Blog Outrages!

Times Literary Supplement  30 October 2004

‘What Adam Smith never said’

Sir – Colin Kidd’s review of capital of the Mind: How Edinburgh changed the world by John Buchan* (October 24) notes Buchan’s “fine turn of phrase” in his reference to “Adam Smith’s apparent provision of modern capitalism with an ‘invisible moral brush and dustpan’ “.  This is indeed a fine phrase but one more apparent than real.  It follows a long line of attribution to Smith of thing he never said, ideas he never promoted and words he never used.

‘Capitalism’, the word, was never uttered by Smith or even known to him.  Smith wrote in the third quarter of the eighteenth century about a “commercial fourth stage of society” that was closer to the street markets of the ancient world than what we recognise today as capitalism. 

His sour suspicions of “merchants and manufacturers” never relaxed into acquiescence to their in-built monopolising tendencies, aided by gullible legislators fooled by their rhetoric, to which he consistently advised the closest examination of all and every proposal from them to narrow their markets.  Smith knew nothing of the capitalist markets of the nineteenth and twentieth centuries, he did not foresee the industrial revolution, an epoch-changing process only recognised with the benefit of hindsight by observers fifty or more years after Smith’s death.  Anything Smith wrote in Wealth of Nations (1776) cannot be sensibly described as providing modern capitalism with anything, not even “fine phrases|”.  He wrote about a differently world entirely.

He never used the French economists’ word “laissez-faire” because he did not agree with its premises that anybody should be left alone to do whatever he wanted irrespective of the effect on society, as seen in his support for the protectionist Navigation Acts.   He did not believe that markets could solve everything (education?) and he saw a role for the State to undertaken major projects, which no individual could fund privately.  The vast capitals required for the capitalist (fifth?) stage were a feature of the nineteenth not the eighteenth century.  It is not accidental that Smith decried that ubiquitous instrument of capitalism, the “joint stock company”, which he saw as unworkable in his world of the eighteenth century, and he had no idea of just how important shareholder capital was to become as a means of marshalling the vast capitals required for an entirely different economy from the one he reported on in the Wealth of Nations.

The attributions of these (and other) capitalist associations to Smith were nineteenth- and twentieth-century inventions.  His legacy was purloined, selectively pruned, and given a spurious authority, creating the myth of Adam Smith as the “high priest of capitalism”, “the prophet of laissez-faire”, a “pioneer of liberal capitalism, or even a provider of “modern capitalism with an ‘invisible moral brush and pan’ “.

Distinguished historians such as Colin Kidd should know this.

Gavin Kennedy

Edinburgh Business School

[*] I wrote this letter soon after reading Colin Kidd’s Times Literary Supplement review and before I had read John Buchan’s book, Capital of the Mind: How Edinburgh changed the world, which arrived a week later. I was mortified to see that I had made an inaccurate aside about John Buchan’s book, the subject of Colin Kidd’s review.    John Buchan’s book presented a picture of Adam Smith with which I wholly agree. 

For my error an angry John Buchan rightly chastised me for implying that his book should be criticised by association with the misrepresentations of Smith complained of in my letter and before reading it.  He complained of my ‘scholarly inexctitude’, so I have deleted the offending sentence.

This is a salutary warning to only critique a book review after you have read the book and never before, and you should separate criticism of the reviewer from the author of the book.  Apologies are due once again to John Buchan.  Colin Kidd has not commented.