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Investor's Business Daily , 30 June 2005

Father Of The Free Market

Donna Howell

The word "capitalism" rarely evokes the image of a kindly soul who
puts others before himself.

Yet that's exactly the route taken by Adam Smith -- the man known as
the father of capitalism and economics. And it was his compassion and
tact that helped win people over to his point of view.

"To restrain our selfish, and to indulge our benevolent affections,
constitutes the perfection of human nature," wrote Smith in his 1759
book "The Theory of Moral Sentiments."

"If you think he was selfish, greedy and wealth-chasing, he wasn't at
all," said Gavin Kennedy, author of the new book "Adam Smith's Lost
Legacy." "He was in favor of freedom to do what you want with your
own capital."

In Smith's environs, the 18th-century British Isles and Europe,
workers had little ability to start new endeavors. Their meager
wages, Smith observed, barely sustained them and could hardly
stimulate commerce.

If they could improve their lot, Smith reasoned, that could improve
the nation's.

"You had highly restricted world trade and huge government monopolies
on things (such as) salt," said Eamonn Butler, director of the Adam
Smith Institute in London. "Workmen wouldn't travel from one town to
the next. You had to be licensed. But Smith said that doesn't really
work and you should get rid of these regulations and mercantilism and
allow free trade."

Change In Plans

Economics wasn't Smith's first calling. He trained for the ministry.
He veered from that path to become a philosopher after, as an Oxford
University student, he was caught reading a book considered heresy.
It was David Hume's "A Treatise of Human Nature," which noted: "There
is nothing which is not the subject of debate, and in which men of
learning are not of contrary opinions."

"They seized the book and punished him and he fell into a terrible
depression," said Jonathan Wight, an economics professor at
Virginia's University of Richmond and author of the novel "Saving
Adam Smith." "He realized the Church wasn't for him because it didn't
allow him free thought. Smith believed God gave him a mind."

Smith (1723-90) determined to follow his conscience and speak out
about what he considered most important. As he did, doors opened,
people listened and he prospered. There are indications too that
Smith was adept at navigating political life to get his messages
across.

He was born in Kirkcaldy, Scotland. But by then his father, a customs
comptroller, had died. His devout mother, a well-off landowner,
raised Adam alone.

"He was stolen by gypsies at age 3, but his uncle rounded up a posse
and got him back," Butler said. "Nothing very interesting happened to
him after this."

Unless one counts travels through Europe, pioneering dangerous ideas
and intellectual adventures.

Smith was a sickly child, but very studious, Kennedy says. Enamored
of any knowledge, he quickly learned Greek and Latin in a one-room
schoolhouse. He then went on to the University of Glasgow at around
the usual age, 14.

The Scottish Enlightenment was under way, with Glasgow and Smith's
professor, Francis Hutcheson, at its center. Smith drew inspiration
from Hutcheson's views about the human capacity for benevolence. And
Hutcheson was impressed enough with Smith to help him get a
scholarship to Oxford University.

Smith rode the long distance to Oxford on horseback and stayed six
years despite not liking the place.

Being Scottish, Smith was shunned as an outsider. He endured fatigue
and fought scurvy and shaky hands with a remedy of the day, tar
water. But he rallied through to get a degree and planned to go into
religious work -- until the blowup over his interest in Hume's
philosophy.

Though it took courage, Smith decided to abandon a future with the
church and pursue philosophy instead. That presented a dubious career
path, but allowed freedom of thought.

"He returned to Scotland with what friends reported as no prospects
and a very uncertain future," Kennedy said.

Total Focus

Committed to see his decision through, Smith moved in with his mother
and began giving local lectures on literature and moral philosophy.
Gradually he attracted fans.

One fan, the politically powerful Duke of Argyll, helped Smith land
an appointment as a logic professor at the University of Glasgow in
1751. Smith soon moved on to a professorship in moral philosophy at
the school.

He trained his total focus on intellectual debate.

Eight years into his professorship, Smith published his first book,
"The Theory of Moral Sentiments." In it he considered what motivates
man, his sympathy for others, sense of duty, the character of virtue
and other topics.

In one passage, he said: "What can be added 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; and if he is much elevated upon account of
them, it must be the effect of the most frivolous levity."

Smith created opportunities by writing the book. His growing
reputation got him a job tutoring the young Duke of Buccleuch on
travels through Europe.

"He met lots of interesting people and saw all sorts of things there
that didn't happen in Britain, and it started his mind turning to the
subject of economics, which wasn't even really a subject then,"
Butler said. "He looked at markets and trade and money and that sort
of thing. As he saw Europe, he saw that the wealth of a nation was
not the gold in its vault but the wealth of its people. He thought to
unleash that what was needed was to scale back government
intervention."

The connections Smith made during his travels included eminent
literary and philosophical figures who could be influential in
furthering his views. He carefully maintained these connections,
aware that he one day might need them.

Smith knew tact would help sway listeners to his viewpoint. So he
phrased lectures carefully to say what he needed to without offending
zealots.

"He was very, very meticulous in how to influence the university, the
government, the ministers and so on, never to offend them. Not that
he was obsequious," Kennedy said. "His manner was extremely polite.
He believed the prudent man was the ideal man."

Upon return to Kirkcaldy after his European tour, an inspired Smith
launched into a several-year effort, writing "An Inquiry Into the
Nature and Causes of the Wealth of Nations." Nearly 700 pages in
paperback today, the book homes in on Smith's view of what makes
economies tick.

In one section he observed: "Among the Tartars, as among all other
nations of shepherds, who are generally ignorant of the use of money,
cattle are the instruments of commerce and measures of value. Wealth,
therefore, according to them, consisted in cattle, as according to
the Spaniards it consisted in gold and silver. Of the two, the Tartar
notion, perhaps, was nearest to the truth."

Smith made a decent living as a professor and was well-paid for
tutoring. After he finished "The Wealth of Nations" in 1776 he became
a commissioner of customs in Scotland. Between a pension and other
money, Smith led a financially comfortable life.

Still, he put others before him to the end. "When he died he had no
money," Kennedy said. "He'd given it all away."



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