http://www.tnr.com/book/review/adam-smith-nicholas-phillipson


March 21, 2011

From The New Republic
Adam Smith: An Enlightened Life
by Nicholas Phillipson

Morals and Markets
A Review by Yuval Levin

Adam Smith is not exactly a biographer's dream. An intensely private
man, he seemed to go out of his way to leave no trail for future
chroniclers. His correspondence is dry and workmanlike, with few
personal details or revealing moments. He made sure his private notes
and unpublished works-in-progress were burned before his death. Having
lived unmarried with his mother for most of his life, he left behind
very few intimates who could relate his story for posterity. And yet
Smith was more than a profoundly important figure in the history of
moral philosophy, economics, and liberal political thought; he was
also, in his eccentric way, a quite charismatic man.

This perplexing combination of challenges has meant that Smith has had
too few biographers, and that most of them have fallen into one of two
traps -- the purely intellectual biography, in which the man is merely
the vehicle for his ideas, and the purely contextual biography in
which the man is just a representative of his time and place. The best
modern studies of Smith -- Joseph Cropsey's Polity and Economy, and
Jerry Muller's Adam Smith in His Time and Ours -- fall respectively
into these two camps. Like so much that has been written about Smith,
they make the reader yearn for something more.

With this superb new book, Nicholas Phillipson has answered that
yearning at last. He has done it by leaning toward both traps at
different times, but never quite falling into either. There is, as
Phillipson acknowledges at the outset, no getting around the fact that
Smith's ideas are almost all we have of him. But through meticulous
research, a masterful command of the philosophical debates of the age,
and a fine grasp of the particulars of Scottish life in Smith's era,
he manages to shadow out the man himself -- decisively demolishing
some longstanding myths popular on both the left and the right, and,
without straining to be relevant, nonetheless showing us a thinker
with a great deal to offer our own troubled time.

Phillipson leans toward a contextual biography in the early chapters
of the book, which are as much about Scotland as they are about the
youthful Adam Smith himself -- about whom, to be fair, scant little is
reliably known. A historian at the University of Edinburgh and among
the world's leading scholars of the Scottish Enlightenment, Phillipson
is uniquely well suited to making sense of that period, and through a
mix of detective work and informed conjecture he pieces together an
altogether plausible story of how Smith's early education shaped his
later views.

There are times when Phillipson's conjectures go too far. An entire
chapter is devoted to a series of lectures on jurisprudence that we do
not actually know whether Smith delivered. Phillipson assumes he did,
and builds too much on the assumption. He later argues that Smith's
moral philosophy -- and especially his The Theory of Moral Sentiments
-- was decisively shaped in response to Rousseau, rather than (as most
Smith scholars argue) as an expression of a kind of modern stoicism.
But Rousseau is never mentioned in Smith's great masterwork of ethics,
while the case for a modified stoicism is everywhere apparent, and
frequently explicit.

Once he enters Smith's most productive (and most public) period,
Phillipson's analysis is brilliant and clarifying. He demonstrates
decisively the coherence and immense ambition of Smith's life-long
project -- the development of an overarching system for the study of
social life -- of which his individual works were elements. By so
doing, Phillipson effectively puts to rest the longstanding argument
that the economics of The Wealth of Nations was inconsistent with the
moral theory that Smith had laid out in The Theory of Moral
Sentiments, a view that dominated the study of Smith until well into
the twentieth century, and that continues to shape the way he is
understood.

Smith's economics, Phillipson argues, was a function of precisely his
understanding of morality -- an understanding of man as a profoundly
social creature whose capacity for sympathy and desire for approval
made it possible to civilize him through the inculcation of "moderate
virtues" like prudence, restraint, industry, frugality, sobriety,
honesty, civility, and above all "self command" or discipline. These
low bourgeois virtues were nothing to sneer at, Smith believed. They
were the essence of a functioning liberal society. And the market, in
turn, was an institution crucial to the effort to inculcate such
virtues. It could both yield immense prosperity and encourage
discipline and the moderate virtues by making self-command (which is
essential to keeping a job, satisfying customers, and beating out the
competition) a means of bettering our condition.

The compatibility and continuity of Smith's two great works suggests
that there was not -- as left-leaning admirers of Smith ever since
Thomas Paine have suggested -- a hidden revolutionary morality in the
The Wealth of Nations. The insistence on such a veiled radical agenda
(which can be found in many contemporary studies of Smith, most
recently Iain McLean's book Adam Smith, Radical and Egalitarian) has
kept too many readers of Smith from taking his moral philosophy
seriously.

But the same continuity also means that many libertarian readers of
Smith are wrong to believe that his economics is his morality, or that
an unregulated market exhausts his idea of an ethical society. In
fact, Smith's market is highly regulated. Far from a pseudo-natural
phenomenon best left to its own equilibrium, it is a social
institution constructed by policymakers with very particular moral
ambitions.

The nature of those ambitions speaks directly to the problems
bedeviling our own capitalist economy -- indeed Smith's arguments are
more relevant today than at any time since Smith's own age. For most
of its history, capitalism was locked in conflict with various forms
of collectivism, and above all with socialism and communism. That
conflict is for the most part over now, and what remains in the
developed world is an argument about what sort of capitalism we want.
And as Phillipson powerfully brings out, Adam Smith's capitalism is a
very particular type.

Smith, after all, did not offer up his economics in opposition to
collectivism, which did not really emerge until the subsequent
century. His adversary was mercantilism -- by which each of the
European powers set market rules that served the interests of a few
large domestic manufacturers and trading companies working closely
with the government. Mercantilism thus put economic policy in the
service of the national interest, in order to advance the nation's
trading position. Smith believed this was counterproductive. Instead,
he argued, legislators should govern the market in the interest of the
common consumer. This was his key economic insight. As he put it:


Consumption is the sole end and purpose of all production; and the
interest of the producer ought to be attended to only so far as it may
be necessary for promoting that of the consumer. The maxim is so
perfectly self-evident that it would be absurd to attempt to prove it.
But in the mercantile system, the interest of the consumer is almost
constantly sacrificed to that of the producer.
By turning the logic of mercantilist economics on its head and
establishing a market designed for the good of the common citizen,
Smith believed governments could both unleash immense productivity and
wealth and create economic institutions that encouraged discipline,
moderation, and order in an open society. This would mean drawing a
clear distinction between "pro-market" economic policy and
"pro-business" economic policy, and Smith believed there were few
threats to the moral order of a liberal society greater than the
entanglement of the government with the nation's largest producers.


That distinction has been lost in our time. In recent decades, the
federal government has too often sought to advance the nation's
economic interests by tying itself to our largest corporations. What
the left derides as crony capitalism and the right derides as state
capitalism has been the policy of Republican and Democratic
administrations alike, particularly since the economic crisis of 2008.
The Bush administration's bailouts of large Wall Street firms and the
joint Bush-Obama bailouts of the nation's largest automakers were the
epitome of such entanglement. And the Obama administration's economic
reforms -- empowering the largest health insurers over smaller
competitors in last year's health-care reform and the largest
financial companies over smaller competitors in last year's financial
regulation reform -- have taken this approach to new heights.

It was no surprise that those large insurers and financial firms
supported those reforms, even though they increased the government's
power over the companies' operations. As Smith understood, the wealthy
and powerful will always look for exemptions from the rigors of
competition. Though he was a champion of free markets, Smith was no
fan of big business. Large merchants and principals of "joint stock
companies" (or corporations), Smith wrote, are "an order of men whose
interest is never exactly the same with that of the public, who have
generally an interest to deceive and even to oppress the public, and
who accordingly have, upon many occasions, both deceived and oppressed
it." And they are more than happy to use the government as their
instrument.

As Phillipson ably shows, Smith feared the moral consequences of such
entanglement between legislators and large corporations even more than
the economic consequences. We have failed to take heed of these
consequences in our time because we have forgotten the moral
underpinnings of our economic system. Phillipson has expertly reminded
us of the moral character of our way of life, and he shows why neither
the right nor the left can truly lay claim to the father of
capitalism.

Yuval Levin is the editor of National Affairs magazine and a fellow at
the Ethics and Public Policy Center.