On the Wealth of Nations Read online

  It is clear from Adam Smith's other writings that he was a moral advocate of freedom. But the arguments for freedom in The Wealth of Nations are almost uncomfortably pragmatic. Smith opposed most economic constraints: tariffs, bounties, quotas, price controls, workers in league to raise wages, employers conniving to fix pay, monopolies, cartels, royal charters, guilds, apprenticeships, indentures, and of course slavery. Smith even opposed licensing doctors, believing that licenses were more likely to legitimize quacks than the marketplace was. But Smith favored many restraints on persons, lest brute force become the coin of a lawless realm.

  In words more sad and honest than we're used to hearing from an economist, Smith declared, 'The peace and order of society is more important than even the relief of the miserable.'4 Without economic freedom the number of the miserable increases, requiring further constraints to keep the peace among them, with a consequent greater loss of freedom.

  Smith was also aware that economic freedom has its discontents. He was particularly worried about the results of excess in the division of labor: 'The man whose whole life is spent in performing a few simple operations … generally becomes as stupid and ignorant as it is possible for a human creature to become.'5 We've seen this in countless politicians as they hand-shake and rote-speak their way through campaigns. But it's worth it. Productivity of every kind can be increased by specialization. And the specialization of politics at least keeps politicians from running businesses where their stupidity and ignorance could do even greater harm to economic growth.

  Adam Smith's More Complicated Principles

  Smith's logical demonstration of how productivity is increased through self-interest, division of labor, and trade disproved the thesis (still dearly held by leftists and everyone's little brother) that bettering the condition of one person necessarily worsens the condition of another. Wealth is not a pizza. If I have too many slices, you don't have to eat the Domino's box.

  By proving that there was no fixed amount of wealth in a nation, Smith also proved that a nation cannot be said to have a certain horde of treasure. Wealth must be measured by the volume of trades in goods and services – what goes on in the castle's kitchens and stables, not what's locked in strongboxes in the castle's tower. Smith specifies this measurement in the first sentence of his introduction to The Wealth of Nations: 'The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes.'6 Smith thereby, in a stroke, created the concept of gross domestic product. Without GDP modern economists would be left with nothing much to say, standing around mute in ugly neckties, waiting for MSNBC to ask them to be silent on the air.

  If wealth is all ebb and flow, then so is its measure, money. Money has no intrinsic value. Any baby who's eaten a nickel could tell you so. And those of us old enough to have heard about the Weimar Republic and to have lived through the Carter administration are not pained by the information. But eighteenth-century money was still mostly made of precious metals. Smith's observations on money must have been slightly disheartening to his readers, although they had the example of bling-deluged but impoverished Spain to confirm what he said. Gold is, well, worth its weight in gold, certainly, but not so certainly worth anything else. It was almost as though Smith, having proved that we can all have more money, then proved that money doesn't buy happiness. And it doesn't. It rents it.

  Adam Smith's Principles: Their Principal Effect

  The Wealth of Nations was published, with neat coincidence, in the very year that history's greatest capitalist nation declared its independence. And to the educated people of Great Britain the notion of the United States of America was more unreasonable, counterintuitive, and, as it were, outlandish than any of Adam Smith's ideas. Wealth was not light reading, even by the weightier standards of eighteenth-century readers. But it was a succès d'estime and something of an actual success. The first edition sold out in six months, shocking its publisher. Other than this, there is no evidence of Smith's work shocking his contemporaries.

  For instance, Smith's suggestion of the economic primacy of self-interest didn't appall anyone. That self-interest makes the world go round has been tacitly acknowledged since the world began going round – a little secret everyone knows. And the worrisome thought that money is imaginary had been worried through by Smith's good friend David Hume a quarter of a century earlier. Indeed the fictitious quality of money had been well understood since classical times. In the two hundred years between the reigns of the emperors Nero and Gallienus, imperial fictions reduced the silver content of Roman coinage from 100 percent to none.

  But, though its contents didn't make people gasp, something about The Wealth of Nations was grit in the gears of Enlightenment thinking. And that something is still there, grinding on our minds. I could feel it myself when the subject of self-interest came up.

  Gosh, I'm not selfish. I think about the environment and those less fortunate than me. Especially those unfortunates who don't give a hoot about pollution, global warming, and species extinction. I think about them a lot, and I hope they lose the next election. Then maybe we can get some caring and compassionate people in public office, people who aren't selfish. If we elect an environmentalist mayor, the subdivision full of McMansions that's going to block my view of the ocean won't get built.

  And let's face it, the 'lower ranks of the people' do have too much money. Look at Britney Spears. Or I'll give you a better example, the moneybags buying those châteaux-to-go on the beachfront. You with your four-barge garage and the Martha-bitchin'-Stewart-kitchen that you cook in about as often as Martha does the dishes. You may think you're not the lower ranks because you make a lot of dough, but your lifestyle is an 'inconveniency to the society' big time, as you'll find out when I key your Hummer that's taking up three parking spaces.

  I know your type. All you do is work all day, eighty or a hundred hours a week, in some specialized something that nobody else understands, on Wall Street or at fancy corporate law firms or in expensive hospital operating rooms. A person has to balance job, life, and family to become a balanced … you know, person. This is why my wife and I are planning to grow all our own food (rutabagas can be stored for a year!), use only fair-traded Internet services with open code programming, heat the house by means of clean energy renewable resources such as wind power from drafts under the door, and knit our children's clothes with organic wool from sheep raised under humane farming conditions in our yard. This will keep the kids warm and cozy, if somewhat itchy, and will build their characters because they will get teased on the street.

  Okay, yes, I admit that total removal of every market restraint would be 'good for the economy'. But money isn't everything. Think of the danger and damage to society. Without government regulation the big shots who run companies like Enron, WorldCom, and Tyco could have cheated investors and embezzled millions. Without restrictions on the sale of hazardous substances young people might smoke, drink, and even use drugs. Without the licensing of medical practitioners the way would be clear for chiropractors, osteopaths, and purveyors of aromatherapy. If we didn't have labor unions, thirty thousand people would still be wage slaves at General Motors, their daily lives filled with mindless drudgery. And if there weren't various forms of retail collusion in the petroleum industry, filling stations could charge as little as they liked. I'd have to drive all over town to find the best price. That would waste gas.

  Also consider the harm to the developing world. Cheap pop music MP3 downloads imported from the United States will put every nose-flute band in Peru out of business. Plus some jobs require protection, to ensure they are performed locally in their own communities. My job is to make quips, jests, and waggish comments. Somewhere in Mumbai there is a younger, funnier person who is willing to work for less. My job could be outsourced to him. But he could make any joke he wanted. Who would my wife scold? Who would my in-laws be offended by? Who would my friends shun?

  This
anonymous fellow, tens of thousands of miles away, might let his sense of humor run wild. He might, for example, be doing that amusing article I write about once a year concerning the trials and tribulations (and heartwarming moments) of taking the children to Manhattan at Christmastime. The kids get squashed against the glass department store windows, shoved under the tree at Rockefeller Center, and sliced to ribbons on the Central Park skating rink by hordes of Midwesterners, Europeans, and Japanese. Mumbai-Me might be tempted to slip in a bit of tasteless doggerel.

  In yule New York, while suff'ring the

  Ugly, rude tourist parade. A

  Gift-giving thought occurred to me –

  Donation to Al-Qaeda.

  For the sake of accountability, sensitivity to hurtful language, and all things socially responsible, Adam Smith's flow of goods and services needs to be accompanied by at least the threat of another flow – getting a drink thrown in my face.

  Then there is the matter of those goods and services – Adam Smith's gross domestic product. I am as grossly domestic as anyone. Where's the product? How come all the goods and services flow out of my income instead of into it? Of course, I understand that money isn't what's valuable. Love is what's valuable. And my bank account is full of love or something closely related to it, sex. That is, I've got fuck-all in the bank. And if money isn't worth anything, why was Alan Greenspan such a big cheese for all those years? Did he just go to his office and do Sudoku puzzles all day?

  None of us, in fact, take the axioms of Adam Smith as givens – not unless what's given to us are vast profits, enormous salaries, and huge year-end bonuses resulting from unfettered markets, low labor costs, increased productivity, and current Federal Reserve policy. Like the AFL-CIO, France, and various angry and addled street protestors, we quarrel with Adam Smith. If this is to be an intelligent squabble we need to examine Smith's side of the argument in full. The Wealth of Nations is – as my generation used to say when my generation was relevant – relevant.

  CHAPTER 2

  Why Is The Wealth of Nations So Damn Long?

  So we sit down to read, load our lap with the case-of-Scotch weight of Adam Smith's opus, and crack open The Wealth of Nations to page 1 of so very, very many pages. And we find ourselves in a position of intellectual embarrassment more blush-inducing than mere disagreement with Smith's logic and common sense. We face the Quantity Query. It occurs to most readers of most great works (often late at night before an exam). Even a devout biblical literalist at a conservative Baptist seminary must privately speculate upon it while wading through the begats of 1 Chronicles. And I am, or on my good days I like to think I am, a devout advocate of free markets. But The Wealth of Nations, in my Modern Library edition, is nine hundred pages plus preface, editor's introduction, and appendix.

  I've been told that one of the pleasures of middle age is getting to read the classics again, now that, almost forty years after my last college class, I've forgotten enough about them. I'm supposed to gain new, adult perspicaciousness from Plato's Dialogues; discover a fresh, mature appreciation of Paradise Lost, and experience, as a grown man, unremembered wonders in The Wealth of Nations. That includes wondering if I ever actually read it. I quiz myself frankly: is it the Monarch Notes that I've forgotten?

  Be this as it may, another pleasure of middle age is that as the face reddens more with rum blossoms it reddens less with chagrin. I am now willing to pose the question that, as a student, I didn't have the nerve for. Imagine, in a graduate seminar on George Eliot, summoning the courage to ask, 'Why is Middle-march so damn long?'

  The simplest reason for Adam Smith's lack of economy with words was, aptly, economic. When Wealth was published it sold for one pound sixteen shillings. By Smith's own estimate the 'ordinary wages of labour'1 at the time were ten shillings a week. Consumers, even well-off consumers of intellectual luxury goods, demand good weight. Hoist Bill Clinton's apologia pro vita sua, which could have been summed up in a few choice words.

  The Libertarian Reader, published by the Cato Institute in 1997, did just that for Adam Smith, making his essential points in seven and a half pages of excerpts from Wealth. When David Boaz, executive vice president of Cato and editor of the Reader, was writing the introduction, he put in something to the effect that each original work from which material had been drawn could be enjoyed in its entirety. 'No, no, no, not The Wealth of Nations!' said Tom Palmer, senior fellow at Cato and resident expert on Adam Smith.

  Smith's genius was to establish economics as a scientific discipline, distinct from the unruly jumble of the mental and material worlds that we encounter in the actual economy. But it doesn't take much of an economic encounter to bring every other scientific discipline jumbling down on our heads. Consider the psychology, sociology, political science, and mechanical engineering involved when we find that our five-year-old has left Wal-Mart with an unpaid-for My Little Pony. Adam Smith was as willing as my crying child and I are to stray from strictly economic points. Here he is, 230-odd years ahead of himself on why Angelina Jolie makes a discreditable amount of money:

  There are some very agreeable and beautiful talents of which the possession commands a certain sort of admiration; but of which the exercise for the sake of gain is considered … as a sort of public prostitution … The exorbitant rewards of players, opera-singers, opera-dancers, &c are founded upon … the rarity and beauty of the talents, and the discredit of employing them.2

  It is this sort of thing that makes the 892½ pages of Wealth that aren't included in The Libertarian Reader worth reading.

  Or some of them. Tom Palmer isn't wrong about the slogging involved in a real perusal of Wealth. Not all of Smith's asides involve opera-dancers cavorting to the music of Monteverdi, presumably in scanty costumes. There is, for instance, the sixty-seven-page 'Digression concerning the Variations in the Value of Silver during the Course of the Four last Centuries'. Here yeoman service is done in the cause of quashing the idea that a certain commodity possesses a fixed value, or that we'd want it to. But to those uninterested in the historiography of currency supply, it's like reading Modern Maturity in Urdu.

  The very largeness of his subject may have circumscribed Smith's desire to edit. And at age fifty-three, considering himself to be in poor health when The Wealth of Nations was published, Smith may have thought he wouldn't write another book. He didn't. Tom Palmer calls it, 'the kitchen sink effect – he had a lot to say and here was his big chance.'

  The eighteenth century was a time of clarity of expression – a respite from the euphuistic blithering that went before and the romantic blather that would come after. But the Enlightenment style, though clear, was diffuse. A digression, if worthy-seeming, was not considered a distraction. It was thought of the same way twenty-first-century mothers with careers think of multitasking. And the pace of reading was more leisurely in the 1700s. There wasn't much on TV.

  Edmund Burke, who could wander away from a subject with the best of them, wrote in a letter to Adam Smith, 'You are in some few Places, what Mr. Locke is in most of his writings, rather a little too diffuse. This is however a fault of the generous kind, and infinitely preferable to the dry sterile manner, which those of dull imaginations are apt to fall into.'3

  General literacy was a relatively new thing in Smith's time, and the dry sterile manner of modern economics textbooks had yet to be dully imagined. The printed word was closer kin to the spoken word. And speaking was still a source of entertainment. Today no Michelin Green Guide would give an extra star to a restaurant that hurried its diners through a five-course meal in twenty minutes. For the same reason eighteenth-century speakers – and, by extension, writers – were not celebrated for brevity. Brevity may be the soul of wit, but The Wealth of Nations was no joke. Anyway, a taste for brevity is a recent fashion. Lincoln's Gettysburg Address received a tepid response at Gettysburg. And semiliterate and subliterate types still enjoy a good stem-winder on AM radio or in Hugo Chávez's Venezuela.

  Smith was a pr
acticed public speaker. He began his career, in Edinburgh, giving paid talks of the intellectually improving kind. He spent thirteen years lecturing at Glasgow University, first as professor of logic and then as professor of moral philosophy. And lecture was what he did do. Professors in the 1760s didn't just throw questions open to classroom discussion, then go around saying, 'I learn more from my students than they learn from me.' Form following function, Smith adhered to the rule of all instructional adepts: say what you will say, say what you do say, say what you did say.

  According to one of Smith's pupils, John Millar, a future professor at Glasgow himself, Smith's delivery 'was plain and unaffected … As he advanced, however, his manner became warm and animated, and his expressions easy and fluent.'4 Or, as we would put it, he talked his head off. More correctly, he could be said to have talked his head full. Smith's Glasgow lectures have survived only in reminiscences and two incomplete sets of student notes, but there is evidence he was shaping his ideas for The Wealth of Nations as he talked. Formal prolixity extended to his private chats. A friend of Smith's reported, 'I have often told him after half an hour's conversation, "Sir, you have said enough to make a book."'5 And so, at times, the book Smith made reads like an FBI wiretap transcription, except with deeper thoughts and no swear words.

  'Said enough to make a book' is also a fitting comment because Smith probably dictated The Wealth of Nations. He claimed he found penmanship slow and difficult, and the poor script and tardy replies of his personal correspondence demonstrate it. The natural verbosity of dictation may have made Wealth longer, but we shouldn't complain. Most writers talk too much and often expend what brilliance they possess on their palaver instead of their writing. We have Smith's brilliance on the page, in contrast to Samuel Johnson's. We must go to that toady Boswell for Dr Johnson's lively talk, which is not so well represented in the Doctor's sometimes deadly prose and poetry.