ADAM SMITH died 200 years ago this month. But phoenix-like, his
vision of market freedom has taken a new lease on life.
Pop culture paints its pictures in crudest tints. So to speak,
Karl Marx and Adam Smith have met in a Wagnerian duel these last
seven decades, and Adam has roundly defeated Karl.
Never mind that matters are not quite so simple. It is West
Germany's mixed economy, and not the pure capitalism advocated by
the Austrian-born economist Friedrich Hayek that has incited to envy
the footloose East Germans.
But why quibble about what will seem details to several hundred
million inhabitants of Eastern Europe?
Smith was well named Adam. He really is the founding father of
economic science. Quite apart from his being in the winning camp of
ideology, Smith's stock as an original economic theorist has risen
strongly during my lifetime in academia.
There are many bright stars in the heaven of economics. But I
say, surely the three brightest of all are these:
- Adam Smith, 1723-1790, a Scot.
- Leon Walras, 1834-1910, a Frenchman.
- John Maynard Keynes, 1883-1946, an Englishman.
I might call Smith the economists' Aristotle; Walras, our Newton;
and Keynes, our Einstein.
Smith's "Wealth of Nations" with its laissez-faire arguments was
well-timed, being published in 1776 just when America's democratic
capitalism proclaimed its independence. In Britain, the original
home of the industrial revolution, Adam Smith's fame was
Not quite so in Germany. In that yet-to-be-developed region, the
gospel of free trade was regarded as apologetics for British
capitalism, which had begun with a head start over the rest of the
There is a paradox here. You might say that it was the backward
German economy that needed most the ideology of economic
deregulation. De facto, Manchester liberalism had evolved pretty
much autonomously, so that the academic scribblers were only
catching up in their doctrines with what already existed.
Instead, however, the German reaction was a wooly Romanticism
that glorified its own lack of logic. Nationalism was extolled at
the expense of cosmopolitanism and glory was valued beyond a long
and comfortable life for the individual citizen.
Back in the summer of 1953, when Henry Kissinger was still a
junior academic, he asked me whether I would mind admitting to my
Harvard International Seminar an applicant who had been a Storm
Troop Officer. Regarding World War II as having ended in 1945, I
espoused free trade in ideas. The applicant in question turned out
to be an eager disciple of Milton Friedman. From Charybdis to
"We Germans," he said, "are tired of politics and armies. We want
to cultivate our gardens. Work hard. Make money. Let my money make
more money for me. For me, not for them and not even for us."
The ghost of Max Weber (1864-1920), who associated the rise of
capitalism with the Protestant ethic, must have smiled. …