Adam Smith on the Nature and Causes of Poverty

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Adam Smith has long been identified with the idea - indeed the ideology - of a dynamic, wealth-creating capitalism. In his Inquiry into the Nature and Causes of the Wealth of Nations (1776), he draws a compelling picture of the market economy expanding in a way that distributes the benefits of "opulence" through all the ranks of society.(1) Often admired, and too often stereotyped, as the great visionary of capitalist abundance, Smith has been much less appreciated for his commentary on poverty. We can account for this, in part, by the wide scattering of his remarks on the condition, character, and prospects of the poor throughout his writings and lectures, making a comprehensive view of his thought on poverty difficult, though not impossible, to achieve. More to the point, within a generation after the publication of the Wealth of Nations the emerging science of political economy had acquired an authoritative new treatment of poverty in Malthus's Essay on Population (1798). Earlier analyses of poverty by Smith and others effectively dropped from view. The purpose of this paper is to reconstruct the Smithian idea of poverty in its philosophical, moral, economic, and policy dimensions.

In his Theory of Moral Sentiments (1759, and cited hereafter as TMS), Smith nearly defined away the problem of poverty by taking a skeptical, antimaterialist position toward wealth. "What can be added," he asked rhetorically, "to the happiness of the man who is in health, who is out of debt, and has a clear conscience? To one in this situation, all accessions of fortune may properly be said to be superfluous" (TMS: 45). A passive indifference to worldly fortune was one of the qualities admired by Smith in the ancient Stoics: "I accept, said a stoical philosopher, with equal joy and satisfaction, whatever fortune can befall me. Riches or poverty, pleasure or pain, health or sickness, all is alike."(2) Nor is it only in the mouths of Stoic philosophers that one finds, in the Moral Sentiments, expressions of the fatuousness of material pursuits. In a well-known passage Smith states:

Wealth and greatness are mere trinkets of frivolous utility, no more adapted for procuring ease of body or tranquillity of mind than the tweezer-cases of the lover of toys; and like them too, more troublesome to the person who caries them about with him than all the advantages they can afford him are commodious. (TMS: 181)

Smith goes on to declare, echoing a phrase from Mandeville's notorious Fable of the Bees (1714), "Power and riches appear then to be, what they are, enormous and operose machines contrived to produce a few trifling conveniences to the body" (TMS: 182-183).

For all his philosophic minimizing of the value of material goods, Smith accorded them a key role in the realm of social interaction. As social beings, men take a keen interest in their economic well-being; social status depends in large part on relative economic position. Honor and "approbation" are extended to the wealthy and powerful, with whose joys (Smith contends) we easily sympathize, while the poor suffer disapprobation and even contempt because of our lesser capacity to sympathize with misfortune. It is our "regard to the sentiments of mankind," then, that causes us to "pursue riches and avoid poverty," and causes the poor, in shame and mortification, to try to conceal their poverty (TMS: 50).

A notable feature of Smith's treatment of poverty in the Moral Sentiments was the characterizing of the distress of the poor in terms of psychic pain. Real hardship, the deprivation of goods per se, hardly entered the picture.(3) What oppressed a man in poverty was not a lack of physical comfort or health but a sense of social isolation and inferiority:

The poor man . . . is ashamed of his poverty. He feels that it either places him out of the sight of mankind, or, that if they take any notice of him, they have, however, scarce any fellow-feeling with the misery and distress which he suffers. …