PrintNovember 1, 2008
Obama's Adam Smith Problem
German scholars in the nineteenth-century exercised a good amount of frustration over something they dubbed "das Adam Smith Problem." To the consistency-minded Germans the brilliant yet humble Scottish economist and "father of capitalism" had nevertheless left a rather dubious literary legacy: two monumental and influential books that seem to argue in radically divergent and quite insurmountable directions. A consideration of this problem might help us to explain an astonishing and quite alarming deficiency in Barack Obama's economics education. Simply put, it's doubtful that Obama has ever even read the man whose influential theories of wealth creation he wishes to supplant.
Indeed, in the first of Smith's books, The Theory of Moral Sentiments (1759), Smith makes a quite humane and often beautiful case for the power of human sentiment in the practice of social virtue. He binds humanity together at an extraordinarily deep level and demonstrates why "we sympathize with the natural resentment of the injured" when, for example, greedy industrialists "violate fair play" and "throw down" their competitors "in the race for wealth and honors." Indeed, Smith seems to foreshadow the bleak finale expertly captured by Orson Wells in his Citizen Kane when he argues that the twilight years of greedy men will be filled with thoughts of "terror and amazement" at their prior conduct and make them outcasts from "the affections of mankind."
Conversely, in his magisterial The Wealth of Nations (1776), Smith relentlessly drives another point: that our darker and asocial instincts of self-preservation, retaliation and competition nevertheless provide the potent and necessary ingredients to "rouse the industry of mankind." In short, in his commanding treatise on capitalism it is self-interest and utility, not benevolence and sympathy that can solve the problem of economic scarcity: "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest." Indeed, what mystified German scholars was the quite sensitive and touching portrayal of human community in Smith's first book and statements like the following in his second: "It is his own advantage, indeed, and not that of society, which he has in view."
What gives? For years I've taken a rather morbid interest in the state of academia by asking my college students if they've ever even heard of Adam Smith. Invariably about two or three out of fifty mention something about "a Scottish guy." When I ask about Karl Marx however every hand in the room goes up. By helping to shed some light on "das Adam Smith problem" though I hope that students might come to appreciate a man who more than any other in modern history has shaped the world in which we live. I also hope to demonstrate to students that it's entirely possible to entertain a defense of Smith's philosophy of life even against his harshest critics in these dire economic times.
When I ask students to comment on "socialism" they normally say things like "publically minded" or "selfless" or "thinking of the whole instead of yourself." When I write "capitalism" on the chalkboard the predictable epithets start flowing: "greedy" or "selfish" or what Barack Obama likes to call in various ways "uncaring" (I did manage to hear "opportunity" on one occasion years ago). We spend some time then reading and discussing the "thinking of the whole instead of yourself" philosophers such as Plato, Marx, Rousseau, and Mao.
The common theme in each of these thinkers is distaste for private property and self-interest and a glorification of an intellectual ruling elite. By eliminating private property and free trade each philosopher thinks he is "freeing" an individual from the kind of acquisitive mentality that creates division in society. Indeed, it was Jean-Jacques Rousseau, whose portrait hung above Karl Marx's writing desk, who famously said that those not willing to free themselves from their attachments would be "forced to be free." Mao Tse Tung did Rousseau one better when he quipped that the "voluntary" cooperation of class enemies would be "compelled" by the state.
Next to these "public good first" philosophers we examine a list of the "individuals first" and "pro-private property" philosophers beginning with Aristotle and moving through John Locke, Adam Smith, and James Madison - the father of the U.S. Constitution. The common theme in each of these thinkers is a vigorous defense of private property and individual freedom and a palpable distrust of ruling elites. Says Adam Smith in this regard: "Every man is, no doubt, by nature, first and principally recommended to his own care; and as he is fitter to take care of himself than of any other person, it is fit and right that it should be so." The statesman who considers himself a better judge of a man's "local situation" is assuming a "dangerous" and "presumptuous" authority according to Smith.
Students notice right away that the "freedom" advocated by thinkers like Smith and Madison has more of a "freedom to" flavor usually informed by some notion of truth like natural law or natural rights. Indeed, to James Madison, something like Rousseau's or Mao's version of "compelled" freedom would have meant removing what he called "the causes of faction" - the preservation of which constitutes the chief task of any free and representative government. By dividing government against itself a statesman should only control rather the "effects of faction" and thereby preserve both the public good and an individual's freedom to own property and form different opinions (i.e., the causes of faction). By trying to remove the causes of faction a tyrant, in addition to destroying a person's "freedom to", attempts to, in Madison's words, give "every citizen the same opinions, the same passions, and the same interests."
Similarly, to Smith, the only way to produce the public good is to not think of the public good! In his words: "By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good." Self-interest then produces the public good through what Smith famously called "the invisible hand." More wealth is created for everyone when each thinks about his own interest. To Marx and Rousseau however this doesn't cut it since the very definition of morality is to think of others first, not yourself. But like Smith says, economies built on this principle (what Barack Obama has called "spreading the wealth") rarely accomplish "much good" for the public.
As a sentimentalist philosopher, Smith also noticed something quite remarkable about the human condition: we're all hard-wired with common sentiments concerning what constitutes fair competition and what appears to us as fraud or greed. We universally condemn the behavior of rapacious capitalists who "throw down" their competitors - they appear "detestable" to us. He recognized in his Theory of Moral Sentiments that the virtue of "justice" was required to keep these people in line with proper legislation. The danger however is that the lawgiver might "push" this legislation "too far" and "destroy liberty, security, and justice."
Why was Smith so concerned with preserving freedom? Because he understood that human sentiments like "beneficence" were only possible in a free society. In short, unlike justice, which can be extorted by force (threat of punishment), moral virtues like beneficence or fellow-feeling would completely disappear under something like socialism or communism: "Beneficence is always free, it cannot be extorted by force, the mere want of it exposes to no punishment; because the mere want of beneficence tends to do no real positive evil." Our common sentiment, in short, "approves" of fellow-feeling only if it has not been extorted by force. No one, says Smith, can force you to be a good neighbor - this has to be done freely. And here is where Smith differs from thinkers like Rousseau, Marx, Mao, or Barack Obama for that matter.
Smith is interested in taking stock of human beings and finding out how to both preserve freedom and benefit society within the bounds of our given nature. Justice is there to force good behavior "to a degree" in a capitalist economy but we also need to recognize that the self-preservation instinct is the only dynamic engine for increasing wealth and avoiding poverty. But beneficence, freely given and not forced, serves as another check in the "race for wealth and honors." It is our common human sentiment says Smith that keeps us from looking "mankind in the face" and claiming that we prefer ourselves to all others.
Like Madison's famous "checks and balances" then, Smith has articulated a way to preserve our freedom, create wealth, and prevent what he called "shocking enormities" in the system by revealing the genius of our human nature: "self-interest and benevolence" he called it. Indeed, much of the current economic crisis nationwide or in particular states like California for that matter can be attributed to Democrats who felt compelled to "trade for the public good." It turns out then that there really is never was a "das Adam Smith problem" at least according to Smith.
Whatever remains of the Adam Smith problem in recent years here in America is mostly a result of either poor education or socialist education, or both. Elite socialists like Barack Obama have never really cared much about economics or wealth creation as much as they care about power and a vision of what "ought to be." Like Rousseau and Marx, they feel that no matter what the capitalist system must be scrapped because in their minds, self-interest can never lead to the public good, and the freedom to be lacking in beneficence, a requirement for any display of freely chosen beneficence, does create a kind of positive evil in their communal utopias. There's an uncomfortable twitch, an annoying burn when someone claims that freedom means the freedom to be grumpy and selfish as well.
Barack Obama has advanced the astonishing thesis that by "spreading the wealth around" he'll somehow create a more benevolent society. But we've seen above that since benevolence can never be extorted by force the only thing Obama will succeed in doing is spreading suspicion, resentment, and poverty - the condition of any society whose lawmakers "push too far." A vote for John McCain on Tuesday can help keep America in the good hands of the humble yet brilliant Scottish economist who, in his race to develop a solution to the problem of scarcity, never lost sight of man's most important virtue: freedom.
