What conservatives ignore in Adam Smith's message is killing our economy
In the name of capitalist hero Adam Smith, Americans are told to shop 'til they drop to stimulate our economy. But Smith actually condemned vanity-driven consumption. Are we building our economic recovery on the sand?
West Lafayette, Ind.
In virtually all current political debate concerning the requirements of American prosperity, the classic argument of Adam Smith remains the fashionable mainstay of conservatives. It was Smith, after all, who reasoned capably and persuasively that a system of private property, although naturally unequal, would nonetheless permit the poor to live tolerably.Skip to next paragraph
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Rejecting Jean-Jacque Rousseau’s fully contrary position that, in commerce, “the privileged few...gorge themselves with superfluities, while the starving multitude are in want of the bare necessities of life,” Smith saw in capitalism not only rising productivity, but also the ultimate condition for political liberty.
Significantly, perhaps, Adam Smith published his “Inquiry into the Nature and Causes of the Wealth of Nations” in 1776. A revolutionary book, “Wealth” did not aim to support the interests of any one class over another, but rather the overall well-being of an entire nation. Smith discovered, of course, “an invisible hand,” an utterly unsought convergence whereby “the private interests and passions of men” will lead to “that which is most agreeable to the interest of a whole society.”
Through capitalistic modes of production and exchange, therefore, reasoned Smith, an inextinguishable social inequality might still be reconciled with broad human progress.
But today’s conservative defenders of Smith usually ignore, either deliberately or unwittingly, the full depth of his rather complex thought. A system of “perfect liberty,” as Smith called it, could never be based upon any encouragements of needless consumption. Instead, he argued, the laws of the market, driven by competition and a consequent “self-regulation,” strongly demanded a principled disdain for all vanity-driven consumption.
“Conspicuous consumption,” a phrase that would be used more effectively by Thorstein Veblen at the start of the 20th century, could thus never be the proper motor of economic or social improvement.
To be sure, Adam Smith understood the dynamics of conspicuous consumption, but (and this part is widely disregarded) he also loathed them. For him, it was only reasonable that the market regulate both the price and quantity of goods according to the final arbiter of public demand. Yet, he continued, this market ought never to be manipulated by any avaricious interferers.
More precisely, Smith excoriated all who would artificially create or encourage contrived demand as mischievously vain meddlers of a “mean rapacity.”
An economic recovery built on the sand
Today, of course, with engineered demand and hyper consumption as both permanent and allegedly desirable market features, we have lost all sight of Smith’s “natural liberty.” As a result, we try, foolishly and interminably, to construct our economic recovery and vitality upon sand. Below the surface, we still fail to recognize, lurks a truly fundamental problem that is not economic, fiscal, or financial. Instead, as Adam Smith would have us understand, it is a plainly psychological or human dilemma.
Wall Street’s persisting fragility is largely a mirror image of Main Street’s insatiable drive toward hyper-consumption. This manipulated drive, so execrable to Adam Smith, has already prompted certain learned economists to warn repeatedly against saving too much. Upon reflection, could any advice be more ironic?