Adam Smith and the New Right

Gentlemen Prefer Capitalists

by Gwydion M. Williams

Adam Smith and the ‘Market Fundamentalists’ really do belong together.  And he used phony logic to claim that anything that was not commercially profitable was a drain on the wealth of the society.

Adam Smith’s work was very much part of what’s called the Whig View of History. The past was seen as an inevitable march towards an enlightened modern world (or whatever was modern and enlightened at the time). Somehow Smith’s reputation has survived the collapse of the world-view he operated within.

The Whig View of History includes the assumption that the head that wears the wig rules the world. This was justified in 18th century Europe, when enlightened aristocrats managed to dampen down the violent religious passions of the 17th century. Feeding selfish passions was a major weapon in getting control. There was also a deep-down belief in a benevolent hierarchy – Imperial China was seen as a fine example, a place that should be copied.

Praising a benevolent hierarchy is something very different from demanding social justice. That is the big difference between Smith and later writers: not just Marx but also the ‘Ricardian Socialists’. Ricardo differed from Smith in admitting that the split in wealth between rents, profits and wages was arbitrary, following no natural law. He drew no radical social conclusions from this, but the logic was that capitalism need not be fair and must be regulated, at the very least. Smith took the opposite view, insisting that the system ran best when left alone.

If you ignore the social context, you can easily misread Smith by taking his admiration for benevolent hierarchy at face value. For instance:

“There is something exceptional in the clarity and compassion revealed by Smith, and which drew me very close to him in my youth. I had been particularly struck by his empathy for others far removed from him and in terms of class, culture and life-style, extremely different from his own. I noticed that this characteristic was ignored in the standard literature analysing economic questions.” [A]

If you know the British gentry tradition, you’ll recognise that Smith was following a set of well-established cultural habits, making grand fine-sounding statements that turn out to mean very little. Fine words followed by no specific proposals for action can safely be treated as an intent to do nothing and let a social evil continue unchecked. Often it’s worse than that: the expression of hope for something better is commonly followed by an argument that seems to prove that all actual action is futile and that it is better to leave things much as they are. Or to rely on self-interest, the favoured method of the Enlightenment. Thus Smith, an academic with strong connections to the gentry, is content to say:

“But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. 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.” [B]

That has never been entirely true of any human society. It was closest to being true during the European Enlightenment, when selfish calculations were favoured as an alternative to self-destructive religious ideologies. But it failed because few humans could be content with a social order in which there was nothing but cool unfeeling self-interest.

Smith uses some absurd arguments to defend the existing order, in which some people were hundreds of times as wealthy than others. He says:

“The produce of the soil maintains at all times nearly that number of inhabitants which it is capable of maintaining. The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency [sic], though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants.” [C]

A professor like Smith would have consumed one way or another a quantity of material wealth equal to that consumed by several ordinary families of the era. Obviously he could only eat so much food, but it would have been better quality and with much more meat. The labour of others would have produced the clothes he wore, the house he lived in, the books he read. Looking up the social scale, a nobleman would have consumed vastly more than a professor like Smith, enough to provide an independent living for thousands. That some of those thousands were employed as servants means little: the wealth would have mostly come from rents, from farmers and labourers who could have found plenty to spend it on had they had control of it.

Contrary to what Smith said, the advantages of the rich in his day were very great. And they were advancing fast, at the expense of most of the small producers.

In Adam Smith’s lifetime, there were two massive economic developments he must have been well aware of. These were the growth of West Indian slavery and the acceleration of Enclosure in England. Which makes it remarkable that he says very little about either of them.

Smith’s book argued that markets left to themselves were sedate and lovely things, producing a natural harmony ‘as by an invisible hands’. The two matters of Enclosure stripping ordinary people of their land and a massive modern re-growth of slavery strongly suggested the opposite, that Britons were ‘riding an economic tiger’. Slavery in far-off lands was mostly ignored in Smith’s day, it posed no threat to British society. Enclosure was another matter: the gentry were being socially radical and upsetting the social order that they stood on top of. A lot of the original protest was conservative – the rioters asked that things should be left as they were.

Enclosure was a massive change in social habits. It was also carried through in such a way that those with just a little land were likely to lose it. Either that or they’d find that the loss of common grazing lands and the new expenses of making hedges left them much poorer, often pitching them into debt and forcing them to sell their property. It was a major redistribution of land from the poor and middling to the rich. Lots of people knew that there would be massive long-term consequences.

In actual history, it was almost true that ‘nothing came back save a smile on the face of the tiger’. The economic forces unleashed by the 18th century British gentry made them world-rulers for a time and then cast them down again. Marx guessed one possible outcome – the dispossessed workers accepting their new condition and aspiring to turn the whole world into a gigantic well-run factory. In the form of the Soviet Union, this vision came quite close to being realised globally. But at the same time as the Soviet experiment began, renegade Marxist Benito Mussolini found an alternative outcome in which the rival classes were united in a militant nationalism and a militaristic state that did provide basic welfare for all those rated as part of the nation.

The Anglo nations survived the crisis of the 1930s and 1940s by copying the best successes of the Soviet Union and the various Fascist states. Roosevelt’s New Deal had a strong socialist element, though he was wise enough to build strength at home and not rush too soon into foreign adventures. By the 1950s, it was generally believed that the West had transcended capitalism, advanced to a superior Mixed Economy. But despite its massive success, the Mixed Economy was left with few ideologists to defend its basic soundness when it hit a crisis in the 1970s.

The New Right looked back to Smith and argued – rather improbably – that things had gone wrong because Smith’s wise advice had not been headed. They shared his belief that markets left to themselves were sedate and lovely things, producing a natural harmony ‘as by an invisible hands’. They applied this especially to the former Soviet Union in the 1990s. They were baffled when it produced crime and a shrinking economy rather than the expected free-market utopia.

The West in the 1990s could have urged the former Soviet Union to copy what actually existed in Western Europe, or even what actually existed in the USA. Instead, a bunch of well-funded smart-Alecs drew up grand plans for sweeping changes based on what they believed to be an expertise in Macro-Economics. My view is that it was lucky for the wider world that they were such a bunch of fools: advisors with more common-sense might have secured their former enemy as an ally, in the same way as they secured Japan, Italy and West Germany. A global block including all Europe and all Europe’s offshoots and led by the USA would have been possible and would have been almost certainly have come into collision with the rising nations of Asia. The New Right after 1991 were maybe a ‘Felix Culpa’, a fortunate error. But an error they certainly were, and The Wealth Of Nations was their Bible.

Smith has some nice sentiments, but expressed as abstractions, with no firm demands on the care or cash of the rich. He promised harmony but had no sound basis for this. He also had an unhappy habit of leaving out facts that did not suit his case. His example of pin-making is famous – but who has ever studied the social context of pin making as he might have observed it? There are several well-written books about the Galapagos Island finches that inspired Charles Darwin.[K] I could find nothing on pin-making except a couple of 18th-century sources that strongly indicated that pin-makers had a strong state-regulated organisation controlling their work.[L]

Adam Smith also didn’t discover Division of Labour – every previous writer on economics had noted it, right back to Plato and probably before. It was also typically found in large state-run enterprises, especially the military and military suppliers. Smith failed to offer any evidence that Division of Labour worked better when it was producing commodities, goods sold into an unregulated market.

Having spend the better part of two decades trying to figure Smith out, I’ve concluded that he valued his reputation much more than he valued truth. That’s normal enough in most ages, even with people of great intellectual gifts, and Smith definitely was gifted. But the fact that he’s often very interesting should not hide the fact that he would not say things that might upset conventional opinion or that might imply a need for curbs on the new economics.

Most people who’ve studied him agree that Smith lost faith in Christianity in his early years, and that he kept quiet about this. That much is fair enough: you could be unemployable if you were an open disbeliever. But his massive account of economics is very selective in the facts it chooses to look at. You might excuse him not noticing the rise of the factory system or the spread of machinery into manufacturing – these things were only just beginning to happen when he published The Wealth of Nations in 1776. But he had no excuse for downplaying Enclosure and West Indian slavery, two major phenomena that could not have been easily fitted into his schema.

Enclosure gets one mention that is too trivial to be worth quoting. [D] The massive destruction of small farms in England was the biggest economic change of Smith’s lifetime, and he chooses not to deal with it. It’s a fairly clever tactic, and for all my skepticism I missed that particular omission.

Regarding slavery, Smith says rather more and seems to think he has a good excuse:

“In the antient state of Europe, the occupiers of land were all tenants at will. They were all or almost all slaves; but their slavery was of a milder kind than that known among the antient Greeks and Romans, or even in our West Indian colonies. They were supposed to belong more directly to the land than to their master. They could, therefore, be sold with it, but not separately. They could marry, provided it was with the consent of their master; and he could not afterwards dissolve the marriage by selling the man and wife to different persons. If he maimed or murdered any of them, he was liable to some penalty, though generally but to a small one. They were not, however, capable of acquiring property… This species of slavery still subsists in Russia, Poland, Hungary, Bohemia, Moravia, and other parts of Germany. It is only in the western and southwestern provinces of Europe, that it has gradually been abolished altogether.” [E]

In the 19th century, this form of slavery was renamed ‘serfdom’, a word not much used before then. Remarkably, a version of serfdom survived in Scotland into Smith’s time, but is not mentioned in The Wealth of Nations. Some commentators have supposed he genuinely overlooked it. But though Smith arranged for most of his notes and unfinished works to be destroyed after his death, we do have some survivals and these show he was well aware of it.

In a set of notes taken from his lectures in 1766, Smith said:

“That slavery is a disadvantage appears from the state of colliers and salters in our own country. They have indeed privileges which slaves have not. Their property after maintenance is their own, they cannot be sold but along with the work, they enjoy marriage | and religion, but they have not their liberty altogether, and it would certainly be an advantage to the master that they were free. The common wages of a day labourer is between six and eight pence. That of a collier is half a crown. If they were free their prices would fall. At Newcastle the wages exceed not 10d or a shilling, yet colliers often leave our coalworks where they have half a crown a day, and run there tho’ they have less wages, where they have liberty.” [H]

Smith’s argument is open to question: was there a difference in the danger of work and in the amount of work demanded? Newcastle coal was also known as ‘sea-coal’, because some of it could be found on beaches and much of it was from fairly shallow mines. It is very difficult to believe that in 18th century Scotland, people would be insisting on unfree labour when they could get free labour cheaper. I strongly suspect that unfree labour was more profitable to the owners. But it would be an interesting topic for a professional historian to examine. Slavery In 18th Century Scotland would be a catchy title, with the Adam Smith connection to attract additional public interest.

The fact that there doesn’t seem to be any such history is as remarkable as the neglect of the history of pins. Economics fancies itself a science, but most economists prefers to spin improbable metaphysical structures rather than make a solid analysis of any of the off-message things that actually existed.

Smith still admits the persistence of a form of slavery in Scotland in an early draft for his famous book:

“That land can never be cultivated to the best advantage by slaves, the work which is done by slaves always coming dearer than that which is done by freemen. Of the scanty produce and great expense of the slave cultivation among the antient Greeks and Romans. Of villenage as it took place among our Saxon and Norman ancestors; of the adscripti glebae in Germany and Poland, and the rustici in Russia, and those who work in the coal and salt works of Scotland. That the high cultivation of Barbadoes, and of some other sugar and tobacco colonies, notwithstanding that in them the labour is performed almost entirely by slaves, is owing to this circumstance, that the cultivation of tobacco and sugar is engrossed, the one almost entirely by the English, the other by the English and French, who thus enjoying a sort of monopoly against all the rest of the world, indemnify themselves by the exorbitancy of their profites for their expensive and thriftless method of cultivation. The great expence of slave cultivation in the sugar plantations. The yet more exorbitant profites of the planter. That the planters in the more northern colonies, cultivating chiefly wheat and Indian corn, by which they can expect no such exorbitant returns, find it not for their interest to employ many slaves, and yet Pensilvania, the Jerseys, and some of the provinces of New England are much richer and more populous than Virginia, notwithstanding that tobacco is by its ordinary high price a more profitable cultivation. ” [F]

Like his modern admirers, Smith had a way of excluding ‘off-message facts’. Pretending not to know about unfree Scottish labour is a minor flaw compared to his supplying a reassuring and false explanation for the massive re-growth of a particularly nasty version of slavery as part of the new system of global commerce. Expanding on his original idea in The Wealth of Nations, he says.

“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. Wherever the law allows it, and the nature of the work can afford it, therefore, he will generally prefer the service of slaves to that of freemen. The planting of sugar and tobacco can afford the expence of slave–cultivation. The raising of corn, it seems, in the present times, cannot. In the English colonies, of which the principal produce is corn, the far greater part of the work is done by freemen. The late resolution of the Quakers in Pennsylvania to set at liberty all their negro slaves, may satisfy us that their number cannot be very great. Had they made any considerable part of their property, such a resolution could never have been agreed to. In our sugar colonies, on the contrary, the whole work is done by slaves, and in our tobacco colonies a very great part of it. The profits of a sugar–plantation in any of our West Indian colonies are generally much greater than those of any other cultivation that is known either in Europe or America: And the profits of a tobacco plantation, though inferior to those of sugar, are superior to those of corn, as has already been observed. Both can afford the expence of slave–cultivation, but sugar can afford it still better than tobacco. The number of negroes accordingly is much greater, in proportion to that of whites, in our sugar than in our tobacco colonies.” [G]

Smith does not try to explain why slavery should be spreading if it was so economically burdensome. It’s moot anyway if slavery was uneconomic in any part of the New World. The northern states of what became the USA mostly cultivated familiar crops in a climate that wasn’t very different from what Europeans were used to. The southern states were much hotter, the West Indies hotter again. People of all races were enslaved, with criminals and rebels shipped out from England and Native Americans also sold, including the tribes that celebrated the original ‘Thanksgiving’ with the Pilgrim Fathers of New England. But Black Africans lasted better under such conditions. They’d command a better price down there than a northern owner could expect to get from keeping them as ‘living tools’. Also slaves would be a source of ready cash, and it was the south that grew most of the cash crops until bulk shipments of corn and wheat become possible in the mid-19th century.

Slavery grew massively in the tropical portion of Britain’s expanding Empire, and also in the south of the USA after independence. In the first few decades it was assumed that slavery would gradually vanish, and there was shock when unregulated settlement pushed the slave system north of the Mason-Dixon line in the shape of the new state of Missouri. Slavery was flourishing in most of the states where it was legal when the Civil War broke out. The war was caused by Lincoln’s election, he was helped to victory by a split in the Democratic Party, and the split was caused by the failure by the northern wing of the Democratic Party to deliver Kansas as another slave state next to Missouri.

The British Empire abolished slavery in the 1830s. But slaves were immediately replaced by another form of unfree labour, indentured workers from China and the Indian subcontinent. These workers were not free to quit until they had worked their ‘labour contract’ and it was not much better than slavery. The newly freed Afro-Caribbeans mostly preferred to live as small farmers and not take order or have their lives regulated.

Smith made the convenient assumption that private profit is usually in line with public welfare, at least in the long run. He took the view that the absence of slavery in the north of the USA was the cause of it being noticeably richer than the south. This same view has been taken by most writers since Smith, but explanations differ. Smith is part of a small minority in arguing that slavery is unprofitable to the actual slave-owners, as distinct to harmful to the society as a whole. Smith preferred not to see society as any sort of whole, arguing that private self-interest would somehow add up to social welfare. But the argument looks very stretched.

Smith could also not have argued that the existence of slavery stops a society getting rich, since he had identified both India and China as maybe richer than Europe, yet both had slavery. In China, slavery was mostly domestic servants in rich households, with the land worked by free peasants. I’ve argued elsewhere that Western Europe’s key advantage was that educated people did not feel any need to distance themselves from manual labour, which was the norm elsewhere. But slavery has a way of undermining that, even the relatively mild slavery that existed in the advanced states of Asia. Asian slaves were mostly domestic servants and might eat better than families that were free but poor. North American slavery was much nastier and created a much bigger social gap.

Whites in the southern USA got a definite notion that hard work done by white men was shameful and a sign of failure, whereas the dominant attitude in the north was that it was a sign of merit. This problem has not yet been fully resolves – state-led action in the 1960s was making progress, but the Republican Party from Nixon onwards went after the racist vote with slogans that were technically not racist. The doctrine was that state action to enforce non-racism was unjustified and would do no good. Doing as little as possible became the idea, so that racism remains unresolved in the US, whereas the British state has always harassed the racists and kept them marginal. Though most of Britain’s non-white population are newly established, the society is pretty much integrated.

The same doctrine of the needlessness of state action led both Republicans and Democrats in the USA to dismantle all of the financial protections that had been introduced in the 1930s, the previous time when finance had massively damaged the real economy. They told themselves that it wasn’t finance that caused the trouble in the 1930s, that the Wall Street Crash was a minor ‘spat’ and that the real damage was done by wicked Protectionism that was introduced later. They got the chance to put their ideas to the test, and it looks to have cost the USA it’s chance of World Hegemony. All of the foolishness looks back to Adam Smith.

Smith laid the foundations for the idea that economics was something that could be safely separated from social values and from morality. But this was a false assumption, a ‘line of patter’ that justified doing nothing about new economic forces that produced wealth but which were also undermining the existing society. I doubt he had any idea where this was leading: he disliked Christianity but was otherwise quite conservative. He maybe thought it would all work out somehow. He correctly concluded that the system was not about to collapse or ruin itself, as some of its critics expected. It was left to Karl Marx to work out the actual process, that the people operating the new economic system were undermining their own basis for existence and lay the basis for something. If it didn’t work out entirely as Marx expected, this was maybe because some conservatives recognised that functional conservatism meant putting curbs on business and the so-called Free Market. This harsh lesson was learnt in the 1930s and 1940s, forgotten again in the 1980s. Now we’ve got another major economic crisis and Marxism has revived again. The world’s most successful economy is China, which never accepted the Adam Smith viewpoint.

In my book Adam Smith: Wealth Without Nations, I explained how Smith laid the foundations for many heartless systems, down to and including our current New Right Doctrine. Smith says:

“There is one sort of labour which adds to the value of the subject upon which it is bestowed: there is another which has no such effect. The former, as it produces a value, may be called productive; the latter, unproductive1 labour. Thus the labour of a manufacturer adds, generally, to the value of the materials which he works upon, that of his own maintenance, and of his master’s profit. The labour of a menial servant, on the contrary, adds to the value of nothing. Though the manufacturer has his wages advanced to him by his master, he, in reality, costs him no expence, the value of those wages being generally restored, together with a profit, in the improved value of the subject upon which his labour is bestowed. But the maintenance of a menial servant never is restored. A man grows rich by employing a multitude of manufacturers: he grows poor, by maintaining a multitude of menial servants. The labour of the latter, however, has its value, and deserves its reward as well as that of the former. But the labour of the manufacturer fixes and realizes itself in some particular subject or vendible commodity, which lasts for some time at least after that labour is past. It is, as it were, a certain quantity of labour stocked and stored up to be employed, if necessary, upon some other occasion. That subject, or what is the same thing, the price of that subject, can afterwards, if necessary, put into motion a quantity of labour equal to that which had originally produced it. The labour of the menial servant, on the contrary, does not fix or realize itself in any particular subject or vendible commodity. His services generally perish in the very instant of their performance, and seldom leave any trace or value behind them, for which an equal quantity of service could afterwards be procured.

“The labour of some of the most respectable orders in the society is, like that of menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject, or vendible commodity, which endures after that labour is past, and for which an equal quantity of labour could afterwards be procured. The sovereign, for example, with all the officers both of justice and war who serve under him, the whole army and navy, are unproductive labourers. They are the servants of the public, and are maintained by a part of the annual produce of the industry of other people. Their service, how honourable, how useful,1 or how necessary soever, produces nothing for which an equal quantity of service can afterwards be procured.” [J]

Smith is in fact doubly confused. He confuses labour that produces goods for sale with labour that is performed without anything being sold. And he confuses labour which produces a tangible item with labour with other sorts of labour. This is nowadays an unimportant and forgotten error, an increasingly high proportion of goods produced are not actually tangible and these are no more or less likely to be useless than goods that exist in some tangible form. (Full details are set out in my book Wealth Without Nations, which was published in the year 2000 and was completely ignored by all of those who could have learned something useful from it.)

Some of Smith’s errors are forgotten: others are treated as the height of economic wisdom. Particularly the notion that labour is only productive if it results in goods sold in a market. Smith is the agreed source for this doctrine, so it’s worth examining the topic more closely.

Supposing a gentleman of Smith’s day orders his cook to prepare a dozen large pies that he intends to serve at a meal for some visitors. But then half of them get delayed, so he orders another servant to sell half of them at the local market. The cook is presumably a productive labourer for those pies that get sold and an unproductive labourer for the pies that are eaten by the gentleman and his guests. Maybe one of the purchased pies is forgotten until it is uneatable and then gets thrown away. It is wasted, but the labour of producing it is productive because it was sold, and would have been unproductive if it had been eaten at home.

Smith ‘proves’ that production depends on markets and money, by insisting that labour is not productive unless it produces something that enters into the cycle of markets and money. By the same logic, I could prove that all Tories are cannibals. I merely define ‘cannibal’ as meaning ‘member of the British Conservative Party’, ignoring the more normal definition as ‘person who consumes human flesh’.

Smith uses misleading names. Clearly a profit is made on the six pies sold, assuming the sale price covers materials and the cook’s labour, plus cost of selling. But to call the split ‘profitable’ and ‘unprofitable’ would leave open the question of the overall usefulness.

The actual material life of the society is badly reflected by profit and loss, regardless of whether the market is efficient or not. And ‘Productive’ cannot be defined without some subjective choices.

Wealth is deemed to be produced by capital accumulation, because that is how Smith chooses to define wealth. Beyond that, one finds nothing. I’ve read absolutely everything that Smith published, as well as the stuff published after his death. And there is no real explanation for his doctrine. Nor do his disciples fill in the gap: they seem not to notice it.

Smith deems wealth to come from capitalism, just as a lawyer deems his client to be innocent, however guilty they seem to be. Evidence does not come into it. Smith’s apparently simple remarks about productive labour and wealth smuggle in a whole range of concepts that would have aroused many questions and disputes if introduced in some more open fashion.

Smith makes no distinction between different sorts of value, the distinct though overlapping ideas of use-value and exchange value that Marx identified. A well of pure water has great use-value or usefulness to those who need to drink from it. The usefulness is hardly increased if someone starts charging for the water, giving it an exchange value.

If some benevolent local gentlemen has a servant look after the well, along with other helpful tasks for the needy traveller, this is ‘unproductive work’ by Smith’s definition. If the well is fenced off and denied to those who cannot pay, only then is the work productive.

Smith is saying that labour is only productive if it is directed towards producing a cash income for the rich. Wealth that is not also a contribution to the wealth of rich individuals is deemed not to be wealth at all, even if those ignorant of economics might suppose that it was. Smith anticipated and helped to promote the general destruction of all non-capitalist social forms that had begun in his day, and which intensified greatly in the 19th century.

In the 18th century there was a huge range of endeavours directed, not towards the market, but directly for consumption. Much cloth was homespun, beer and cider produced at home from basic ingredients. ‘Housecraft’ was a complex affair in which each household provided for much of its own consumption.

Entertainment, too, was normally a non-market activity. People might have a very good way of life without much cash, satisfying their own wants without making a profit for others. Smith does not venture to directly condemn such a way of living. It was not even static or incapable of change, there was much technical progress by people who were outside of the market. Indeed the whole of science has continued to be organised this way, with commercial interests having just a secondary role in adapting pure science to their own particular needs.   But the slur of ‘unproductive’ remains, whereas to call it non-market or non-profit-making would have been much more accurate.

Accuracy in describing the non-market sectors of the economy would have weakened the case for replacing them with the cash nexus. This area of life has been carefully written out of history, with all progress ascribed to market forces. Even Marx gives mixed messages, recognising that these forms existed, but accepting without question that they were obstacles to progress.

Smith and his successors ignore all the use-values which serve to make life comfortable without providing a profit. There are no real economic measures that can tell you the benefit of a health service, the positive influence of good public leisure facilities and the usefulness to society of a competent state infrastructure.

If a health service is operated ‘rationally’ as a source of exchange values, it would pay to give patients treatments they do not really need, and to always go for the most expensive options. It isn’t just outsiders who see the US medical system as having just those faults; US culture makes the same judgement. And this despite all of the dedicated idealists who try to make it a service for health rather than money. It remains twice as expensive for each member of the society as the British NHS, while giving a rather worse service to the society as a whole.

Economic comparisons look at profit-making commodities and ignore non-market social benefits. Outside of the cash nexus, there is supposed to be nothing. Nothing except perhaps God or ‘spiritual values’, and God and ‘spirituality’ are never allowed to get in the way of market forces.

Commerce favours a gelded god and empty spiritual values. Not all religions in the USA are like that, but a great many of them are, including the Southern Baptists and other right-wing Christian traditions, which are Christian in the same sense that tigers are fishes. Tigers and all other mammals have remote ancestors that were indeed fish, but the link is obscure and remote, as is that between the anti-commercial and non-violent teachings of Jesus and the rubbish that currently passes itself off as ‘fundamentalism’ within the Christian religion.

A creed actually based on the Bible would be very different from any existing version of Christianity and would probably not be popular. Apples are not mentioned in the Book of Genesis: the idea probably entered the tradition when pagan Greeks were converted but brought with them memories of sacred apples from their own myths. The case of the ‘Sabbath’ is even more complex: the Jewish Holy Day is Saturday, but also Saturday is viewed as beginning on what most Europeans would view as sunset on Friday. Non-Jewish Christians are assumed to have ignored it, while offering their own alternative worship on Sunday, the Day of the Sun that late Roman paganism favoured as a day of rejoicing. Much later, all of this was muddled and there was a move within Roman Catholicism to apply some rules of the Jewish Sabbath to the former pagan Day of the Sun. Protestants took this much further, with the discrepancy being noticed by just a few small sects like the Seventh Day Adventists.

The New Right depended on a peculiar alliance between the Christian Fundamentalists and the Market Fundamentalists who look back to Adam Smith. The current economic crisis has led to a move away from any formal belief in Market Fundamentalism – left to itself, the global financial market would have self-destructed in 2008. But there is also a determination not to restore the sensible curbs on global finance that were introduced in the 1930s and dismantled from the 1970s onwards. The curbs are a ‘burden’, only if Market Fundamentalism is viewed as a confirmed truth. From any other viewpoint they are a necessity.

You can find out more about Smith’s errors in my book, Adam Smith: Wealth Without Nations.  Shown as ‘unavailable’ by Amazon Books, but actually available from


[A] Amartya Sen on Adam Smith, Le Monde, 16th. October 2009

[B] The Wealth of Nations, Book I, Chapter ii, paragraph 2

[C] The Theory of the Moral Sentiments, Part IV, Chapter I. You can find the this and other texts on-line at []

[D] The Wealth of Nations, Book I, Chapter xib, paragraph 13. It’s the only reference to Enclosure in the Subject Index of the Glasgow Edition of 1976.

[E] The Wealth of Nations, Book III, Chapter ii, paragraph 8. He does say ‘antient’ rather than ‘ancient’, one of the original spellings of the word.

[F] Early Draft of Part of The Wealth Of Nations, paragraph 44, emphasis added.. Included in the volume Lectures On Jurisprudence in the Glasgow Edition of 1976, page 579. All spelling oddities are there in the original. Though I’ve mostly worked from printed books, I have saved time by copying the text from [], which has all sorts of nice old books available.

[G] The Wealth of Nations, Book III, Chapter ii, paragraph 10

[H] Lectures On Jurisprudence, Report dated 1766, paragraph 453. Page 453 in the Glasgow Edition of 1976

[J] The Wealth Of Nations, Book II, Chapter iii, paragraphs 1 and 2

[K] I’d recommend Jonathan Weiner’s The Beak of the Finch: Story of Evolution in Our Time.

[L] In my book Adam Smith: Wealth Without Nations, I cited Chamber’s Cyclopaedia. 1750, 6th Edition and also some documents held by the British Library concerning rival schemes for organising pin-makers.


First published in Labour & Trade Union Review, 2005