purposes; and one of the masterly chapters added to the third edition of
his book (1784) traces the misery, injustice, and commercial failure
which had attended the rule of the East India Company.
“It is a very singular government, in which every member of the
administration wishes to get out of the country, and consequently to
have done with the government, as soon as he can, and to whose
interest, the day after he has left it, and carried his whole fortune
with him, it is perfectly indifferent though the whole country was
swallowed up by an earthquake.”
What, then, was the practical policy which Smith recommended to the
British Government? It had two main ends in view. First, to pay off the
debt; secondly, to lessen and gradually remove all taxes which raised
the prices of articles consumed by the labouring classes, or interfered
with the free course of trade. Writing as he did, in 1775, on the eve of
war, his thoughts naturally turned to the colonies, then so rich and
prosperous, which had contributed nothing to the income but so heavily
to the expenditure and debt of the British crown.
Smith would have liked the British Government to renounce its authority
over the colonies, and so not only relieve the revenue from a serious
annual drain, but at the same time convert the Americans from turbulent
and fractious subjects to the most faithful, affectionate, and generous
allies. But seeing that neither people nor government would brook such a
mortification, he suggested that to save the situation they should try,
by a scheme of union, to break up the American confederacy and
reconstitute the empire on a fair basis. Let us give, he said, to each
colony which will detach itself from the general confederacy a number of
representatives in parliament proportionate to its contribution, and so
open up a new and dazzling object of ambition to the leading men of each
colony. If this or some other method were not fallen upon of
conciliating the Americans, it was not probable that they would
voluntarily submit, and “they are very weak who flatter themselves that,
in the state to which things have come, our colonies will be easily
conquered by force alone.” The leaders of the Congress had risen
suddenly from tradesmen and attorneys to be statesmen and legislators of
an extensive empire “which seems very likely to become one of the
greatest and most formidable that ever was in the world.” Nay, if the
union he suggested as an alternative to peaceful and friendly parting
were constituted, he predicted that in the course of little more than a
century the empire would draw more revenue from America than from the
mother country; and “the seat of the empire would then naturally remove
itself to that part of the empire which contributed most to the general
defence and support of the whole.” It was such a scheme as this that
Burke ridiculed when he pictured “a shipload of legislators” becalmed in
mid-Atlantic.
As a politician Smith was doubtless attracted by the prospect of
introducing a strong democratic and republican strain into parliament,
though he pretends to think that the balance of the constitution would
not be affected. He points out also that the constitution would be
completed by such a union, and was imperfect without it, for “the
assembly which deliberates and decides concerning the affairs of every
part of the empire, in order to be properly informed, ought certainly to
have representatives from every part of it.”[32] In the last chapter of
the _Wealth of Nations_ he describes the project as at worst “a new
Utopia, less amusing, certainly, but no more useless and chimerical than
the old one,” and shows how the British system of taxation might be
extended along with representation in parliament to the colonies in such
a way as to produce a great addition to the imperial revenue and a large
permanent surplus for the redemption of debt. In this way the debt could
be discharged in a comparatively short period, and as revenue would be
continually released, the most oppressive taxes could be gradually
reduced and remitted. By this prescription “the at present debilitated
and languishing vigour of the empire” might be completely restored.
Labourers would soon be enabled to live better, to work cheaper, and to
send their goods cheaper to market. Cheapness would increase demand, and
the increased demand for goods would mean an increased demand for the
labour of those who produced them. This again would tend both to raise
the numbers and improve the circumstances of the labouring poor. Lastly,
as the consuming power of the community grew, there would be a growth in
the revenue from all those articles of consumption which remained
subject to taxation.
The plan of an imperial parliament and imperial taxation could not be
realised. Smith himself saw that the economic and constitutional
objections were great, though “not unsurmountable.” Upon one point,
however, he was clear. If it were impracticable to extend the area of
taxation, recourse must be had to a reduction of expenditure; and the
most proper means of retrenchment would be to put a stop to all military
outlay in and on the colonies. If no revenue could be drawn from the
colonies, the peace establishments “ought certainly to be saved
altogether.” Yet the peace establishments were insignificant compared
with what wars for the defence of the colonies had cost. But for
colonial wars the national debt would have been paid off. It was urged
that the colonies were provinces of the British Empire:—
“But countries which contribute neither revenue nor military force
towards the support of the empire, cannot be considered as provinces.
They may perhaps be considered as appendages, as a sort of splendid
and showy equipage of the empire. But if the empire can no longer
support the expence of keeping up this equipage, it ought certainly to
lay it down; and if it cannot raise its revenue in proportion to its
expence, it ought, at least, to accommodate its expence to its
revenue. If the colonies, notwithstanding their refusal to submit to
British taxes, are still to be considered as provinces of the British
Empire, their defence in some future war may cost Great Britain as
great an expence as it ever has done in any former war. The rulers of
Great Britain have, for more than a century past, amused the people
with the imagination that they possessed a great empire on the west
side of the Atlantic. This empire, however, has hitherto existed in
imagination only. It has hitherto been, not an empire, but the project
of an empire; not a gold mine, but the project of a gold mine; a
project which has cost, which continues to cost, and which, if pursued
in the same way as it has been hitherto, is likely to cost, immense
expence, without being likely to bring any profit: for the effects of
the monopoly of the colony trade, it has been shewn, are, to the great
body of the people, mere loss instead of profit. It is surely now time
that our rulers should either realise this golden dream, in which they
have been indulging themselves, perhaps, as well as the people; or
that they should awake from it themselves, and endeavour to awaken the
people. If the project cannot be completed, it ought to be given up.
If any of the provinces of the British Empire cannot be made to
contribute towards the support of the whole empire, it is surely time
that Great Britain should free herself from the expence of defending
those provinces in time of war, and of supporting any part of their
civil or military establishments in time of peace, and endeavour to
accommodate her future views and designs to the real mediocrity of her
circumstances.”
With these ever-memorable and resounding words he ends the great
_Inquiry_, not vaguely admonishing some shadowy cosmopolis of economic
men, but straightly beckoning his own countrymen and their rulers off
the broad way of wantonness and mischief to the harder paths of an
inglorious but fruitful economy.
The reader of this little volume will not expect or desire an excursus
upon the multitudinous treatises, critical and apologetical, that have
sprung out of the _Wealth of Nations_. The vitality of the book may be
measured by the numbers of its detractors and defenders. Among the
former the modern historical school of Germany claims notice; for has
not its distinguished and erudite leader, Professor Schmoller, placed
Adam Smith somewhere below Galiani, Necker, Hoffmann, Thünen, and
Rümelin?
Perhaps the reason why economists of the modern historical school so
often fail as valuers of men and books, is that they are enjoined by the
very laws of their existence to be “learned”; and “learning” requires
that obscure and deservedly forgotten writers should be rediscovered and
magnified at the expense of surviving greatness. Too many modern critics
of “Smithianismus,” instead of attending to the author’s own works and
so penetrating his philosophy, seek him elsewhere, rummage in the
literature of the period, overhaul every book, good, bad, or
indifferent, characterise it in the text, and place its title-page and
date in a footnote. Such labour, however useful to others, is apt to
destroy the perspective and warp the judgment.
A man who snares facts is of all men the most likely to be caught in a
theoretical trap. Here is an example. In 1759 Adam Smith wrote a book on
_moral_ sentiments which he founded on the natural instinct of sympathy.
In 1776 he wrote a book on _economic_ sentiments, which he derived from
self-love or the desire of man to improve his position. Upon these facts
the following theory is built up by the historical school of Germany:—
“Smith was an Idealist as long as he lived in England under the
influence of Hutcheson and Hume. After living in France for three
years, and coming into close touch with the materialism that prevailed
there, he returned a Materialist. This is the simple explanation of
the contrast between his _Theory_ (1759), written before his journey
to France, and his _Wealth of Nations_ (1776), composed after his
return.”[33]
Most of this nonsense has been blown to the four winds by Mr. Cannan’s
publication of the _Lectures_ delivered at Glasgow before Adam Smith
went to France; but a vast quantity of similar rubbish is embedded in
the economic literature of the last thirty or forty years, and a
difficulty which learned investigators have invented and solved has been
dignified in Germany by the name of “Das Adam Smith Problem.”
The truth, as Smith conceived it, is that men are actuated at different
times by different motives, benevolent, selfish, or mixed. The moral
criterion of an action is: will it help society, will it benefit others,
will it be approved by the Impartial Spectator? The economic criterion
of an action is: will it benefit me, will it be profitable, will it
increase my income? Smith built his theory of industrial and commercial
life upon the assumption that wage-earners and profit-makers are
generally actuated by the desire to get as high wages and profits as
possible. If this is not the general and predominant motive in one great
sphere of activity, the production and distribution of wealth, the
_Wealth of Nations_ is a vain feat of the imagination, and political
economy is not a dismal science but a dismal fiction. But there is
nothing whatever either to excite surprise or to suggest inconsistency
in the circumstance that a philosopher, who (to adopt the modern jargon
of philosophy) distinguished between self-regarding and other-regarding
emotions, should have formed the first group into a system of economics
and the second into a system of ethics.
If this comes of learning, an even more extravagant charge has been
preferred by an emotional school. A heated imagination, certainly not
encumbered with facts, and informed only that Adam Smith was the founder
of an odious science, denounced him as “the half-bred and half-witted
Scotchman” who taught “the deliberate blasphemy”—“Thou shalt hate the
Lord thy God, damn His Laws, and covet thy neighbour’s goods.” The same
authority declares that he “formally, in the name of the philosophers of
Scotland, set up this opposite God, on the hill of cursing against
blessing, Ebal against Gerizim”—a God who “allows usury, delights in
strife and contention, and is very particular about everybody’s going to
his synagogue on Sunday.”[34] These three characteristics of Adam
Smith’s deity were unfortunately chosen; for, as it happens, he disliked
usury so much that he defended the laws which had vainly sought to
prevent high rates of interest; disapproved vehemently of war, which he
regarded as one of the deadliest enemies of human progress, and
protested against the idea that a perfect Deity could possibly desire
His creatures to abase themselves before Him. It is sad to think that to
get his gold the Ruskinian must pass so much sand through his mind. The
_Fors Clavigera_, with all its passionate intensity and high-strung
emotion, is a standing warning to preachers not to abuse their masters,
and to learn a subject before they teach it. Let those who climb so
recklessly on Ebal deliver their curses from a safer foothold.
Perhaps what most impresses one in reading the _Wealth of Nations_ is
its pre-vision. The author seems to have been able to project himself
into the centuries. He saw the blades of wheat as well as the tares that
were springing up; and it would be hard to mention a single one of his
forecasts and Utopias that has not been realised in some degree, or at
least taken shape as a political project during the last century. He
was, of course, above all, the precursor of Cobden and of the
philosophic Radicals, who drew from him not only their economics, but
their foreign and colonial policy. It is perhaps remarkable, after so
fair a beginning had been made in his own lifetime, that the triumph of
his doctrines was so long delayed. But most of what Shelburne, Pitt, and
Eden did for commercial emancipation in the eighties was swept away by
the French war. And when Napoleon fell, England was so weak, tyranny and
superstition were so ground into the principles of her governing
classes, that she seemed to be, in Milton’s phrase, beyond the manhood
of a Roman recovery. For many years Smith’s disciples, and even the
indefatigable Bentham, laboured almost in vain. Parliament was ignorant
and bigoted. Until a great agitator arose, very little could be done;
and the great agitator did not arrive quite soon enough to fulfil
Pulteney’s prediction that Smith would convert his own generation and
rule the next.
In the early years of the nineteenth century the practical influence of
Smith’s teaching was felt principally in France and Germany. In France,
as we have seen, Count Mollien was a professed disciple of the new
economy. “It was then,” he said, in reviewing the events of his youth,
“that I read an English book which the disciples M. Turgot had left
eulogised in the highest terms—the work of Adam Smith. I had especially
remarked how warmly the venerable and judicious Malesherbes used to
speak of it—this book so disparaged by all the men of the old routine.”
It is perhaps the most dazzling of all Smith’s posthumous triumphs, that
he, through Mollien, should have been the philosophic guide of
Napoleonic finance.
But his conquest of Germany was equally startling and momentous. The
movement in that country can be directly traced to the university of
Königsberg, where Kraus began to lecture on the _Wealth of Nations_ in
1781. He soon gained the ears of the official class. In East Prussia,
vexatious dues and taxes, with a multitude of feudal embarrassments,
were removed from internal commerce, and in spite of much opposition
Smith’s principles spread all over Germany. By the close of the
Napoleonic war the officials as well as the professional economists were
converts to the new ideas. Stein and Hardenberg, two truly great
reformers, led the way. Year by year commercial restrictions were
removed, and though jealousy of Prussia stood in the way of complete
commercial union, the North German Zollverein constituted a great
advance. It removed the barriers between Prussia and the adjoining
States, and reduced external duties to such an extent that in 1827
Huskisson cited the example set by Germany to prove the wisdom of
abandoning a restrictive policy. Even Friedrich List, who sought for
political reasons to build up a counter theory of protection for infant
industries, asserted that free trade was the right policy for England
and for every adult nation. List, who often wrote with a bitterness and
malice that only readers of his unhappy life can excuse, admitted in his
principal work “the great services of Adam Smith”:—
“He was the first to introduce successfully into political economy the
analytical method. By means of this method and of an unusual sharpness
of intellectual vision he illuminated the most important branches of a
science, which before his time had lain in almost utter darkness.
Before Adam Smith there was only a policy (Praxis); his labours first
made it possible to build up a science of political economy; and for
that achievement he has given the world a greater mass of materials
than all his predecessors and successors.”
Mill’s _Political Economy_ is the only English treatise that can be
compared with the _Wealth of Nations_. Indeed in his preface Mill
challenges the comparison, but adds that “political economy, properly
so-called, has grown up almost from infancy since the time of Adam
Smith.” He finds the _Wealth of Nations_ “in many parts obsolete, and in
all imperfect,” and though he speaks generously enough of Adam Smith’s
“admirable success in reference to the philosophy of the [eighteenth]
century,” it is plain from this preface and from the autobiography that
the later economist felt he could look down upon the earlier from the
serene temples of increased knowledge and better social ideas. Mill’s
confidence was not only justified for the time being by unqualified
success in the sense that his own book at once became, and remained for
a generation, the principal text-book of English students, it was also
based upon what appear at first sight to be enormous advantages. A more
logical and systematic arrangement is adopted. Errors are corrected;
digressions are few; and in order to attain scientific exactitude,
historical illustrations from the conditions and experience of nations
are replaced by more precise instances of imaginary societies labelled
A, B, C. Technical terms and definitions make it easy for the student to
move lightly about in an artificial atmosphere.
But in this realm of political economy, is it not well to keep a foot,
or at least an eye, on the ground? In Mill’s treatise there is a danger
of mistaking words for things. It is never so in Smith’s inquiry. He
gave twenty years to a task for which Mill could hardly spare as many
months. With a gift for exposition, certainly not inferior, he had what
Mill had not, a love of the concrete, a faculty for the picturesque, and
withal a nervous force and vigour in argument quite peculiar to himself.
It has been said that Smith hunted his subject with the inveteracy of a
sportsman. With a wonderful knowledge of history, law, philosophy, and
letters, he combined an intuitive insight into the motives of men and
the unseen mechanism of society. At the same time, by restricting his
horizon to wealth and its phenomena, he was able to see how men always
had acted and always would act under certain circumstances, and by what
rules public finance should be governed. This is the secret of his
success in making political economy queen of the useful arts, and in
raising her alone among political studies to the dignity of a science.
“I think,” said Robert Lowe, “that Adam Smith is entitled to the merit,
and the unique merit, among all men who ever lived in the world, of
having founded a deductive and demonstrative science of human actions
and conduct.” True, he is not a systematic writer. He does not shine, as
so many inferior geniuses have shone, in the art of comparing,
correlating, and harmonising the great truths which it is his glory to
have discovered and illustrated. He puts us, as Lowe remarked with his
usual felicity, in mind of the Sages of Ancient Greece, who, after lives
of labour and study, bequeathed half a dozen maxims for the guidance of
mankind.