Adam Smith and his vision of Capitalism

by Mary

What would Adam Smith say about the Republican version of capitalism and their fetish for "job creators"? An interesting answer to that question has just been published at The Business and Society Review by John Paul Rollert with a great blog post adapted from the article at Rortybomb.

He notes that Adam Smith's essential players were the just plain folks, and not those at the top. Smith's observation was that humans are dependent on others for their survival and well-being. And in an advanced economy, people can negotiate with each other to get their needs filled.

Thankfully, says Smith, human beings have a natural propensity to negotiate or, as he describes it, to truck, barter, and exchange. “Give me that which I want, and you shall have this which you want” is not only the manner in which we acquire most things in this world, but it is the building block for an economically advanced society. Thus, Smith declares in his most famous passage:

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.

People who read this passage and nothing else of Smith tend to regard it as an affirmation of the virtue and efficacy of selfishness over and against the relative impotence of altruism. But that isn’t its significance for Smith. Yes, our personal interests act as a sharper spur to action than the interests of others, but the same may be said for the cocker spaniel. The difference is not that we have selfish interests, but that only by understanding the interests of others are we able to fulfill our own.

Indeed, the passage attests to the human capacity for empathy, the focus of Smith’s other great work, The Theory of Moral Sentiments. It is because of our natural tendency to stand in the shoes of others and see the world through their eyes that we can appeal to their interests. The commercial effect of this practice is that we individually learn how to make the kinds of exchanges that, in the aggregate, lead to the wealth of a nation.

So rather than preaching that greed is good which is the mantra of Republicans, he was providing a road map of how to construct a human society that worked for all the members and not just some. Empathy and shared success are the tools that make a society work.

The road we are on with the misguided conservative economic philosophy of extreme wealth for a few and serfdom for the rest will never provide the wealth that truly would be possible under the terms of Adam Smith.

Do read the whole thing.