In my ignorance I thought that when neoliberal economists used the theories by Adam Smith to do what they did, at least they did it knowing what they were doing and with a certain coherence. I thought that Smith defended what the neoliberals did. What I should have guessed, seeing the lack of heart and soul of neoliberalism, is that Smith, like the rest of us, had been used.
Smith considered himself above all a moral philosopher. The monopoly system that he talked about wasn’t the democracy that we have now, but an absolute monarchy. He defended individual freedom in a society that was terribly structured, where social class was clearly defined and professions passed from fathers to sons without any possibility of personal decision. Smith criticised the morals of the time, he was interested in the human ability to form moral judgements despite the tendency to defend one’s personal interest. He proposed a theory of sympathy, in which the observation of others makes us conscious of ourselves and of our ethical behaviour.
The social benefit derived from a market economy only exists, according to Smith, if the market is really free. Smith warned against the accumulation of power, which was, in his opinion, the main enemy of personal freedom.
What would Smith have thought of the big corporations that monopolise and manipulate the markets in their favour and against people? Aren’t they very similar to the absolute monarch who thinks he owns his subjects?
According to Smith, the market is made up of people who act in their own interest to produce the best possible value. And in many cases this is a very useful social mechanism. But Smith realises that there are many more values apart from utility that cannot be treated in the market. Freedom of expression is not a utility, nor is the ability to be able to listen to music when one comes back home, neither are aesthetic values a utility. A society in which the market is dominant neglects values that are important. That is why Smith limits the role of the market in society.
Smith was much more critical and sceptical of the market than I thought. He talks about capitalists that conspire against the general interest and that are always trying to con consumers. And yet, despite that, never have a problem asking the state for help to defend their interests. But Smith didn’t believe much in the state either. Mainly because the democracy in Great Britain in the 18th century left a lot to be desired. Smith thought that in practice, the role of the state was to protect private property, to protect the ones that have it against the ones that don’t, that is, rich against poor.
Neoliberalism has interpreted his theories as saying that a free market requires a diminished state. But Smith says we can’t get rid of the state, and that for a society to work it needs well working and honest institutions. For Smith freedom and the state are not in opposition, but rather the accumulation of power is in opposition of freedom.
What is important for Smith is the Enlightenment’s central belief that people should be able to choose freely. In Smith’s market the agents are free, nobody has power over others. The idea behind the invisible hand is the idea that there isn’t a state or power that decides what is produced. People act rationally, they buy and sell, they work at what makes them money but also in what they like. Smith urged people to have a good life. And he suffered when he saw that they didn’t.
Smith’s ‘general interest’ (another one of his manipulated expressions), doesn’t refer to a selfish act, on the contrary, it refers to the use of conscience. To the ability we have to put oneself in somebody else’s shoes. According to Smith, if we think rationally and listen to our conscience, we act morally.
What would he have thought about financial speculation? Smith often talked about productive work and underlined the importance of manual work. It is not sure he would have considered financial speculation as a productive activity.
Smith wasn’t interested in how things were, but in how they should be. The purpose of his work was to find an ethical way to control individualism through decency. Smith attacked greed and defended moderation, decency and justice. He would have worried about the current levels of greed and accumulation of power. Deep down he was an educator, he wanted people to understand. Today we can learn from his theories that the economy should never come before ethics.
Artwork that I have done inspired by the economic crisis: