The Myth of Adam (Smith)

Richard Dawkins, Christopher Hitchins, Sam Harris and their clubby ilk love to ramble on about destructive, unreasoned religious beliefs that enchain humanity in a continued dark age. It’s a mistake to blame human wonder at the mystery of it all rather than the blowhards of institutional religion who turn our wonder and worry to their own earthbound ends.

But as long as we’re going to examine the folly of unwarranted belief, let’s take on an unjustified faith too little challenged: the myth of Adam Smith’s invisible hand and the yet-to-be-seen miracles of the so-called free market. As the etymology of the word religion indicates, there is in it an aspiration to bind us together in love. The Myth of the GodMarket depends on sundering fellow-feeling and mutuality on the altar of greed. Its worldview is, in a word, ugly.

Amartya Sen, a Nobel prize-winner in economics, penned a recent essay that attempts to set the record straight with regard to Adam Smith. Sen’s work is to orthodox free-market economics what the Jesus Seminar is to Christianity. Sen looks to all of Smith’s writing and the historical record to pierce the veil of delusion surrounding the seminal thinker, just as the scholars of the Jesus Seminar searched the record for the emancipatory wisdom of the historical Jesus.

In case you can’t tell, I believe there is power in spiritual aspiration. Few tall tales are as dis-empowering as the myth of the GodMarket.

The claims of free-marketeers are so preposterous that it seems insane that any of its many victims would still believe its unwise tales. As with too many religious institutions, the tales are told by vested interests whose power and wealth depend upon a hoodwink and a nod.

Not only did Smith not make the outrageous claims for a free market, he also spoke eloquently about the dangers of unfettered self-interest and the affectionate bonds of sympathy that play a role in human fulfillment. The misinterpretation is a double-whammy. The free marketers convince us we’re all Hobbesian, selfish animals who would tear one another apart if not for their police actions – but then claim that in the marketplace, that selfishness somehow produces the best of all possible worlds for all concerned. They have us, going and coming.

Here’s how Sen put it:

The spirited attempt to see Smith as an advocate of pure capitalism, with complete reliance on the market mechanism guided by pure profit motive, is altogether misconceived. Smith never used the term “capitalism” (I have certainly not found an instance). More importantly, he was not aiming to be the great champion of the profit-based market mechanism, nor was he arguing against the importance of economic institutions other than the markets.

And,

Smith was convinced of the necessity of a well-functioning market economy, but not of its sufficiency. He argued powerfully against many false diagnoses of the terrible “commissions” of the market economy, and yet nowhere did he deny that the market economy yields important “omissions”. He rejected market-excluding interventions, but not market-including interventions aimed at doing those important things that the market may leave undone.

It is an undeniable fact that unregulated capitalism contains a trickle-up mechanism that sooner or later empties the pockets of the many into the goldpots of the wealthy few. If there is an invisible hand, it’s a dirty one that cares nothing for a fully human life, a survivable environment, or a free, healthy and educated citizenry.

I was lucky. I read Smith’s Theory of Moral Sentiments before I read his mostly misinterpreted Wealth of Nations. Moral Sentiments is a humanist work that addresses many subjects, including limits to the moral and practical worth of self-interest or self-love. Sen summarizes:

Beyond self-love, Smith discussed how the functioning of the economic system in general, and of the market in particular, can be helped enormously by other motives. There are two distinct propositions here. The first is one of epistemology, concerning the fact that human beings are not guided only by self-gain or even prudence. The second is one of practical reason, involving the claim that there are good ethical and practical grounds for encouraging motives other than self-interest, whether in the crude form of self-love or in the refined form of prudence. Indeed, Smith argues that while “prudence” was “of all virtues that which is most helpful to the individual”, “humanity, justice, generosity, and public spirit, are the qualities most useful to others”. These are two distinct points, and, unfortunately, a big part of modern economics gets both of them wrong in interpreting Smith.

The marketplace needs moral guardians. There is no such thing as a “free market” in the first place. There is no denying the benefits of open-exchange, though. Smith wanted to do away with feudal monopolies. He certainly did not want to empower a new feudalism.

No, we ought to be free to pursue a livelihood we find fulfilling. We ought to be able to trust our encounters in the marketplace. There is a logic to supply and demand, and competition for our interests and our dollars is a good thing.

But unguarded, unregulated capitalism has failed. Adam Smith never thought it would succeed in the first place.

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