Political Theory - Adam Smith.docx

Adam Smith is our guide to perhaps the most pressing dilemma of our time: how to make a capitalist economy more humane and more meaningful. He was born in Scotland in Kirkcaldy – a small manufacturing town – near Edinburgh in 1723. He was a hard working student and very close to his mother. He then became an academic philosopher, wrote a major book about the importance of sympathy and lectured on logic and aesthetics. He was also one of the greatest thinkers in the history of economics – in part because his concerns went far beyond the economic. He wanted to understand the money system because his underlying ambition was to make nations and people happier. Smith remains an invaluable guide to four ideas: When one considers the modern world of work, two facts stand out: - modern economies produce unprecedented amounts of wealth. - many ordinary people find work rather boring and (a key complaint): meaning-less. The two phenomena are in fact intimately related, as Adam Smith was the first to understand through his theory of specialisation. He observed that in modern businesses, tasks formerly done by one person in a single day could far more profitably be split into many tasks carried out by multiple people over whole careers. Smith hailed this as a momentous development: he predicted that national economies would become hugely richer the more specialised their workforces became. One sign our world is now so rich, Smith could tell us, is that every time we meet a stranger, we’re unlikely to understand what they do. The mania for incomprehensible job titles – Logistics Supply Manager, Packaging Coordinator, Communications and Learning Officer – prove the economic logic of Smith’s insight. But there is one huge problem with specialisation:

meaning. When businesses are small and their processes contained, a sense of helping others is readily available. But when everything is industrialised, one ends up as a tiny cog in a gigantic machine whose overall logic is liable to be absent from the minds of people lower down in the organisation. A company with 150,000 employees distributed across four continents, making things that take five years from conception to delivery, will struggle to maintain any sense of purpose and cohesion. So Smith discerned that bosses of the specialised corporations of modernity therefore have an extra responsibility to their workers: to remind them of the purpose, role and ultimate dignity of their labour. Smith’s age saw the development of what we’d now call consumer capitalism. Manufacturers began turning out luxury goods for a broadening middle class. Some commentators were appalled. The philosopher Jean-Jacques Rousseau wished to ban ‘luxury’ from his native Geneva. He was a particular fan of ancient Sparta and argued that his city should copy its austere, martial lifestyle. Disagreeing violently, Smith pointed out to the Swiss philosopher that luxury consumerism in fact had a very serious role to play in a good society – it generated the surplus wealth that allowed societies to look after their weakest members. Consumer societies, despite their frivolity, didn’t let young children and the old starve, for they could afford hospitals and poor relief. So Smith defended consumer capitalism on the basis that it did more good for the poor than societies devoted to high ideals. That said, Smith held out some fascinating hopes for the future of capitalism. He didn’t want it to stay stuck at the frivolous level forever. He observed that humans have many ‘higher’ needs that currently lie outside of capitalist enterprise: among these, our need for education, for self-understanding, for beautiful cities and for rewarding social lives.

The hope for the future is that we’ll learn to generate sizeable profits from helping people in truly important, ambitious ways. Properly developed, capitalism shoudln’t just service our basic material needs while exciting us to buy frivolous things. It should make money from goods and services that deliver true fulfiflment. Then as now, the great question was how to get the rich to behave well towards the rest of society. The Christian answer to this was: make them feel guilty. Meanwhile, the radical, left-wing answer was then and is now: raise taxes. But Smith disagreed with both approaches: the hearts of the rich were likely to remain cold and high taxes would simply lead the rich to flee the country. He proposed that, contrary to what one might expect, it isn’t money the rich really care about. It is honour and respect. The rich accumulate money not because they are materially greedy, but primarily in order to be liked and approved of. So rather than taxing the rich, governments should understand the vanity at the heart of the rich and their motivations. They should therefore give the rich plenty of honour and status – in return for doing all the good things that these narcissists wouldn’t normally bother with, like funding schools and hospitals and paying their workers well. As Smith put it, “The great secret of education is to direct vanity to proper objects.” Big corporations feel very evil to us now, the natural targets of blame for low-paying jobs, environmental abuse and sickening ingredients. But Adam Smith knew there was an unexpected, and more important, element responsible for these ills: our taste. It’s not companies that primarily degrade the world. It is our appetites, which they merely serve. As a result, the reform of capitalism hinges on an odd-sounding, but critical task: the

education of the consumer. We need to be taught to want better quality things and pay a proper price for them, one that reflects the true burden on workers and the environment. A good capitalist society doesn’t just offer customers choice, it also teaches people to exercise this choice in judicious ways. Capitalism can, Smith suggests, be saved by elevating the quality of consumer demand. The economic state of the world can seem at once so wrong and yet so complicated, we end up collapsing into despair and passivity. Adam Smith is on hand to lend us confidence and hope. His work is full of ideas about how human values can be reconciled with the needs of businesses. He deserves our ongoing attention because he was interested in an issue that has become a leading priority of our own times: how to create an economy that is at once profitable and civilised.