Nicholas Phillipson
Page 26
For Smith, Buccleuch was a model pupil with a real interest in the infrastructure and technological demands of agricultural improvement, a landlord who invested heavily in roads, bridges and canals and rewarded innovative tenants. He had been taught to think of the duties of great landowners in a commercializing economy as being the improvement of their estates rather than meddling in the business of politics, and he interpreted this as meaning playing a part in public life in Scotland rather than Westminster. He was to emerge as a popular and pre-eminent peer, well-known in Edinburgh as a ‘patriot’ who could have become the Duke of Argyll’s successor as ‘uncrowned king of Scotland’ had he chosen; but that was not his style and it soon became clear that he was content to leave the government of Scotland and the management of his own political interest to the ambitious and accomplished Henry Dundas, with whom Smith soon established excellent relations. Before long Smith would be known as a close confidant of ‘your duke’, as John Macpherson called him, and a valuable contact when there were favours to be sought.12 It was and remained a quiet and singularly happy relationship.
These interruptions apart, nothing was allowed to intrude on Smith’s retreat in Kirkcaldy and on the hugely demanding business of writing the Wealth of Nations. As he told the judge and antiquarian Lord Hailes in January 1769, after apologizing for an overdue letter, ‘’tho in my present situation I have properly speaking nothing to do, my own schemes of Study leave me very little leisure, which go forward too like the web of penelope, so that I scarce see any Probability of their ending’.13 Although little correspondence from this period has survived, it seems fairly certain that Smith’s principal task was to reflect on the principles of political economy he had developed at Glasgow in the light of those of Quesnay and his disciples, and to develop and refine the vast stock of historical illustrations on which the effectiveness of his advocacy would depend. He had already established the principle that the opulence of a nation was to be measured in terms of the flow of consumable goods and not its reserves of gold and silver. His labour theory had established that the extent and rate of circulation would depend on the manner in which that nation’s labour force was deployed and the extent of the division of labour, and that the progress of the division of labour would depend on the extent of the market. He had also developed a labour-based theory of value and price which distinguished between the natural and market price of commodities and provided a largely Humean theory of money to sustain it. Moreover, he had outlined a theory of natural liberty, which argued that a system of free markets and free exchange would optimize a nation’s wealth, and he had raised the provocative and question-begging issue of why the progress of opulence had been so slow in Europe. But while he had offered an account of many of the economic, political and moral factors on which the progress of opulence depended, he had not yet worked these factors into a system which explained precisely how they interacted.
That was the attraction of Quesnay’s system. Quesnay shared Smith’s view that wealth had to be discussed in terms of a process of consumption and production, and had shown that output could best be maximized in an economy that allowed for the free exchange of goods and services. But the main interest of his system had been to explain the principles which regulated the flow of goods and services throughout an economy and to show how that economy could sustain and reproduce itself. It was also notable for the emphasis it placed on the role of capital in generating improvement. It was for this reason that Smith would describe it as a system that, for all its imperfections, was worthy of serious attention.14
Reflecting on the implications of Quesnay’s system for his own was a complex business. Developing his own account of the principle of circular flow would have to take account of his conviction that the ultimate source of a nation’s wealth lay in its stock of labour, and not its land as Quesnay had argued, and that it was a mistake to argue, as Quesnay had done, that labour employed in manufactures was technically unproductive. He also thought that Quesnay’s claims that the system of circular flow worked on mathematical principles were unjustified, and possibly dangerously mechanistic – questions of price and value were regulated by ‘higgling and bargaining’, not mathematical necessity. He regarded the act of legal despotism, which Quesnay had so notoriously claimed as necessary to set the system of natural liberty in motion, as dangerously utopian; the progress of wealth could be far better encouraged by the improvement of existing institutions than the creation of new ones. Above all, whereas Quesnay believed that economics could be turned into an exact, mathematically based science, Smith remained firmly committed to the Humean view that systems of philosophy could only appeal to the understanding, and that their credibility in the eyes of their readers would depend on the philosopher’s ability to illustrate his principles with examples drawn from common life and history.
Smith clearly devoted time and erudition to illustrating the system he was developing at Kirkcaldy, and there is no better example of the way in which issues that were immediately topical were periodically used as the basis for trenchant illustration than his account of the collapse of the Ayr Bank in 1772. The Ayr Bank was founded in 1769 in response to a credit shortage at a time when the country was nearing the end of a remarkable period of economic growth affecting every major sector of the economy. In his lectures at Glasgow Smith had pointed to a major peculiarity of the Scottish banking system that had some bearing on this story of economic success: the fact that, unlike the banking system of England, the Scottish system relied almost exclusively on the circulation of paper notes and bills of exchange as the primary medium of exchange. It had prevented excessive hoarding of specie on the part of banks and had ensured that the country’s stock of currency was deployed in commerce and the promotion of industry. This had worked to the advantage of the economy because banks had only issued bills to those whose creditworthiness was vouched for by two men of honour and estate, a convention which made it possible for the Scottish banks to allow repayment of loans upon easy terms. For Smith, ‘this prudent and necessary reserve of the [Scottish] banks’ and these easy terms ‘are, so far as I know, peculiar to them, and have, perhaps, been the principal cause, both of the great trade of those companies, and of the benefit which the country has received from it’.15 What this system could not satisfy (and what the Ayr Bank was designed to remedy) was the insatiable demand for credit from projectors and improvers anxious to cash in on a boom. The bank’s founders included a substantial number of very rich landowners who were anxious to encourage investment in agricultural improvement, Buccleuch among them. They subscribed very large capital sums indeed, and accepted liabilities to the extent of their entire fortunes. The bank expanded rapidly, its notes being said to have represented two-thirds of the entire paper currency of the country. But it overtraded, discounting bills of exchange almost on demand and accruing a dangerous amount of insecure debt.16 By 1771 the bank’s fortunes had become inextricably bound up with the fortunes of the London banks at a time when they too were becoming dangerously overstretched. A year later it had crashed, leaving the original subscribers seriously indebted – £750,000 of landed property owned by the subscribers changed hands, much of it in Ayrshire. The Buccleuch estate was to remain seriously encumbered until the 1840s.
The history of Buccleuch’s involvement in this ill-fated venture has not yet been written, nor is it known what Smith thought of Buccleuch’s involvement in a venture which was intended to finance the sort of agricultural improvements that could only deliver long-term returns and had been founded under circumstances which were bound to attract ‘chimerical projectors … who would employ the money in extravagant undertakings, which, with all the assistance that could be given them, they would probably never be able to compleat’.17 Hume, reflecting on the ‘very melancholy Situation’ in London and Edinburgh, asked, ‘Do these Events any-wise affect your Theory? Or will it occasion the Revisal of any Chapters?’, commenting, ‘On the whole, I believe, that the Check given to our
exorbitant and ill grounded Credit will prove of Advantage in the long run, as it will reduce people to more solid and less sanguine Projects, and at the same time introduce Frugality among the Merchants and Manufacturers: What say you? Here is Food for your Speculation.’18 This was broadly Smith’s view as well, although he was anxious to insist in the Wealth of Nations that the multiplication of banks in both kingdoms was beneficial to the banking system as a whole on the grounds that competition bred circumspection among bankers, who would learn to be wary of plots among their competitors to engineer ‘malicious runs’.
Nevertheless the affair clearly made demands on his time when he felt under acute pressure to finish his book. As he told William Pulteney in September 1772, ‘Tho I have had no concern myself in the Public calamities, some of the friends for whom I interest myself the most have been deeply concerned in them; and my attention has been a good deal occupied about the most proper method of extricating them.’ He concluded, ‘My book would have been ready for the Press by the beginning of this winter; but the interruptions occasioned partly by bad health arising from want of amusement and from thinking too much upon one thing; and partly by the avocations above mentioned will oblige me to retard its publication for a few months longer.’19 It was to result in extending a long discussion of banking and the advantages and problems involved in using paper as a medium of exchange, with reflections on the main lesson of the Ayr Bank disaster. It was the consequence of abandoning the prudent banking practises of the chartered banks that had helped to transform the Scottish economy in the past and could continue to work for its improvement in the future. For the remarkable progress of the Scottish economy could be attributed to the system of free markets created by the Union, a spirit of improvement, and an enterprising and generally prudently managed banking system, which had developed quite naturally in response to the demands of the market. In Smith’s eyes, these were also characteristics of the economic development of the American colonies, which were to furnish him with the most important of all his many illustrations in the Wealth of Nations. The fact that the text was to take another three years to complete was partly due to constant tinkering. But it was also due to Smith’s response to the rapidly developing crisis in Anglo-American relations, a situation which could only properly be observed from London.
*
In the spring of 1773 Smith decided to end his Kirkcaldy retreat and to finish the Wealth of Nations in the capital. He needed company and American news. More immediately, there was the prospect of potentially rewarding future employment as tutor to the young Duke of Hamilton, to be taken up, one presumes, when the Wealth of Nations was finished. Before he left for London Smith made his will, appointing Hume as his executor and setting out his wishes for the disposal of his unpublished papers. All were to be destroyed with the exception of the essay on the history of astronomy which contained his thoughts about the nature of philosophical systems. ‘Whether that might not be published as a fragment of an intended juvenile work, I leave entirely to your judgement; tho I begin to suspect myself that there is more refinement than solidity in some parts of it. This little work you will find in a thin folio paper book in my writing desk in my bedroom.’ He concluded, ‘Unless I die very suddenly I shall take care that the Papers I carry with me shall be carefully sent to you.’ For in that event, Hume was to see the Wealth of Nations through the press.20
Smith arrived in London in May 1773 and took rooms in Suffolk Street, near Charing Cross and the British Coffeehouse, in the Scots quarter of Town. The Duke of Hamilton’s offer was not pursued, on Buccleuch’s advice, presumably because Buccleuch held out the promise of a more honourable and lucrative public appointment once the Wealth of Nations was published. He was to be as good as his word, using his considerable political muscle to obtain for Smith the post of Commissioner of Customs in Scotland in 1778. In retrospect, however, refusing the Hamilton offer was surely a mistake. The salary would have been accompanied by a substantial pension to add to Buccleuch’s. It would have left him comfortably off and with plenty of time for philosophy. The Commissionership of Customs was certainly honourable and lucrative, but it proved to be time-consuming and wearisome and was to leave Smith constantly bewailing the lack of time for pursuing his many philosophical projects. Buccleuch undoubtedly meant well but his advice may have been a misjudgement of historic proportions.
The three years Smith spent in London with the Wealth of Nations nearing completion were notably sociable and provided a much-needed cathartic response to the rigours of the preceding years. He became a regular denizen of the British Coffeehouse and Alexander Wedderburn’s weekly dinners. He was formally admitted to the Royal Society in May 1773, followed its proceedings with attention and went to some trouble to secure a complete set of its transactions. He attended William Hunter’s public lectures on anatomy. In 1774 he became a member of The Club, the focal point of London’s literary life and the much publicized theatre for Samuel Johnson’s conversational talents. Although this brought him into contact with Edmund Burke and Edward Gibbon, both of whom he liked, James Boswell’s chronicles suggest that his conversation was not much to Johnson’s taste or that of some of the other members. Johnson did not like him, thought him ‘as dull a dog as he had ever met with’ and commented that he was a ‘most disagreeable fellow after he had drank some wine’, which, he said, ‘bubbled in his mouth’.21 Smith for his part once offered a ‘very contemptuous opinion’ of a man whose eccentricities offended his sense of social propriety. ‘I have seen that creature, said he, bolt up in the midst of a mixed company and, without any previous notice, fall upon his knees behind a chair, repeat the Lord’s Prayer, and then resume his seat at table. He has played this freak over and over perhaps five or six times in the course of an evening. It is not hypocrisy, but madness.’22
Nevertheless Smith seems to have been on excellent form in London. A long letter to William Cullen, now Professor of Medicine at Edinburgh, commenting on a proposal by the Royal College of Physicians that there should be new legislation to ensure that medical degrees were only awarded to those who had spent two years at university, shows him at his most cheerful and formidable, ready to deploy a full battery of philosophy, erudition and good humour to demolish a plan sponsored by one of his oldest friends. He thought that the physicians’ proposal was a piece of monopolistic opportunism, which would be ‘oppressive’ to distinguished independent teachers of medicine like William Hunter and do nothing to guarantee that future practitioners would be men of ‘sense or science’.
The title of Doctor, such as it is, you will say, gives some credit and authority to the man upon whom it is bestowed; it extends his practice, and consequently his field for doing mischief; it is not improbable too that it may increase his presumption, and consequently his disposition to do mischief. That a degree injudiciously conferred may sometimes have some little effect of this kind, it would surely be absurd to deny; but that this effect should be very considerable, I cannot bring myself to believe. That Doctors are sometimes fools as well as other people, is not, in the present times, one of those profound secrets which is known only to the learned. The title is not so very imposing, and it very seldom happens that a man trusts his health to another merely because that other is a doctor. The person so trusted has almost always either some knowledge or some craft which would procure him nearly the same trust, though he was not decorated with any such title. In fact the persons who apply for degrees in the irregular manner complained of, are, the greater part of them, surgeons or apothecaries, who are in the custom of advising and prescribing, that is, of practising as physicians; but who, being only surgeons and apothecaries, are not fee-ed as physicians. It is not so much to extend their practice as to increase their fees, that they are desirous of being made Doctors. Degrees conferred, even undeservedly, upon such persons can surely do very little harm to the public.
He continued: sensible physicians would be better advised ‘to attend more to your characters as m
en, as gentlemen, and as men of letters’ than to place their faith in a degree which could never ‘give any tolerable security, that the person upon whom it had been conferred, was fit to practise physic. The strictest Universities confer degrees only upon students of a certain standing. Their real motive for requiring this standing is, that the student may spend more money among them, and that they may make more profit by him.’ He concluded cheerfully: ‘Adieu, my dear Doctor; after having delayed so long to write to you, I am afraid I shall get my lug in my lufe, as we say, for what I have written, But I ever am, most affectionately yours.’23