Adam Smith's Higher Vision of Capitalism

By Alvey, James E. | Journal of Economic Issues, June 1998 | Go to article overview
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Adam Smith's Higher Vision of Capitalism

Alvey, James E., Journal of Economic Issues

Adam Smith had a vision of capitalism that was much more elevated than that of most neoclassical economists. His ideal society would satisfy the ends of human nature as he identified them, and it is from this standard that Smith criticized defective societies, praised good ones, and propounded a detailed agenda of reform. His views on human flourishing were also much richer than is often thought to be the case.

Smith said that there are five explicit ends of nature (self-preservation, procreation of the species, order, happiness, and perfection of the species) [Smith 1976a, 77, 166, 168](1) and an implicit goal of freedom. According to Smith, the satisfaction of the ends of nature could only occur in a particular type of prosperous, modern, free-trade commercial society. But I will argue that Smith's six ends together constitute a "thick"(2) notion of the human good, one that is not bourgeois.

What role does government play in the achievement of the ends of nature? In the Wealth of Nations (WN), Smith said that "according to the system of natural liberty, the sovereign has only three duties to attend to," namely, external security, internal security (law and law enforcement), and "certain public works and certain public institutions" [Smith 1976b, 687-8]. Apart from these three duties, there is also a little-noticed fourth duty:

The laws of all civilized nations . . . impose upon men many . . . duties of beneficence. The civil magistrate is entrusted with the power . . . of promoting the prosperity of the commonwealth, by establishing good discipline, and by discouraging every sort of vice and impropriety; he may prescribe rules, therefore, which not only prohibit mutual injuries among fellow-citizens, but command mutual good offices to a certain degree [Smith 1976a, 81; emphasis added].

This very broad duty, discussed in Smith's Theory of Moral Sentiments (TMS), is called the TMS duty hereafter.

No mention is made of this latter duty by the many neoclassical economists who see Smith as an intellectual forebear. Perhaps because Smith referred to "the system of natural liberty," neoclassical economists have often interpreted Smith to have been a proponent of negative liberty or an advocate of an "area within which man can act unobstructed by others" [Berlin 1969, quoted in Justman 1993, 24]. Clearly, the TMS duty would not be required under a system aimed at maximizing negative liberty. Smith's ideal is much richer than this.

Preservation, Procreation, Order, and Freedom

Let us turn to fleshing out the nature of Smith's ideal. Obviously everyone must be provided with the means for bare preservation. Smith argued that bare preservation is not sufficient: comfortable preservation should be provided not only to allow for the procreation and nurturing of a considerable family, but for the comforts of life and happiness. The goal is comfortable preservation, as is evident in the/MS duty that the government must strive to promote "the prosperity of the commonwealth" [Smith 1976a, 81]. This goal of comfortable preservation is also one means to happiness [Smith 1976a, 297; 1976b, 99].

While government has little role to play directly in the provision of subsistence [Smith 1976b, 524-43 passim], according to Smith, it has a great role to play in the provision of the end of order. Of the three WN duties of government, the first two are related to order. The first, and presumably most important, duty of government is external security [Smith 1976b, 687]. The survival of society requires military defence. Smith argued that in commercial society, protected by a standing army, the concern for "national power" is solved by maximizing economic growth [see Hollander 1973, 310]. In the modern era, generally, defense, individual welfare, national wealth, and the country's power go together [Smith 1976b, 48, 372].

In addition, government has another role to play in the provision of order.

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