Terrance Heath

What Would Adam Smith Say?

Filed By Terrance Heath | November 04, 2011 12:00 PM | comments

Filed in: Politics
Tags: 99%, Abraham Lincoln, Adam Smith, economic justice, Elizabeth Warren, Occupy Wall Street, Thomas Paine

Elizabeth Warren really hit a nerve among conservatives with her winning message about the the social contract and America’s economy. What I didn’t know is that she did it with an assist from the right’s favorite philosopher on economic policy.

Just to review, here’s what Warren said.

In a video of a recent Warren appearance, posted online by an individual who says he or she is not affiliated with the campaign, Warren answered the charge. "I hear all this, you know, 'Well, this is class warfare, this is whatever,'" Warren said. "No. There is nobody in this country who got rich on his own -- nobody.

"You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory -- and hire someone to protect against this -- because of the work the rest of us did.

"Now look, you built a factory and it turned into something terrific, or a great idea. God bless -- keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along."

Well, this drew responses the right by everyone from Paul Ryan to George Will and (of course) the Massachusetts Republican Party. The GOP demanded that Harvard dump Warren. Her opponent, Scott Brown, resorted to low blows about Warren’s physique. Some right-wing bloggers reached for their revolvers.

Turns out, they’d have been better off reaching for their bookshelves instead of their gunracks. There they would find their dog-eared copies of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations in which, Truthout’s Brian T. Thorn notes, the father of “the invisible hand” wrote the crib notes for Elizabeth Warren’s stump speech.

Yes, that Adam Smith – beloved by laissez-faire capitalists for his economic metaphor, the invisible hand. From his 1776 work “An Inquiry Into the Nature and Causes of the Wealth of Nations”:

Adam Smith“The woolen-coat, for example … is the produce of the joint labor of a great multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to complete even this homely production. How many merchants and carriers, besides, must have been employed in transporting the materials from some of those workmen to others who often live in a very distant part of the country! How much commerce and navigation in particular, how many ship-builders, sailors, sail-makers, rope-makers, must have been employed in order to bring together the different drugs made use of by the dyer, which often come from the remotest corners of the world!“(1)

There is a clear connection between the two passages. Both explain the cooperation required of businesses to build and sustain a functioning economy, cooperation with both government and workers. Both explain the importance of economic community.

Granted, I didn’t know this either, but you’d think conservative media figures and political leaders would know their Adam Smith at least as well as Warren -- a former Republican herself -- does, before opening their mouths. Yet, Republicans seem to have lost the plot entirely.

George Will accused Warren of implying a “collectivist political agenda” in her statement, apparently forgetting -- as E.J. Dionne noted -- that in 1983 Will himself lamented the “thin gruel” that America’s sense of community had become, and warned fellow conservatives that their “careless anti-government rhetoric” ran counter to what Americans really expect from government.

Paul Ryan accused Warren of “telling Americans that they're stuck in their current station in life, that they're a victim of circumstances beyond their control, and that the government's role is to help them cope with it.” When in fact Warren clearly explained that the economic crisis didn’t “just happen,” and that Americans aren’t “victims of circumstances beyond their control,” but of a financial sector that “broke the economy,” and politicians who were content to let it happen as long as they got a cut.

Worse yet, Ryan accused Warren of falling victim to the “fatal conceit of liberalism,” only to stumble over what sounds a lot like “the fatal conceit of conservatism.”

Few tricks of the unsophisticated intellect are more curious than the na├»ve psychology of the business man, who ascribes his achievements to his own unaided efforts, in bland unconsciousness of a social order without whose continuous support and vigilant protection he would be as a lamb bleating in the desert,” wrote the great economic historian R.H. Tawney in 1926. He added pointedly that the arrogant assumption that marginal people’s “distress is a proof of demerit… has always been popular with the prosperous.”

Apparently that assumption is still popular in Republican debate audiences and among online commenters terrified of losing what little they have and desperately seeking targets that are easier to blame than the powerful interests that are actually taking them down.

No Known Restrictions: Thomas Paine by George Romney, 179? (LOC)For that matter, you’d think they would concur with the “common sense” of Thomas Paine -- the patriot the right loves to co-opt.

Separate an individual from society, and give him an island or a continent to possess, and he cannot acquire personal property. He cannot be rich. So inseparably are the means connected with the end, in all cases, that where the former do not exist the latter cannot be obtained. All accumulation, therefore, of personal property, beyond what a man’s own hands produce, is derived to him by living in society; and he owes on every principle of justice, of gratitude, and of civilization, a part of that accumulation back again to society from whence the whole came.

Coincidences: A Lincoln - JF KennedyYou might assume that a party that once upon a time called itself “The Party of Lincoln” would as honest as old Abe was about wealth and labor.

Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.

You’d be wrong.

Instead of having coniptions over what Elizabeth Warren said, maybe conservatives should be asking themselves: What would Thomas Paine say? What would Abe Lincoln say? And what would Adam Smith say?

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I think the invisible hand is finally being seen as a pickpocket.

While it might be true that the two passages are somewhat similar, there are striking differences -- first, Ms. Warren alienates the factory owner from "the rest of us" -- and Mr. Smith made sure to include everyone in the "economic community." She implies that somehow the factory owner did not contribute anything whatsoever - "the rest of us paid for..." being her motif -- I submit -- the factor owner is part of the "rest of us" indeed. In fact, income tax wise, it seems the wealthy pay far more than the 43% of Americans workers who paid no income tax at all. Though the poor do indeed pay roughly 50% of their income in taxes, through other sorts of taxes -- historically, all societies which reach the 50% tax threshold have tax revolts -- that was true in 12th Century France, 14th century Germany, 19th century Mexico, etc etc -- the US is now approaching the 50% threshold, ergo, the rage on both left and right. So why did Ms. Warren make the implication that somehow the factory owner was not part of the "rest of us"? Because perhaps she believes the factory owner is getting a free ride? Hmm. I don't know. Ask the lady.

Secondly, Mr. Smith did not advocate for "no government" nor do the words "laissez-faire" appear in his works, to my knowledge -- and indeed, constantly, consistently, gives to government various roles, like bridges, canals, roads, etc, and even proposes taxes to pay for them, without quibble. Mr. Smith was no "anti-government" "no gov't" person whatsoever, and what even quite King friendly.

Thirdly, Mr. Smith in "Wealth of Nations" was comparing the laws and economies of France and England at that time, 1776. England had a much smaller population than France in 1776 -- today they have about the same, 60 million. Mostly because England has had a higher immigrant rate than France has had. Why is that? And why is England so much the richer, with so much less unemployment than France today? And England has a $26,000 a year average income, while France is but $20,000 -- a division just as it was in Smith's day. The US by comparison, is $32,000. And yet, the Democrats, in which Ms. Warren luxuriates, look to France as the model, perhaps.

Fourth, what Mr. Smith showed was that more government results in less wealth. And he showed it clearly with his comparisons of actual laws that were in effect at the time. And what Ms. Warren wants, as per the Democratic Party today, is more government, not less -- when 84 Democrats in Congress are also Socialist Party members, I dare say they have it it in for the Factory owner. Mr. Smith argued that Less government, not "No" gov't, produced the wealth. And that More government always resulted in more poverty. Which has been amply demonstrated in nation after nation the world over.

And lo, as the government here gets bigger, there are more poor, as the Democrats themselves run on "to help the poor" -- and who creates the poor? Well, as Adam Smith showed -- the government. And who wants more government? Ms. Warren.

And so while it might be true, again, that she alludes to the words of Smith, she hardly draws the same conclusions -- but the exact opposite. That any particular commentator doesn't reason it so, doesn't make Ms. Warren right. And that anyone quotes Smith doesn't make them all of a sudden some Freer Markets driven person of Smith's proportions, and Ms. Warren is clearly not. And indeed, the socialists of our times are quite fond of quoting, then berating Smith -- while having absolutely no compunction in quoting Marx, and defending him to the death. Which, in Marxist states all over the world, is usually the death of those who question Marx. I lost a few cousins in Prague to the Socialist wonder.

But it is disingenuous to argue that Ms. Warren is some Smithian free marketeer, as she goes about proposing ever higher taxes on the factory owners, which will result in ever growing poverty for all, all because she merely alludes, knowingly or not, to some peripheral similarities between her comments and those of Adam Smith.