On the Wealth of Nations Read online

  On The Wealth of Nations

  Also by P. J. O'Rourke

  Modern Manners

  The Bachelor Home Companion

  Republican Party Reptile

  Holidays in Hell

  Parliament of Whores

  Give War a Chance

  All the Trouble in the World

  Age and Guile Beat Youth, Innocence, and a Bad Haircut

  Eat the Rich

  The CEO of the Sofa

  Peace Kills

  Other titles in the Books That Changed the World series:

  Available now:

  Plato's Republic by Simon Blackburn

  Darwin's Origin of Species by Janet Browne

  The Qur'an by Bruce Lawrence

  Marx's Das Kapital by Francis Wheen

  Forthcoming:

  The Bible by Karen Armstrong

  Machiavelli's The Prince by Philip Bobbitt

  Homer's The Iliad and the Odyssey by Alberto Manguel

  Clausewitz's On War by Hew Strachan

  On The Wealth of Nations

  P. J. O'ROURKE

  Atlantic Books

  First published in the United States of America in 2007

  by Grove/Atlantic Inc.

  First published in Great Britain in 2007 by Atlantic Books,

  an imprint of Grove Atlantic Ltd.

  Copyright © P. J. O'Rourke 2007

  The moral right of P. J. O'Rourke to be identified as the author

  of this work has been asserted in accordance with the Copyright

  Designs and Patents Act of 1988.

  All rights reserved. No part of this publication may be reproduced,

  stored in a retrieval system, or transmitted in any form or by any

  means, electronic, mechanical, photocopying, recording, or

  otherwise, without the prior permission of both the copyright

  owner and the above publisher of this book.

  Every effort has been made to trace or contact all copyright-holders. The publishers will be pleased to make good any

  omissions or rectify any mistakes brought to their attention at

  the earliest opportunity.

  9 8 7 6 5 4 3 2 1

  A CIP catalogue record for this book is available from the

  British Library

  ISBN 978 1 84354 388 6

  Export and Airside ISBN 978 184354 626 9

  Offset by Avon DataSet Ltd, Bidford on Avon, Warwickshire

  Printed in Great Britain

  Atlantic Books

  An imprint of Grove Atlantic Ltd

  Ormond House

  26–27 Boswell Street

  London WCIN 3JZ

  www.groveatlantic.co.uk

  In hope that he will grow up in a world that enjoys the morality as well as the materiality of The Wealth of Nations, this book is dedicated to Edward Clifford Kelly O'Rourke.

  CONTENTS

  Acknowledgments ix

  1 An Inquiry into An Inquiry into the Nature and Causes of the Wealth of Nations 1

  2 Why Is The Wealth of Nations So Damn Long? 14

  3 The Theory of Moral Sentiments In the Augean Stables of the Human Condition, Adam Smith Tries to Muck Out the Stalls 26

  4 The Wealth of Nations, Book 1 How the High Price of Freedom Makes the Best Things in Life Free 38

  5 The Wealth of Nations, Book 2 'Of the Nature, Accumulation, and Employment of Stock' Let Adam Smith Be Your Market Guru 57

  6 The Wealth of Nations, Book 2, Continued Adam Smith, Un-Motivational Speaker 70

  7 The Wealth of Nations, Book 3 'Of the different Progress of Opulence in different Nations' and How We Have the Stupidity of the Powerful to Thank for It 85

  8 The Wealth of Nations, Book 4 'Of Systems of Political Economy' Adam Smith Tackles the Chinese Trade Menace 98

  9 The Wealth of Nations, Book 4, Continued Adam Smith versus the Ideological Swine When They Were Still Cute, Squealing Piglets 111

  10 Adam Smith, America's Founding Dutch Uncle 119

  11 The Wealth of Nations, Book 5 'Of the Revenue of the Sovereign or Commonwealth' Adam Smith, Policy Wonk 132

  12 Adam Smith's Lost Book 153

  13 An Inquiry into Adam Smith 162

  14 Adam Smith in Heaven 190

  Appendix: An Adam Smith Philosophical Dictionary 197

  Notes 219

  Bibliography 235

  Index 239

  ACKNOWLEDGMENTS

  It was Toby Mundy, head of Atlantic Books, London, who had the good idea for this series of commentaries. It was also Toby who had the idea (how good is not for me to judge) of asking that I write one. However the reader may feel, I am grateful for the experience. Although it did throw me into the deep end of the intellectual pool where I am not accustomed to swim.

  Thanks go as well to Morgan Entrekin, chief of Grove/ Atlantic worldwide, whose editorial advice ('rewrite the whole thing') was appreciated if not taken. Morgan and I have been together in that civil union known as writer/editor (and recognized by most states) since 1983. He has put every one of my books into print. Be it on his own head.

  Chapter 3 of this book, on Adam Smith's The Theory of Moral Sentiments, previously appeared, in somewhat different form, in the Weekly Standard. I owe a great debt to that fine publication, which for more than a decade has let me hold forth on – anything, really, even The Theory of Moral Sentiments.

  Another great debt (and large contribution, which is … um, in the mail) is owed to the Cato Institute, in Washington, DC, a nonpartisan think tank promoting the individual liberty that we all love and insisting upon the individual responsibility that we don't all love quite so well. Cato is headed by President Ed Crane; its executive vice president, David Boaz, does most of the work; and I – Cato's Mencken Research Fellow – do none (being as crabby but hardly as prolific as my fellowship's namesake). Cato Senior Fellow Tom Palmer, who is a genuine Adam Smith scholar, walked me through The Wealth of Nations. It was Tom who pointed out that Smith, when he was using dead beavers and deer to explore the nature of value, had no idea what he was talking about. And it was Tom who noted the irony of mercantilist policy attempting to do to its own country in peacetime what it would strive to do to an enemy country in war.

  Some years ago Cato offered a course of lectures, Advancing Civil Society, which are soon to be rereleased on CDs and tape cassettes. The four recordings devoted to The Wealth of Nations are brilliant and succinct. And listening to them is, according to an authoritative source (my wife), more pleasant than listening to me.

  Julie Mariotti, with her linguistic skills and her knowledge of eighteenth-century French culture, provided me with a colloquial translation of Mme Riccoboni's letter to David Garrick. Even for someone literate in French (je ne pas), that missive is a nearly indecipherable jumble of obsolete grammar and long-gone slang.

  James Kegley, with his knack behind the lens, provided the reader with a picture of me looking – rather inaccurately – intelligent and presentable.

  I talked about my book (endlessly, I fear) to the people with whom I discuss everything that is beyond my comprehension (but rarely beyond theirs): Andy and Denise Ferguson, Nick and Mary Eberstadt, Michael Lehner, and Tina O'Rourke. The last of these, being married to the author, had to endure that talk day and night. I thank them all for their kind patience and wise ideas.

  More kind patience and further wise ideas came from Ed Crane, David Boaz, Richard Starr, Philip Terzian, Richard Pipes, Charles Murray, Chris DeMuth, Toby Lester, and Cullen Murphy.

  Credit must also be given to David Brooks for his reminder, in one of his excellent New York Times columns (they should give him the whole paper to run), that the basis of free market principles has been understo
od since at least the time of Albertus Magnus in the thirteenth century. And credit, too, to Robert Samuelson for his continued wonderful reporting on and analysis of economic matters. In a 2005 column in the Washington Post, Samuelson captured the whole of Adam Smith's argument against the know-it-alls of dirigisme and economic planning in one sentence: 'The less we understand the economy, the better it does.'

  Dr William C. Freund, who was for many years the chief economist for the New York Stock Exchange, told me a joke that I have found useful to keep in mind: 'An economist is a fellow who knows 101 ways to make love and doesn't have a girl.'

  I was complaining to lawyer and legal scholar Peter Huber about some of the dryness and difficulty in Adam Smith's thinking. Peter said that one may be as dull as one likes if one has something truly brilliant and original to say. This made me recall that I don't, and therefore it has behooved me to maintain a light touch with my own thinking, which I hope, but cannot promise, that I've done.

  What I can promise is undying gratitude to Tina O'Rourke and Caitlin Rhodes for all the research they did and for their labors in taking what that research turned into after it had been through my mental digestive system and feeding it into the computer's maw. Thus did they keep that glowing, keyboarded troll that squats beneath the bridge of literary endeavor from devouring this Billy Goat Gruff.

  I'd like to end these acknowledgments with one item for which no thanks whatsoever should be given. Cambridge University separated the study of economics from the study of moral sciences in 1903. A little soon.

  He took only what his superficial mind had the power of taking, and the pith of Smith's thinking must have been left behind. To borrow even a hat to any purpose, the two heads must be something of a size.

  —Adam Smith's biographer, John Rae,

  on a previous author who attempted

  to appropriate Smith's work

  CHAPTER 1

  An Inquiry into An Inquiry into the Nature and Causes of the Wealth of Nations

  The Wealth of Nations is, without doubt, a book that changed the world. But it has been taking its time. Two hundred thirty-one years after publication, Adam Smith's practical truths are only beginning to be absorbed in full. And where practical truths are most important – amid counsels of the European Union, World Trade Organization, International Monetary Fund, British Parliament, and American Congress – the lessons of Adam Smith end up as often sunk as sinking in.

  Adam Smith's Simple Principles

  Smith illuminated the mystery of economics in one flash: 'Consumption is the sole end and purpose of all production.'1 There is no mystery. Smith took the meta out of the physics. Economics is our livelihood and just that.

  The Wealth of Nations argues three basic principles and, by plain thinking and plentiful examples, proves them. Even intellectuals should have no trouble understanding Smith's ideas. Economic progress depends upon a trinity of individual prerogatives: pursuit of self-interest, division of labor, and freedom of trade.

  There is nothing inherently wrong with the pursuit of self-interest. That was Smith's best insight. To a twenty-first-century reader this hardly sounds like news. Or, rather, it sounds like everything that's in the news. These days, altruism itself is proclaimed at the top of the altruist's lungs. Certainly it's of interest to the self to be a celebrity. Bob Geldof has found a way to remain one. But for most of history, wisdom, beliefs, and mores demanded subjugation of ego, bridling of aspiration, and sacrifice of self (and, per Abraham with Isaac, of family members, if you could catch them).

  This meekness, like Adam Smith's production, had an end and purpose. Most people enjoyed no control over their material circumstances or even – if they were slaves or serfs – their material persons. In the doghouse of ancient and medieval existence, asceticism made us feel less like dogs.

  But Adam Smith lived in a place and time when ordinary individuals were beginning to have some power to pursue their self-interest. In the chapter 'Of the Wages of Labour,' in book 1 of The Wealth of Nations, Smith remarked in a tone approaching modern irony, 'Is this improvement in the circumstances of the lower ranks of the people to be regarded as an advantage or as an inconveniency to the society?'2

  If, in the eighteenth century, prosperity was not yet considered a self-evidently good thing for the lower ranks of people, it was because nobody had bothered to ask them. In many places nobody has bothered to ask them yet. But it is never a question of folly, sacrilege, or vulgarity to better our circumstances. The question is how to do it.

  The answer is division of labor. It was an obvious answer – except to most of the scholars who had theorized about economics prior to Adam Smith. Division of labor has existed since mankind has. When the original Adam delved and his Eve span, the division of labor may be said to have been painfully obvious. Women endured the agonies of childbirth while men fiddled around in the garden.

  The Adam under present consideration was not the first philosopher to notice specialization or to see that divisions are as innate as labors. But Smith was arguably the first to understand the manifold implications of the division of labor. In fact he seems to have invented the term.

  The little fellow with the big ideas chips the spear points. The courageous oaf spears the mammoth. And the artistic type does a lovely cave painting of it all. One person makes a thing, and another person makes another thing, and everyone wants everything.

  Hence trade. Trade may be theoretically good, or self-sufficiency may be theoretically better, but to even think about such theories is a waste of that intermittently useful specialization, thought. Trade is a fact.

  Adam Smith saw that all trades, when freely conducted, are mutually beneficial by definition. A person with this got that, which he wanted more, from a person who wanted this more than that. It may have been a stupid trade. Viewing a cave painting cannot be worth three hundred pounds of mammoth ham. The mutuality may be lopsided. A starving artist gorges himself for months while a courageous oaf of a new art patron stands bemused in the Grotte de Lascaux. And what about that wily spear point chipper? He doubtless took his mammoth slice. But they didn't ask us. It's none of our business.

  Why an Inquiry into Adam Smith's Simple Principles Is Not an Inquiry, First, into Adam Smith

  Most things that people spend most of their time doing are none of our business. This is a very modern idea. It makes private life – into which we have no business poking our noses – more fascinating than private life was to premoderns. Adam Smith was a premodern, therefore this book is organized in an old-fashioned way. The man's ideas come first. The man comes afterward. Adam Smith helped produce a world of individuality, autonomy, and personal fulfillment, but that world did not produce him. He belonged to an older, more abstracted tradition of thought.

  When a contemporary person's ideas change the world, we want to know about that person. Did Julia Child come from a background of culinary sophistication, or did her mother make those thick, gooey omelets with chunks of Velveeta cheese and Canadian bacon like my mother? I fed them to the dog. What elements of nature and nurture, of psychology and experience, developed Julia Child's thinking? But there was a time when thinking mostly developed from other thinking. The thinkers weren't thinking about themselves, and their audience wasn't thinking of the thinkers as selves, either. Everyone was lost in thought. Dugald Stewart, who in 1858 published the first biography of Adam Smith, excused its scantiness of anecdote with the comment, 'The history of a philosopher's life can contain little more than the history of his speculations.'3

  Another reason to put the history of Adam Smith's speculations ahead of the history of Adam Smith is that Smith led the opposite of a modern life – uneventful but interesting. He was an academic but an uncontentious one. He held conventional, mildly reformist political views and would have been called a Whig if he'd bothered to be involved in partisan politics. He became a government bureaucrat. Yet the essence of his thinking – 'It's none of our business' – will eventually (I
hope) upend everything that political and religious authorities have been doing for ten thousand years. In a few nations the thinking already works. There are parts of the earth where life is different than it was when the first physical brute or mystical charlatan wielded his original club or pronounced his initial mumbo jumbo and asserted his authority in the first place.

  The whole business of authority is to interfere in other people's business. Princes and priests can never resist imposing restrictions on the pursuit of self-interest, division of labor, and freedom of trade. Successful pursuits mean a challenge to authority. Let people take the jobs they want and they'll seek other liberties. As for trade, nab it.

  A restriction is hardly a restriction unless coercion is involved. To go back to our exemplary Cro-Magnons, a coercive trade is when I get the spear points, the mammoth meat, the cave painting, and the cave. What you get is killed.

  Coercion destroys the mutually beneficial nature of trade, which destroys the trading, which destroys the division of labor, which destroys our self-interest. Restrain trade, however modestly, and you've made a hop and a skip toward a Maoist Great Leap Forward. Restrain either of the other economic prerogatives and the result is the same. Restrain all three and you're Mao himself.

  Adam Smith's Less Simple Principles