Tuesday, October 31, 2006
Why has he enjoyed such a resurgence now?
For two main reasons. First, because he was seen as the first economic thinker to explain and advocate the free market. As such, he was one of a constellation of economists co-opted by the British political right in the Seventies when they were looking for alternatives to what they regarded as the bankruptcy of Socialism. When Margaret Thatcher became Prime Minister in 1979, the political right had the chance to put the theory into practice: lower taxes, smaller government and freer markets. Long dead, Adam Smith was resurrected as the economic guru for Thatcherism.
And for this he must suffer:
But he is quite a controversial figure today, isn't he?
Yes he is, and the association with Thatcherite economics is one of the main reasons. But it is not the only one. Tony Blair's New Labour accepted many of the free-market capitalist principles of the Thatcher years. But even New Labour found it hard to swallow the Thatcherite interpretation of Adam Smith whole, and it has looked for aspects of his thinking that fit more comfortably with New Labour. A global division of labour was fine, but selfishness was not - unless it was consciously understood to contribute to the common good.
This kind of thinking needs to meet the likes of Walter Williams, who explains in this wonderful interview at EconTalk the benefits to society that come from greed. He quotes the famous passage of Smith
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. Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow-citizens. Even a beggar does not depend upon it entirely. The charity of well-disposed people, indeed, supplies him with the whole fund of his subsistence. But though this principle ultimately provides him with all the necessaries of life which he has occasion for, it neither does nor can provide him with them as he has occasion for them. The greater part of his occasional wants are supplied in the same manner as those of other people, by treaty, by barter, and by purchase. With the money which one man gives him he purchases food. The old cloaths which another bestows upon him he exchanges for other old cloaths which suit him better, or for lodging, or for food, or for money, with which he can buy either food, cloaths, or lodging, as he has occasion.As I pointed out to my class yesterday, relying on a section of Heyne's Economic Way of Thinking, the difference between the market and the government is the difference between persuasion and coercion. By serving others and ministering to their self-interest, you advance your the common good. Motives are irrelevant; what matters are results.