Puzzles of the "Wealth of Nations"

Puzzles of the "Wealth of Nations"Author(s): Arthur H. ColeSource: The Canadian Journal of Economics and Political Science / Revue canadienned'Economique et de Science politique, Vol. 24, No. 1 (Feb., 1958), pp. 1-8Published by: Wiley on behalf of Canadian Economics AssociationStable URL: http://www.jstor.org/stable/139111 .

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THE CANADIAN JOURNAL OF

Economics and Political Science Volume XXIV FEBRUARY, 1958 Number 1

PUZZLES OF THE "WEALTH OF NATIONS"

ARTHUR H. COLE Harvard University

EVERY well-bred economist knows that a man named Adam Smith was born at Kirkcaldy in 1723, published a somewhat notable book in 1759 entitled The

Theory of Moral Sentiments, and in 1776, when he was fifty-three years old, produced an extraordinary pair of volumes called An Inquiry into the Nature and Causes of the Wealth of Nations. Most young economists nowadays, I fear, do not read either work of the great Scotsman as we all once didl-in the days when one could still take time to enjoy also the leisurely pace of Thackeray and Dickens, even Scott. Students who just skim the Wealth of Nations, or parts of it, would surely miss what has attracted my attention; and even scholars interested in Smith's economic principles would hardly perceive what I have in mind, namely, that he was noteworthy for his "unbounded benevolence," as one near-contemporary described him, and that he was "slow to think evil" as a recent biographer alleges.2

Apparently it was out of this abounding good nature that Smith alluded to "the avarice and injustice of princes and sovereign states, abusing the confidence of their subjects"; that he took opportunity to mention "the conveyances of a verbose attorney"; and that, with a more sweeping serenity, he recorded an observation of "the over-weening conceit which the greater part of men have of their own abilities."

Biographers of Smith have been led to state that perhaps he was not as

obviously religious as some of his contemporaries. He was perhaps a deist, even if he was a philosopher and a friend of Hume. John Rae reported that Smith's "opening prayers" at Glasgow were thought to "savour strongly of natural religion," and occasioned no little shaking of heads.3 Perhaps, then, one might expect Smith to have been somewhat less charitable toward wearers of the cloth than he was toward other groups.

To be sure, the author did grant to the clergy courage or religious obstinacy under persecution, at least if the victims enjoyed public support. He called upon "the experience of all ages" to testify to the fact that, relative to "no order of men" was it "so dangerous, or rather so perfectly ruinous, [for

1Apparently the practice of reading Smith from cover to cover began to fade some time ago. J. S. Nicholson, in his introduction to an 1884 edition of the Wealth of Nations, spoke of the item as "one of those books which are much talked of and little read."

2Alexander Carlyle, quoted by William R. Scott, Adam Smith as Student and Professor (Glasgow, 1937), 76; and Scott himself, ibid., 100.

3John Rae, Life of Adam Smith (London, 1895), 60.

Vol. XXIV, no. 1, Feb., 1958



Canadian Journal of Economics and Political Science

governments] to employ force and violence, as upon the respected clergy of

any established church." But there was hardly any subdivision of the aggregate of "established" or "non-established" religious groups that gained Smith's

approbation. Thus, "candour and moderation" were, it seemed to him, "seldom to be found among the teachers of those great sects . . . supported by the civil

magistrate"; clergy of "ancient and established systems .. . reposing themselves

upon their benefices" were liable to attack from "teachers of new religions" because they "had neglected to keep up the fervour of faith and devotion in the great body of the people"; "the proud dignitaries of opulent and well- endowed churches" were likely to display "contemptuous and arrogant airs"; clergy with small benefices were prone to appear "ridiculous" by reason of the "vices of levity and vanity"; while the exponents of the "little sects" did not escape criticism: their morals were frequently "rather disagreeably rigorous and unsocial."

Smith's attitude toward members of the Catholic persuasion was somewhat ambivalent. He went out of his way a bit once or twice to praise individual

representatives, such as "the Jesuit Gumila" and "Father Charlevoix," although in the latter case for the rather modest virtue of reporting nothing in his accounts of Canada "less considerable than it really was." Also Smith quite understandably seemed almost to commend the arrangement by which "the inferior clergy" in the church of Rome were "kept more alive by the powerful motive of self-interest than perhaps in any established protestant church."

However, he did not approve of the "numerous race of mendicant friars, whose beggary" was "not only licensed, but consecrated by religion," and whom he compared in another place to "the hussars and light infantry of some armies; no plunder, no pay." And despite some Catholic writers such as Father Charlevoix aforesaid, he seems to have been considerably annoyed by other writers connected with that church. These latter were quite surely in his mind, when, in deriding certain accounts of the public works of China, he spoke of their having "generally been drawn up by weak and wondering travellers; frequently by stupid and lying missionaries."4

It appears highly probable that Smith had reference particularly to the men whose materials Father Jean-Baptiste du Halde drew upon for his Description of China. To be sure, du Halde's volumes did not exist in the Scotsman's library. However, there were features about them that could well have drawn Smith's displeasure. The author had never been to China; he relied on the memoirs of some two dozen missionaries; and the book abounds in such extravagant statements as that "the industrious Chinese" cut "numberless Canals through all their Lands"; the Chinese are very "careful in making the Roads smooth and level, which are often pav'd"; and that "in some Provinces the High Roads are like so many great Walks between two great Rows of high

4It was this passage that started me on the inquiry of which this essay is the product. It was quoted to me by the late Professor Thomas Sanders of the Harvard Business School. He was English born and bred; he had studied the Wealth of Nations; later in life he had in Japan married the daughter of a missionary; and apparently he could not reconcile Smith's characterization of the missionaries with what he knew from personal observation. Professor Sanders asked me, in the course of our first casual conversation together, whether I could explain Smith's attitude. I could not, and I doubt if I can do so yet.

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Puzzles of the "Wealth of Nations"

Trees." Still the book, which appeared in French in 1735, was favoured with

English editions of 1736, 1738, and 1741, with a German translation in 1747-56, and even a Russian one in 1774-7. It seems quite probable that Smith had in mind Father du Halde's twenty-seven authorities when he mentioned both the "weak and wondering travellers" and the "stupid and lying missionaries."

I

Perhaps it was the presence of shafts such as the one just quoted that led Professor Nicholson to remark that the argument in the Wealth of Nations was "often relieved by quiet touches of humour and occasionally by good-natured satire." Admittedly quite a few varieties of men provoked Smith to reactions of one sort or another. One must view him as indulging in a private chuckle when he wrote that people could not reckon "soldiers the most industrious set" of citizens, or that Scottish banks had "never distinguished themselves

by their extreme imprudence." The more frequent reaction was sharper. A man

might often regain health in spite "of the absurd prescriptions of the doctor"; one could observe "the usual idleness of apprentices"; and Cicero was pre- sumably right in thinking that there was "nothing so absurd .. which has not sometimes been asserted by some philosophers."

Politicians and statesmen aroused rather more extreme emotions. Smith had a good word for the local French "parliaments" by reason of their incorrupti- bility, which condition he attributed to the mode of compensation of their members-not fixed salaries, but fees dependent on their diligence. Otherwise he found such things as officers of government "being generally disposed to reward both themselves and their immediate dependents rather more than

enough"; that the English government, in matters of public expenditure, had achieved the worst of both monarchy and democracy: in time of peace con-

ducting itself "with the slothful and negligent profusion that is perhaps natural" to the former, and in times of war acting "with all the thoughtless extravagance that democracies are apt to fall into."

Smith's most forthright appraisal of the whole genus came when he referred to "that insidious and crafty animal, vulgarly called a statesman or politician"; his severest chastisement of political life when he alleged "attacks which these

leading men" were "continually making upon the importance of one another, and in the defence of their own" to constitute "the whole play of domestic faction and ambition"; and his most incisive castigation of higher government officials in the resounding charge: "The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an

authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it."

II

Curiously enough the business man fared scarcely better at Smith's hands. I say "curiously enough" because it would seem that anyone who held self-

3




interest to be generally so beneficent a force, and who admitted that business men were motivated by that sort of interest, would have been more charitable toward some of the manifestations or excesses of that driving energizer. Smith does give reluctant commendation to the promoter or the innovating entre-

preneur. In his Theory of Moral Sentiments he alleged that a tradesman would be thought "a poor-spirited fellow among his neighbours," who did not 'bestir himself to get what they call an extraordinary job, or some uncommon advan-

tage." In the Wealth of Nations, an idle man is alleged to be in danger of

being despised among men of business; the merchant is apparently praised as

"commonly a bold undertaker" of improvements on agricultural property that he may acquire, in contrast to the country gentleman who is a "timid" one; and the "projector" is credited with having "golden dreams," with "splendid," if somewhat "visionary ideas."

In his Lectures Smith had seemingly presented a sophisticated argument on the point that merchants were undeservedly denigrated. In primitive societies it was considered generous and noble to do or give something without expectation of reward or return; but to indulge in barter was mean; and the low social status of the merchant continued to some extent to persist even in "a refined

society" such as England. Smith goes on to philosophize that "this mean and

despicable idea" of earlier days regarding the merchant "greatly obstructed the progress of commerce."

In the Wealth of Nations, however, this generous attitude and this lesson seem to have been forgotten. To be sure, now the "manufacturer" is often bracketed with the "merchant" for proper opprobrium, but the former was

probably-in 1776-most likely to have been the man who "put out" materials to be worked up in country labourers' homes-at least still half a merchant. At all events, the two are beaten almost unmercifully and in many relationships: "the avidity of our great manufacturers"; "the sophistry of merchants and manufacturers"; "the clamour and sophistry of merchants and manufacturers"; "the mean rapacity, the monopolizing spirit of merchants and manufacturers"; or"the sneaking arts of underling tradesmen."

Merchants pursue "their own pedlar principle of turning a penny wherever a penny was to be got"; merchants speak "with all the passionate confidence of interested falsehood"; and "the capricious ambition of kings and ministers [had not during the seventeenth and eighteenth centuries] been more fatal to the

repose of Europe, than the impertinent jealousy of merchants and manufacturers."

The pursuit of monopoly was a frequent charge against such business men. A conversation among people in the same trade was likely to end in "a con-

spiracy against the public"; monopoly was "a great enemy to good management"; "the highest eulogy" that could "ever justly be bestowed upon a

regulated company" was that it was "merely useless"; while Smith saw "fraud and abuse" as "inseparable from the management ... of so great a company" as the East India.

To be successful was surely no source of forgiveness by the great Scotsman. The rich were not highly regarded. They were accused of "indolence and

vanity"; "great wealth" was "frequently [to] be admitted as an apology for

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Puzzles of the "Wealth of Nations"

great folly"; while "disorders" were believed "generally [to] prevail in the economy of the rich." And wealth was corrupting of natural powers: landowners by their indolence, "which is the natural effect of the ease and security of their situation," were too often rendered "not only ignorant, but incapable of that application of mind which is necessary in order to foresee and understand the consequences of any public regulation"; while "luxury in the fair sex" had the very unhappy result, it seems, "always to weaken, and frequently to destroy altogether, the powers of generation." "A pampered fine lady is often incapable of bearing any [children], and is generally exhausted by two or three."

Ostentatious display was perhaps the social sin that provoked Adam Smith most easily. In his Theory of Moral Sentiments he had spoken already of the "hypocrites of wealth and greatness." In his later book he became more specific: "the chief enjoyment of riches consists in the parade of riches"; "the rich not being able to distinguish themselves by the expence of any one dress, will naturally endeavour to do so by the multitude and variety of their dresses"; while the quantity of plate will tend to increase "from vanity and ostentation." The idea of "conspicuous consumption" was not new with Thorstein Veblen.

III

One is driven to wonder why the great Scotsman was led to take so un- pleasant a view of merchants, of the rich, and especially of the exhibitionism of the latter. To be sure-despite what Nicholson, Rae, Scott, and others have said about his being "friendly and generous" or "slow to think evil"-Smith gives much evidence of a pretty low opinion of mankind in general. Man is full of all sorts of frailties. "In every profession, the exertion of the greater part of those who exercise it, is always in proportion to the necessity they are under of making that exertion"; "the pride of man makes him love to domineer, and nothing mortifies him so much as to be obliged to condescend to persuade his inferiors"; and "it is the interest of every man to live as much at his ease as he can." But even those who seek better things do not necessarily please the learned doctor; they are accused of possessing "the undiscerning eye of giddy ambition."

However, there was a specific case close to Smith's hand which might have influenced his opinion-unconsciously perhaps-in a number of the foregoing matters. I have in mind the "tobacco lords" of Glasgow. As far as I know, they are not mentioned even by inference in the Wealth of Nations, although the London merchants are described as generally not "such magnificent" creatures as those of Cadiz or Lisbon, nor, on the other hand, "such attentive and parsi- monious burghers as those of Amsterdam." The "tobacco lords" are not mentioned, but, if accounts of their behaviour are to be believed, Smith must have found them hard to bear.

The Glasgow merchants dealing in tobacco were exceedingly successful in the first three-quarters of the eighteenth century. The trade was launched only with the union of England and Scotland in 1707; by 1742 Glasgow had passed Bristol, Liverpool, and Whitehaven in volume of this trade; and, before the American Revolution ruined all this commerce, a dozen or fifteen fine new

5




houses for successful merchants had been erected. These business men seem to have deserved the good fortune that was theirs; they could have been com- mended by Smith in his Moral Sentiments for bestirring themselves "to get an

extraordinary job, or some uncommon advantage." They displayed a greater willingness to bear risks than did many of their London competitors; and they introduced innovations in the trade.

However, there were unfavourable features of the business. In the earliest

years it was charged that the success of the Scots was due to the venality of the North British customs officers, and to their ignorance and sloth that made fraud easy without corruption. New legislation attempted to correct matters.

Possibly these accusations stemmed wholly from the jealousy of English tobacco merchants; and it is true that the volume of Glasgow's tobacco trade continued to grow through the investigations and after the new statutes. Still there was the aroma of unscrupulous merchants-"clamour and sophistry," "sneaking arts," and "mean rapacity."

Their effort at "ostentation" in architecture tended to set them apart-houses with "entablatures, urns, and balustraded roofs." And then what a peculiar sort of behaviour these merchants adopted! John Strang, writing as early as 1857, told of their decking themselves out in scarlet cloaks, curled wigs, cocked hats, and gold-headed canes. "They were the princes of Plainstanes [the central market area of the city], and strutted about there all day as the rulers of the destinies of Glasgow." And, wholly congruent with such parading, they ex- hibited a "hauteur and bearing ... assuming the air and deportment of persons immeasurably superior to all around them."5 With the almost inevitable narrow- ness of interests of such men, it is not to be wondered at that Smith gained a rather poor impression of how merchants achieved success, and what success did to them.

IV

Lord Brougham is quoted as finding the Wealth of Nations "one of the most entertaining of books," while Professor E. R. A. Seligman, in the introduction to the Everyman's Library edition of the treatise, speaks of finding it "full of

imperturbable good-humour." Accordingly, perhaps we ought to try to see

just what Smith did like. The largest class upon whom he smiled was the farming group. To be sure,

the landlord himself is accused of "conceit of his own superior knowledge [of farming] (a conceit in most cases very ill founded)"; he "seldom means to leave" the tenant any more than the smallest share; while "the elegance of his dress, of his equipage, of his house, and household furniture, are objects" of his anxious thought. Still "country gentlemen and farmers are, to their great honour, of all people, the least subject to the wretched spirit of monopoly"; the tenants are "sober and industrious"; their "understanding [of their technology]

bJohn Strang, Glasgow and Its Clubs (Glasgow, 1857), 85-7. See also Jacob M. Price, "The Rise of Glasgow in the Chesapeake Tobacco Trade, 1707-1775," William and Mary Quarterly, 8rd ser., XI, 1954, 179-200; and George Eyre-Todd, History of Glasgow (Glasgow, 1934), III, 237-8, 247. Professor Herbert Heaton tells me that Strang was repeating in 1857 what had been common for half a century in the accounts of eighteenth-century Glasgow.

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Puzzles of the 'Wealth of Nations"

is generally much superior" to that of the mechanic; and the "planter who culti- vates his own land, and derives his necessary subsistence from the labour of his own family, is really a master, and independent of all the world." In at least some agricultural callings, man might demonstrate social values and even perhaps find contentment.

Of banking and most bankers, Smith seemed to approve in general. "Judicious operations of banking" appeared to him to provide a "sort of waggon-way through the air," by which commerce may be speedily moved; "the stability of the bank of England is equal to that of the British government"; and, even if "the conduct of all" the Scottish banking companies "has not been unexceptionable," still they too escape serious criticism.

The principle of honour, if not among thieves, at least among individuals with whom Smith had little in common was illustrated with a distinct show of approval in three different areas. "In the race for wealth, and honours, and preferments," he wrote in his Moral Sentiments, the egotist "may run as hard as he can, and strain every nerve and every muscle, in order to outstrip all his competitors. But if he should justle [sic], or throw down any of them, the indulgence of the spectators is entirely at an end. It is a violation of fair play, which they cannot admit of."

Again, in the case of employers' combinations against their workmen, Smith in his later book seems to commend steadfastness among the participants. "To violate this [type of] combination is every where a most unpopular action, and a sort of reproach to a master among his neighbours and equals."

Thirdly, there was the matter of receiving smuggled goods. Smith disliked import duties, and tended to blame such laws for the acts of the smuggler. Then he went on to argue: "To pretend to have any scruple about buying smuggled goods, though a manifest encouragement to the violation of the revenue laws, and to the perjury which almost always attends it, would in most countries be regarded as one of those pedantic pieces of hypocrisy which, instead of gaining credit with any body, serve only to expose the person who affects to practise them, to the suspicion of being a greater knave than most of his neighbours." Yet in 1778 Smith was to become commissioner of customsl

Drinking, at least in moderation, came in for commendation. Smith is reported in his Lectures to have stated that "man is an anxious animal and must have his care swept off by something that can exhilarate the spirits." In the Wealth of Nations, he commented on "the wholesome and invigorating liquors of beer and ale"; while also asserting that "great labour . . . requires to be relieved by some indulgence, sometimes of ease only, but sometimes too of dissipation and diversion." The Scot was broadminded.

Then there is a miscellany of well-regarded items. The training which "naturally forms a merchant" leaves him with habits of "order, economy, and attention." The "delightful art [of gardening] is practised by so many rich people for amusement" that Smith is perhaps inclined on this score to be a little kindly toward them. "The poorest family can often maintain a cat or a dog," and this is apparently a good thing. "The strongest men" are "the chairmen, porters, and coal-heavers in London," and "the most beautiful women perhaps in the British dominions" are "those unfortunate women

7




who live by prostitution." (These two groups had two features in common: they stemmed from "the lowest rank of people in Ireland," and consequently they lived on potatoes.)

Surely it is a strange medley of callings and actions-and a rather meagre list-to be set against the many features of the economic and social system with which Smith found wide-ranging fault.

V

There may be deep-plunging morals to be drawn from the foregoing demon- stration: that one should not remain single; or, living to the age of fifty-three, he should not write a book; that a great man's biographers are not to be believed in all particulars; or that books in political economy should be dull. Perhaps a psycho-analyst should be brought in to complete the study. I would not know.

One lesson seems sufficient: when some specially vigorous judgment is quoted from the great Scotsman-that a politician is an "insidious and crafty animal," or tradesmen are capable of "sneaking arts"- it will be appropriate to reflect that this thorn came from a bouquet full of rather thorny roses. Whether Adam Smith deliberately put such prickly blossoms there-for literary effect-or in his premature cantankerousness didn't realize that such barbs were being placed all through the book-this question each admirer of the Scotsman may answer for himself.

And, in a way of speaking, this conclusion bespeaks failure of my research. I had hoped by assembling what I thought to be a few unguarded phrases of praise or criticism-for example, "stupid and lying missionaries"-to discover what unconscious biases the author really possessed. The "few" became too numerous. And even the reverse question, that is, of what did Smith unconsciously approve, seems in the end to lead us nowhere: probably bankers and smugglers, fair play, "something that can exhilarate the spirits," gardening, and-for the sake of argument-"the most beautiful women perhaps in the British dominions"l-hardly a significant garland of thornless blooms.

At all events the Wealth of Nations is obviously worth examination. David Hume, on first reading the book, is alleged to have remarked that its curious facts would help it to gain the public ear; and Professor C. R. Fay states in his recent appraisal of the book: "The Wealth of Nations was a great period piece, and on that account it is a jewel for all time." I would be inclined to add that its curious psychological revelations and its dazzling turns of phrase should help to preserve it from complete oblivion among scholars, even hurried present-day scholars, interested in the evolution of economic thought.

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Puzzles of the "Wealth of Nations"