‘How many times does Adam Smith use the term the invisible hand?’
I was asked this question, several years ago, during conversations with the British historian, Emma Rothschild, her noble laureate husband Amartya Sen, and the French economist Michel Camdessus, in Bilbao, Spain. Of course, I did not know the answer. So, Rothschild spared me the embarrassment; and went on to explain that he only uses the word three times in his entire opus. In the work most are familiar with, The Wealth of Nations, he uses it only once. Yet this one metaphor has come to dominate the popular consciousness when Smith’s name is uttered. As I processed this information – two famous words, only mentioned once in an almost 700-page work – Rothschild asked another question. ‘Do you know how many times Smith uses the phrase inequality in The Wealth of Nations?’ The history of capitalism, and its stark failure to address inequality, lead me to assume ‘the father of economics’ spent little time on the subject. Yet, Rothschild assured me that the word appears seventeen times in the Wealth of Nations, and that he did not hold back using the word in his other works as well.
While Rothschild would go on to write many thought-provoking pieces on Smith, particularly with regards to how he might encounter and ponder some of the more contemporary economic and social issues of the day, the factoid has stuck with me for all these years. If you were asked the same questions today, you might be tempted to find the nearest copy of The Wealth of Nations and begin the dubious task of counting words (though the task is much easier done with the search of a soft copy of the text). I was provoked to read and think, searching for what Adam Smith was really talking about.
One of the great tragedies of our day is that people do not truly read anymore. Indeed, who has time in our fast-paced world. After all, thanks to the internet of things, we are constantly inundated in updates and notifications. And maybe there is just too much out there – granted a lot of it is duplications and regurgitations. Also, as demand increases, information becomes bite-sized and important detail is often left out. All of this leads to historic amnesia. Although, even before hectic modernity, recorded history itself was not without fault. One of the earliest historians, Herodotus wrote of mythical creatures that never existed and made several mistakes in his reporting that have since been rebuked. From history being written by the victors to the very real bias that requires sifting through from record to record much, both in terms of truth and imperative details, is lost in translation. The problem becomes worse as hardly anyone really reads historical works. Instead, a sort of popular consciousness follows much of what we refer to as historical knowledge. Today, truth is at the mercy of whomsoever can craft the most concise and tantalising headline or get their point across in a catchy Tiktok. There is even now a slew of apps designed for the ‘busy person’ that turns wordy tomes into easily consumed summaries and podcasts.
When I was on the campaign trail during Malaysia’s last general election, I was brought face to face with the reality of the issues before us: how easily history and historic memory can be erased. Fake news is one clear battle. Fighting rumours and avalanche of manufactured accusations is an unwinnable war. But to remind people of a history that had been actively suppressed and whitewashed is a totally different story. It was a real shock to discover that all I had done when I was in government in the 1980s and 1990s, as education, finance, and deputy prime minister, fiscal schemes I created, buildings I had earmarked funding for, and various institutions I helped nurture, had my name and efforts simply erased from their history by the powers that kept me from office and imprisoned me. Even though the tangible evidence of what I had done was there for all to see; and yet it had to be demonstrated as the result of my policies and actions.
But I am fortunate. I have been given the time to set the record straight. To restore the erased memory, to try and end the story on a high note. Many are not so lucky. Great thinkers of the past, of Islam and the West, most of whom were polymaths, have their whole legacy wrapped up in one book or even just one idea. This does a great disservice to the true extent and intention of their thinking. Adam Smith is a good example.
As this year marks the 300th birthday of the ‘Father of Economics’, there will be a great deal of celebration and reflection on his work. I hope we can go beyond what popular consciousness has made of his thought. He is more than ‘the guy who wrote The Wealth of Nations’ a book whose original title – An Inquiry into the Nature and Causes of the Wealth of Nations – is all but popularly forgotten. He is more than the ‘invisible hand’. Inequality is just one of many issues he addresses that are left out by his proponents who would have you believe he was the godfather of unbridled, neoliberalist free market capitalism. Rather, I would even go so far as to say that were he to see what had been done with capitalism today, he would gladly have his name stricken from the histories. Adam Smith wrote tirelessly on the problem of poverty and argued that it urgently needed to be addressed. Yet, we do not see his name amongst the list of humanity’s most compassionate.
Adam Smith, like most humans, was far more complex than our collective memory makes clear. To begin with, he wrote more than one book. The far more philosophical, The Theory of Moral Sentiments launched his career in 1759, seventeen years before the 1776 publication of The Wealth of Nations. Many might be quick to say, well thinkers change their minds and so to read the earlier works misses out on the lessons learned or the clearer thinking that results from age. But the Theory of Moral Sentiments as we read it today is not what was published in 1759. He put out six editions of the book in his lifetime, the last one published in 1790, the year he died. Thus, The Theory of Moral Sentiments is both his first and last book, a wisdom that developed with age and alongside the more commonly known The Wealth of Nations, which I would argue is essential prerequisite reading for all self-confessed pundits.
Within the first words of The Theory of Moral Sentiments, it is very clear that Smith was giving way to anything but the ‘dismal science’ economics would come to be referred to as. In fact, economics, along with various other human interactions such as knowledge creation, begins with the profoundly simple idea of sympathy. This clarifies a contradiction that exists in the popular belief of Smith’s message. That people, in their selfishness, propel the economy to somehow deliver prosperity to all. That bastardisation of the message is now gospel to the neoliberalist, therefore the logical gymnastics required are not even attempted. It is taken for granted. Yet, the message in the very first line is hard to swallow for the staunchest supporters of capitalism today:
How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness to him, though he derives nothing from it except the pleasure of seeing it.
Despite our selfishness, we are still human. ‘The greatest ruffian, the most hardened violator of the laws of society, is not altogether without it.’ The ‘it’ being sympathy which can be negative or positive in intonation, as he puts it ‘pity or compassion’. So, it may be enough to simply think in order to be, according to Descartes, but to be human, for Smith, one had to feel and specifically feel for the other. But how can this come from the same man who wrote the infamous ‘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.’ This quote here, from The Wealth of Nations, is often the only of the many words Smith wrote that is retained in popular consciousness. And, out of context and lost in space, that is how it is taken without even a modicum of critical analysis. Many have damned the man for not having written this sentence just slightly less all-or-none, yet even they, along with the general student, take this declaration of selfishness in the context of our own ethically dehydrated and morally ambiguous postnormal times. Smith’s meaning and context is often disregarded for the convenience or the lazy ignorance of modern definitions.
Smith began as one interested in the social nature of humans and how society itself came about and worked. Selfishness was a hot topic in Smith’s day. And he was greatly troubled as he observed it in the world. Like any great scholar, he endeavoured to understand it more clearly. His selfishness, or as he referred to it, ‘self-love’, is deeply rooted in the sentiment of sympathy. You feel the pain or pleasure of the other as though it were your own. And because you benefit from the knowledge of that feeling, your reflected selfishness aligns with the desires of others. You are morally obligated to seek self-love, which is actually the interests of others as though their circumstances were happening to you. Thus, one key driver of economics, and of greater society in general, follows the lead of the theme behind many animated films, look into your heart to see what you truly must do to benefit yourself, others, and even society. But this nuance is lost on many, particularly those foaming at the mouth defenders of neoliberal economics – those who have effectively drained the life force out of economics, depriving it of ethical fortitude, leaving it a cold mechanical husk of market partiality and survival of the fittest.
The captains of industry fail to miss a great deal of other epistemological differences between their pursuits and Smith’s philosophy. For the ‘Father of Capitalism’ – he never actually used the phrase – was also a man of balance, not of extremes. Especially the extreme opinion that the market was master, king, or, heaven forbid, God. His notion of political economy was not naïve. He understood that the market too had its limitations and that certain institutions would be required to fill in and take on the tasks the market itself did not act upon. He also did not believe in the state as an assembly of individuals. Political economy had the object of, yes, giving the people means to carry out their own prosperity, but that it also needed to give the state the means to stabilise and maintain society, so the first objective is possible to begin with. Yes, he said a little inequality would motivate people to work harder, but I cannot see him supporting the gross and systemic inequalities etched into our societal norms. He argued for free education and was gravely distressed by poverty and the growing inequalities that were becoming common place in industrialised nations. He vehemently opposed the power the East India Company had accumulated in South Asia and frankly called out the oppression and extortion they carried out as well as Britain’s general misrule of India in the early days of colonisation.
In his discussion of the East India Company, in The Wealth of Nations, he walked a very interesting line between social contractarian political philosophy of the day (which would grow with popularity all the way up to John Rawls in the 1960s and beyond) and the more Enlightenment based comparative political theory. Social Contract Theory’s ultimate aim was to devise a utopian state thought experiment, and then propel states towards that image. In the comparative model, philosophers would largely poke at more micro instances of injustice, showing how in other circumstances this injustice can be corrected. Rinse, wash, repeat. Overall, Smith was a man of practical outcomes. Dreams of the ideal state were not for him, rather, he would ask how do we make the present better? Social Contractarians would strike at such a question by asking how it is that one knows what is just or not without extrapolating a utopia. Smith’s clever retort was, why not ask other people – and specifically, those who are unlike the individuals already at the discussion table. And here we see Smith’s last philosophical characteristic that is far too often not shared by his most staunch contemporary disciples.
Adam Smith was a member of the Scottish Enlightenment, and that enlightenment was not handed over from one civilised people to another; it was forged in the crucible of imperial oppression. It must not be forgotten that Scotland was an occupied territory of the British Crown. And you do not have to look hard in the great and eloquent works of the Scottish Enlightenment writers, such as Adam Ferguson, Hugh Blair, and Allan Ramsey, to find clever and linguistically devilish jabs at the Crown who claimed ownership over their lands. Scotland was not educated. The Scotts struggled and pulled themselves up to the standards of their overlords and so in that spirit believed peoples of any land were capable of the same feat. Smith believed deeply in inclusivity on the local and global levels and that we had a moral obligation towards all our neighbours near and far. Our initial judgements, derived from reason, gives us an idea, but that idea must be challenged through discourse, dialogue, and even polylogue – especially that which goes beyond in reaching others from various backgrounds. Our sympathies help us to feel what the other feels as we feel ourselves, but we are the ones who must engage to learn new sympathies from experiencing others. A man of such convictions cannot believe there should be a concentration of a nation’s wealth in one percent of the population, let alone that one state should control another or that the world should be a dog-eat-dog one, ran by monopolies and unregulated market chaos. The true wealth of nations is not measured in pounds, dollars, or ringgit, it is measured in the compassion of its people and their tireless work to build a better, inclusive society.
It is a shame and a tragedy that Adam Smith is confined to classes on economics and economic philosophy. His thought can give us enriching insight on ethics, morality, and even on the importance of compassion and care in our contemporary world, not just so that grave injustices are prevented, but to demonstrate the nature of these sentiments to our very humanity. Likewise, his love for and input to economics was not in a vacuum. He believed that economic change and political change went hand in hand, and he put forward a series of observations that we have failed to adequately challenge and refine. Fundamental misunderstandings of Adam Smith lead to fundamental misunderstandings of his greatest critics such as Thomas Carlyle, David Ricardo, and Karl Marx.
The grotesque simplification of Smith into invisible hands, selfishness, and markets leaves out valuable lessons Smith offers us that we can actually use to forge our post-Covid world. This includes the necessity for a rescuing of our sympathies and moral sentiments, a resistance to protectionism and isolationism, and a more global approach to critically analysing our present and navigating towards more preferred futures. Put another way, learning the lessons put to us.
Malaysia along with many of the other so called ‘developing states’ and ‘developing economies’ of the twentieth century have suffered a great injustice at the hands of those who not only misunderstood but failed to read Adam Smith properly. As a result, today conference after conference, and paper after paper asks: wither economics, the dismal science? But the humanity was always there and the morality, at the time of Smith, was so taken for granted that it need not be spelled out in An Inquiry into the Nature and Causes of the Wealth of Nations. It was also accepted that the minds of the future, would, presumably, like the minds of the eighteenth century, read the works available to them and be instructed on these works in their education.
So, to those intoxicated on neoliberalism, I would say: it’s time to begin the journey of recovery from your stupor. We have a lot of work to do to bring sympathy, care and compassion, and sustainability back into economics. We need to make sure that histories are read, think about what we read, and carry forward enlightened knowledge into our contemporary dilemmas. I am frequently asked: where is ethical or humane economics in Adam Smith? I say, fear not, it is there, but it requires you to read and think about it. Our contemporary existence makes it second-nature to want a single, simple, fixed solution to all our problems. But a complex, interconnected world requires complex, inclusive approaches. We need to think outside of the one-dimensional neoliberal enclave to shape a better, more equal, and just world.