The Wealth of
Nations
(1776) discussed.

On Thursday, 19 February 2015, Melvyn Bragg
and his guests, Richard Whatmore, Donald Winch and Helen Paul, on In Our Time, radio 4, discussed Adam
Smith’s celebrated economic treatise The
Wealth of Nations
(1776). I will say what each speaker approximately said
then add a few comments of my own. This method hardly reproduces the programme as
it was but it does report the substance of it.

Bragg said that Smith was one of Scotland’s
greatest thinkers, a moral philosopher and pioneer of economic theory, whose
1776 masterpiece has come to define classical economics.
Scotland was way ahead of London intellectually for this was the time of the
Scottish Enlightenment and Smith was one of the major thinkers of that
phenomenon.

As a boy, Adam Smith was
a scholar who did well at Grammar school then later at the University of
Glasgow but he found the University of Oxford way below par. However, he used
his time there to do a lot of reading. He went to France and met Voltaire,
amongst many others. His 1776 book was based on his careful consideration of
the transformation that was wrought on the British economy by the Industrial
Revolution, and it looked at how the result contrasted with marketplaces
elsewhere in nations around the world, so the book outlined a theory of wealth,
and how it is accumulated, that has arguably had more influence on economic
theory than any other book so far. Bragg said he rather liked the fact that
Adam Smith was willing to let the seat of the British Empire move from London
to Philadelphia to preserve it.

Richard Whatmore, the
Professor of Modern History and Director of the Institute of Intellectual
History at the University of St Andrews said the book was basically against the
state regulation of markets. The Wealth
of Nations
(1776) came out of the Enlightenment in general and the Scottish
Enlightenment in particular. Adam Smith was born in 1723into a Scotland full of
problems, not least the divide between the Highlands and Lowlands. David Hume saw that commerce needed to be
taken seriously by the state, but owing to early losses the rulers in Scotland agreed to the Act of Union with England in
1707 on the promise of compensation, or full replacement of the losses, so many
thought that “Scotland was bought and sold for English gold”. But despite those fears that it might be bad
for Scotland, the free trade zone that 1707 introduced seemed soon to be a
success. But there was the upset of the 1745 Jacobite Uprising, so all was not
harmony.

Commerce was seen as the
basis of society so the state needed to be concerned with it. As the basis of
society commerce was new, though commerce itself was old. The new society
needed to be justified. In the past commercial cities had been defeated by
agricultural or shepherd states, as Rome had beaten Carthage for example.

Commerce was not so good at
war, so commercial societies did not tend to last long. But in Europe, by the
eighteen century, commerce had become more stable. Why? This needed to be both
explained and justified and this is what Smith set out to do in his book.

Smith found that part of the
explanation was that ordinary men saw that, if they saved a bit, they could
soon make conditions for themselves and their families a bit better by working
on the market system in some specialised job.

Adam Smith was a very
historical writer and he held that an economist would need to be an historian
too. He held an account was needed from the fall of Rome up to modern times and
he planned a big book to show the rule of law was needed but he burnt the notes
for this third book on not getting round writing them up, but he revised his two main books repeatedly till the end of
his life. The Theory of Moral Sentiments
(1759) was not just an early stage that he later abandoned but rather central
to his life’s aims.

The invisible hand metaphor
is used in The Wealth of Nations
(1776) once but in The Theory of Moral
Sentiments
(1759) a few times. Adam Smith saw himself as a moderate between
mercantilists on the one hand and the physiocrats, or complete free traders, on
the other.

Adam Smith did not expect this book to have
much influence. One of his major ideas was unintended consequences. Tom Paine
loved book III and IV of the 1776 book.
But Edmund Burke also loved The Wealth of
Nations
too. But his major book on law was not begun but rather he burnt
the notes for it.

Donald Winch, the Emeritus
Professor of Intellectual History at the University of Sussex said that Adam
Smith’s father had died early and his mother became very close to her son, who
soon attended the local Grammar School, in Kirkcaldy. At the age of 14, the boy
went on to the University of Glasgow and he was good at both the school and the
college. At the college he had Francis Hutcheson as his teacher. Hutcheson was
one of the first not to lecture in Latin but rather in English. All the teachers he had at the college were
full professors.

The Theory of Moral Sentiments (1759) was revised till Adam Smith’s last days. He
burnt his notes and plan for his big third book. He was against the egoism of
Thomas Hobbes. He favoured social rather than selfish activity.

By Smith’s time, England no
longer had a peasantry, though other nations still did and they also retained
other aspects of feudalism too. But in England all had become partly merchants,
as Smith noted. His 1776 book was in five books. “Greed is good” but Adam Smith
did not say so. But he held that each can make things somewhat better by saving
for the future.

Mercantilism was the very
opposite of what Adam Smith wanted, as it was the inverse of liberalism.

Smith delayed publishing The Wealth of Nations for three years to
see what happened in America. He lived in London away from his beloved
Kirkcaldy home owing to his concern about the fate of British Empire. He held that mercantilism was no good so the colonists
were right to reject that aspect of the British Empire.

Smith was against
corporatism. Beware of businessmen when gathered together as they might well be
in a conspiracy against the public, he warned.

Helen Paul, a Lecturer in
Economics and Economic History at the University of Southampton said that Adam
Smith was against both the mercantilists and the physiocrats. Mercantilism was old but the politicians in Smith’s
still largely held to it. This old paradigm held that trade was zero-sum.

Adam Smith used the example
of the pin factory where one man could not even make a single pin a day on his
own but with about eighteen others with distinct tasks on the division of
labour then thousands of pins might be produced.

He did work that led to the current knowledge we of
the price system but he worked before that was completely achieved.

As he thought that shipping should be protected as
it aided the problem of defence he was not quite fully in favour of free
trade.

COMMENTS: The three
experts did not do too badly. They might have said that Joseph Butler was the
big influence in David Hume to get him to reject Thomas Hobbes on egoism and
Butler also said there is not enough self-love too. Hume adopted both in his ethical
writings and later Adam Smith did too in the 1759 book.

Clearly, Smith’s main idea of the division of labour
gears all who join it to serve others as a by-product whilst doing their best for themselves
and thus the metaphor of the hidden hand, as it is usually interpreted, is quite
superfluous.

Richard Whatmore was right to note that trade rarely fits well with war for trade is aimed at service rather than with abusing people but the state sets out to rule the people, rather than to serve them, and its coercive governing can soon spill over into war, especially when state meets state.

Richard Cobden saw that free trade crowds out war, a thesis he found in The Wealth of Nations (1776).