The New Index: Adam Smith’s Theory of Moral Sentiments

This series, in its unrevised form, was posted in Summer  2005.  I thought it was lost forever, but Allen Wilson has been kind enough to send me dozens of old pieces that have disappeared from the old website.

Part One:  Capitalism

1776, the year of the Declaration of Independence, was marked also by the publication of Adam Smith’s path-breaking book on economics, The Wealth of Nations. This is no accident, according to a familiar myth put out by American classical liberals who call themselves conservatives, because America is a land of individualists who came to a New World seeking freedom from monarchy, aristocracy, the patriarchal family, religion, and tradition, and our way of life is based on the principles of John Locke and the Scottish Enlightenment: human equality, natural rights, the consent of the governed. These principles are the basis of the democratic capitalism revealed to the world by Adam Smith. Since Adam Smith was also a great moral philosopher and even a moral theologian, modern capitalism is essentially a moral proposition.

This thumbnail sketch of American exceptionalism and the significance of Adam Smith is, like most of what we have been taught to believe, ahistorical buncombe. America was not a nation of individualists, nor did we Americans escape, in the decades before and after the Revolution, the ancient ties of blood, place, and faith.  Adam Smith was neither a capitalist nor a great moral philosopher, and his brilliant economic analysis is either unrelated to his Theory of Moral Sentiments or, if it is, the effect was to contaminate Smith’s mind with the ultra-rationalist and globalist thought of 18th century France.

Let us start with my lesser claim about Smith, the fact that he was not a capitalist. Although most American conservatives confuse the free-market with capitalism, the two concepts are quite different. A market is a place where people buy and sell; in principle, a free market ought to be one that is open to all or one that does not charge market tolls, or, ideally, both.  The fact that there has never been such a market should not deter us from thinking in these terms.  Yes, some people have to be excluded from certain markets—criminals, children, the mentally deficient, and—in many cases—foreigners, and yes, markets generally charge tolls of some kind, because once a market becomes elaborate, it requires a certain degree of policing, to make sure the money-changers are not clipping coins or the butchers giving short weight or selling bad meat.

Nonetheless, we pretty much know what a free market is or ought to be, though we also know that both market-traders and governments are equally eager to profit from constraints or taxes imposed upon the market.  Even so, people find ways of evading such restrictions, and even under communism, enterprising people form secret black markets where they can trade goods and services more freely.

Adam Smith never used the term capitalism, though he did define capital as stock.  Thackeray is said to have introduced the term into English to signify the ownership of capital, much as we still speak today of capitalizing a business, though it was used earlier by by the Jeffersonian John Taylor of Caroline, in his great agrarian work Arator.  The ideological sense of ‘capitalism’ derives not from Adam Smith but from Karl Marx, who used “capitalist” to refer to those who owned the means of production and capitalism to refer to an economic system (and the political system it controlled) that empowered capitalists at the expense of the workers and would lead to communist revolution.  In Das Kapital Marx was reacting not, primarily, to Adam Smith but to David Ricardo, a wealthy investor who had proposed economic theories that made the increase of capital and the welfare of capitalists the primary objective.

Smith, in contrast, by his very title declares that his primary focus is on the wealth of nations, and in his analysis he is very concerned with the wages and welfare of workingmen as well as with the increase of capital and profits, but he was no capitalist either in Marx’s sense or in Ricardo’s sense.

People seem inevitably to adopt the pejorative names they receive from their enemies. Whig and Tory were both terms of abuse as were Yankee and later rebel. If socialism means that the government owns and controls the means of production, then capitalism means private ownership and the free market.  Thus, to oversimplify, businessmen who oppose communism and socialism end up adopting a Marxist insult as their slogan.

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Thomas Fleming

Thomas Fleming is president of the Fleming Foundation. He is the author of six books, including The Morality of Everyday Life and The Politics of Human Nature, as well as many articles and columns for newspapers, magazines,and learned journals. He holds a Ph.D. in Classics from the University of North Carolina, Chapel Hill and a B.A. in Greek from the College of Charleston. He served as editor of Chronicles: a Magazine of American Culture from 1984 to 2015 and president of The Rockford Institute from 1997-2014. In a previous life he taught classics at several colleges and served as a school headmaster in South Carolina