Nicholas Phillipson
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However, it was the American question that appears to have absorbed most of his energies – Buccleuch telling Hume that Smith was now ‘very zealous in American Affairs’.24 In the Wealth of Nations America was to provide him with the most striking and decisive illustration of the possibilities of the civilizing process in a part of the civilized world that had never been encumbered by feudal laws and institutions, and whose distance from Europe had ensured that the principles of natural liberty had already guided some aspects of its economic development. The book was completed against the background of worsening Anglo-American relations. The Tea Act, which American radicals saw as an attempt to strengthen British fiscal rule over the colonies, had been passed shortly before Smith’s arrival in London. The Boston Tea Party, the Coercive Acts of 1774, and the Quebec Act of 1774, which raised fears in the colonies that the British were determined to govern America without elected assemblies, the subsequent outbreak of hostilities at Lexington and Concord in 1775, and the eventual outbreak of an initially popular war, were to give him a unique perspective on a crisis that suggested that Britain’s future as a commercial power was at a turning point.
Smith was to end the Wealth of Nations with his own version of the question David Hume had raised in his Political Discourses of 1752, of how modern governments with overstretched systems of taxation were to manage the ruinous public debts they had incurred as a result of their incessant wars. In Hume’s words of 1764, ‘either the nation must destroy public credit, or public credit will destroy the nation. It is impossible that they can both subsist, after the manner they have been hitherto managed, in this, as well in some other countries.’25 Smith was to elaborate on the problem in the Wealth of Nations by showing how it had been complicated and intensified by colonial wars and the continuing costs of imperial defence. The scramble for colonies had not simply been driven by a love of power, glory and wealth, but by the absurd, superstitious belief that wealth was to be measured in terms of gold reserves and fostered by a monopolistically driven system of international trade. Indeed, ‘the maintenance of this monopoly has hitherto been the principal, or more properly perhaps the sole end and purpose of the dominion which Great Britain assumes over her colonies’.26 This was to view the present state of Anglo-American relations as the function of a profound crisis in the history of commercial civilization itself, and Smith’s views of its possible outcomes were carefully woven into his critique of the mercantile system and his discussion of public finance. He was to summarize them and bring them into sharp political focus in 1778 in the aftermath of General Burgoyne’s disastrous defeat at Saratoga in the previous year, in a Memorial written at the request of his old friend Alexander Wedderburn, one of the Prime Minister’s closest advisers on American policy.27
Smith’s views about the outcome of the American crisis were austere and politically uncomfortable. A successful war would almost certainly lead to conquest, to the military government of the colonies and to ruinous expense for the foreseeable future. Giving up the colonies, as favoured by the radical Dean of Gloucester, Josiah Tucker, or returning the former French and Spanish colonies to the kings of France and Spain, as Samuel Johnson had suggested, made good theoretical sense on the grounds that these measures would relieve Britain of the enormous costs of defending the colonies and would open up the possibility of negotiating ‘a treaty of commerce as would effectually secure to her a free trade, more advantageous to the great body of the people, though less so to the merchants, than the monopoly which she at present enjoys’.28 But it was an impossible dream. ‘No nation ever voluntarily gave up the dominion of any province, how troublesome soever it might be to govern it.’29 A settlement that continued the existing colonial relationship would only work if the vexed problem of how to tax the colonies was resolved. It was impossible for Britain to shoulder the entire burden of defending the colonies at her own expense indefinitely. On the other hand, the colonies could not be expected to contribute to imperial defence unless they were represented in the British parliament, or unless the power to tax was transferred from the imperial parliament to the colonial assemblies. The first option, which had had some support from Benjamin Franklin some years before and continued to attract Lord Kames, worried British MPs on the grounds that it might strengthen ministerial power in the Commons. The second relied on the improbable assumption that colonial assemblies would always be ready to vote funds to subsidize an army over which they had no control. It was perhaps with a view to lightening an unduly pessimistic conclusion that Smith was to end the Wealth of Nations with the only utopian vision of the future he was ever to offer. And anyway, it was time to finish. The great book was sent to Strahan late in 1775.
11
The Wealth of Nations and Smith’s ‘Very violent attack … upon the whole commercial system of Great Britain’
An Inquiry into the Nature and Causes of the Wealth of Nations was finally published on 9 March 1776, in two simple but elegantly produced quarto volumes priced at £1. 16/- in boards and £2. 2/- bound, and probably in an edition of 750 copies. The author, who had insisted on being styled as Adam Smith ‘without any additions either before or behind’ in the third edition of the Theory of Moral Sentiments, was now restyled as ‘Adam Smith, LL.D. and F.R.S. Formerly Professor of Moral Philosophy in the University of Glasgow’, a philosopher and man of science, rather than a man of letters. The book was a relatively expensive production directed at a serious and select readership in London and Edinburgh, and although the production costs were shared by the author and his publishers in the usual way, it sold well enough to earn Smith an initial payment of £300 at the end of the year. Its success was sufficient to prompt the publication of a Dublin edition and plans were made for what was to be a new, lightly amended second edition, which appeared in the same format in 1778. By then it had been fairly extensively reviewed and noticed in the literary and political circles for which it was intended.1 All in all, it was a successful launch; by the end of Smith’s life it would become a best-seller.2
Most of Smith’s first readers realized that Smith’s masterpiece was more than a treatise on commerce or political economy; for Scottish readers it was part of a historic exercise in placing the science of politics on philosophical foundations. ‘You have formed into a regular and consistent system one of the most important parts of political science’ William Robertson told him,3 John Millar adding that its author deserved to be regarded as the Newton of the science of politics. Dugald Stewart, writing in 1793 at a time when it was prudent to emphasize Smith’s distaste for revolutionary solutions to current political problems, highlighted the importance of his having grasped the fundamental truth that the happiness of a people had more to do with the ‘equity and expediency of the laws that are enacted’ than with voting and participating in the political process.4 A true science of politics ought to be based on a study of the municipal codes of different states at different periods of history and attend to ‘the general principles which ought to run through and be the foundation of the laws of all nations’. This would ‘[enlighten] the policy of actual legislators’ and teach them what sort of ‘legislative improvements … the general interests of the community recommend’. ‘Such speculations,’ he commented,
while they are more essentially and more extensively useful than any others, have no tendency to unhinge established institutions, or to inflame the passions of the multitude. The improvements they recommend are to be effected by means too gradual and slow in their operation, to warm the imaginations of any but of the speculative few; and in proportion as they are adopted, they consolidate the political fabric, and enlarge the basis upon which it rests.
In this respect the Wealth of Nations was important for ‘[directing] the policy of nations with respect to one most important class of its laws, those which form its system of political economy’.5 As Stewart rightly saw, it was a treatise which offered a reformist, Whig account of the politics of improvement, not a democratic one; a treatise wh
ich was firmly rooted in distinctive jurisprudence which had been in a state of gestation for perhaps a quarter of a century.
In writing the Wealth of Nations Smith faced the same problem he had encountered in writing the Theory of Moral Sentiments: developing lectures originally designed for university students for a different sort of readership. In the case of the Theory of Moral Sentiments that had meant presenting his philosophy as a response to Rousseau’s brilliant but misguided attack on the civilizing process. The case of the Wealth of Nations was more complicated. As Robertson, Millar and Stewart had realized, his political economy was deeply embedded in a system of moral philosophy, jurisprudence and politics about which most of his readers knew nothing. The question was, how much of it did they need to know if they were to make sense of his political economy? Smith’s answer was, not much. He made no formal attempt to explain the principles of the history of property and government in which his discussion of the progress of civilization was enmeshed. The long, subtle discussion of ‘the natural wants and demands of mankind’ and their consequences for the progress of civilization and the human mind which had prefaced the Glasgow lectures was reduced to a series of strategically placed aphorisms and aperçus about the power of self-interest and a love of improvement in determining the way in which men used their labour. Nevertheless, these were often aphorisms of some force and consequence. In observing that, ‘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. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities but of their advantages’; in commenting that, ‘The property which every man has in his own labour, as it is the original foundation of all other property, so it is the most sacred and inviolable’; and in concluding that, ‘Civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all’, he was developing a rhetoric which was to become an essential part of the language of political economy itself, admired and reviled by the new discipline’s disciples and detractors.6
Instead of introducing his system as a moral philosopher, Smith introduced it as a political economist, speaking a language that Quesnay and the économistes could understand; they were the only economists he took seriously. In the ‘Introduction and Plan’ he spoke of his subject as the ‘fund’ or ‘stock’ of annual labour which supplies a nation with the ‘necessaries and conveniences of life which it annually consumes’, the ‘skill, dexterity and judgment’ with which it was deployed in different societies and the ratio of ‘useful’ and unproductive labour to be found in different types of nation. This would allow him to discuss the causes of ‘improvements’ in the productive powers of labour and the commercial policies of modern governments, and to take on board Quesnay’s view that wealth should be studied as a function of the process by which revenue circulated through the different sectors of an economy in a free market. But Smith’s famous demonstration that the wealth of a nation depended on the division of labour in different sectors of the economy was at odds with Quesnay’s assertions that agriculture was the ‘mother of all goods’ and the only form of economic activity capable of increasing the wealth of a great monarchy, and that all labour not employed in agriculture was ‘unproductive’. What is more, Quesnay’s model presupposed the existence of a system of ‘bonne culture’ such as that practised in England or in Holland, and not the system of subsistence farming characteristic of France and most of Europe. Worse still, it assumed that a system of improved agriculture could be introduced by an act of ‘legal despotism’, a utopian suggestion that led David Hume to exclaim that, ‘They are, indeed, the set of men the most chimerical and most arrogant that now exist, since the annihilation of the Sorbonne.’7 For Smith, Quesnay’s approach to political economy was too speculative and ahistorical, and too closely geared to the experience of France and contemporary concerns with the future of the French monarchy to be the basis of a viable general theory of economic progress. His own theory would attend to the very different experience of Britain and the British Empire in America and Asia, as well as that of France and the rest of Europe. For in the last resort, Smith was proposing to treat Quesnay as he had treated Condillac, Montesquieu and Rousseau in developing his rhetoric, jurisprudence and ethics – as the author of a brilliant, provocative but flawed contribution to the science of man.
There was much in the first book of the Wealth of Nations that Smith’s former Glasgow students would have found familiar, from the classic restatement of his great axiom, that the progress of opulence depends on the division of labour, through his account of the process of truck, barter and exchange which determines the price of labour, to the discussion of the limitations imposed on the progress of the division of labour by the market. Familiar, too, would have been his account of the origins of money, the claim that labour and not money was the true determinant of price and value, and the all-important distinction he made between the natural and market price of labour and commodities, the distinction on which his analysis of the causes of the slow progress of opulence in Europe and his attack on laws and customs which obstructed the workings of a free market depended. In the Wealth of Nations, however, this attack was to range wider and deeper and was able to draw on the full reserve of Smith’s powers of irony and indignation, precisely because its roots lay in the general economic theory Smith had been able to develop and refine in his last year at Glasgow, in France, and in the company of Quesnay and the économistes. It was a theory about the creation of wealth that drew on his understanding of the principles of human nature and the progress of society but was articulated in a language which was concerned with the principles of exchange, circulation and the workings of the market.
First, important parts of his theory had to be expanded. The discussion of price and value, which had hitherto been focused on the price of labour, was now extended to a discussion of the way in which the price and value of commodities were ‘adjusted’, ‘not by any accurate measure, but by the higgling and bargaining of the market, according to that sort of rough equality which, though not exact, is sufficient for carrying on the business of common life’.8 Characteristically, earlier luminous suggestions that this seemingly natural disposition had its origins in the love of persuading he had discussed in his rhetoric lectures were omitted, no doubt on the grounds that they would divert the reader’s attention from the all-important discussion of the real and nominal (or money) price of goods and its significance for an understanding of the workings of the market.
But this was for later consideration. In this extended discussion of economic principles, Smith’s central task was to establish the three determinants of price – rent, wages and the profit of the ‘undertaker’ or entrepreneur – and to identify landowners, wage earners and manufacturers and merchants as ‘the three great, original and constituent orders of every civilized society, from whose revenue that of every other order is ultimately derived’. It was a discussion which was designed to show that rents and wages would naturally rise and fall as the economy expanded and contracted, but that the profits earned by merchants and manufacturers would be low in rich countries, high in poorer countries, and highest of all ‘in the countries which are going fastest to ruin’, a factor which pointed to the crucial political conclusion that the interests of merchants and manufacturers could never be exactly the same as those of landowners or wage-earners. It was a discussion that culminated in a characteristically sardonic discussion of the capacity of each of the three constituent orders’ ability to understand the true nature of their own interests and those of the public. Landowners were too rich and too indolent to be able to acquire ‘that application of mind which is necessary in order to foresee and understand the consequences of any publick regulation’. Wage earners were too poor, and lacked the time, education and habits needed
to judge, ‘even though … fully informed’. As for merchants and manufacturers, while they had ‘more acuteness of understanding than the greater part of country gentlemen’, they had no hesitation in using it to gull others into believing that their interests were the same as their own. Smith concluded acidly:
The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the publick. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the publick; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the publick, who have generally an interest to deceive and even to oppress the publick, and who accordingly have, upon many occasions, both deceived and oppressed it.9
The message Smith wished to convey was implicit but clear. In a country whose politics and governance was in the hands of the landed and mercantile classes, it was the job of philosophers, who understood the principles of political economy, to safeguard the public interest by educating their masters. Never before had the Ciceronian ideal of the philosopher-statesman seemed so challenging and so urgent.