A review of Glory M. Liu’s “Adam Smith’s America”
Branko Milanović is an economist specialised in development and inequality. His newest book is “Capitalism, Alone: The Future of the System That Rules the World”
This article is cross-posted from Branko’s Substack blog
This is an excellent book. The objective of Glory Liu is to describe how the reception of Adam Smith in America has changed over the past two hundred years, and, using Adam Smith to some extent as a foil, to describe the changes in the intellectual climate and even in the political economy over that period. That Adam Smith is an ideal person, in whose “reception” and in whose discussion, will be reflected broader intellectual trends is obvious. Smith’s work is well known, respected by his admirers and detractors, and covers vast areas going from moral philosophy and jurisprudence to political economy and even astronomy. It is thus an ideal object to refract political and ideological trends.
One could divide the reception of Smith in America into three eras. The first that lasted from Independence until the early 20th century was dominated by the discussion of free trade vs. protectionism in the Wealth of Nations. The second, from the early to the mid 20th century by the debate on the roles played in Smith’s overall work by sympathy vs. self-interest. The third, which continues, was dominated by the disagreement over the roles of the price system (free market) and government. As these antinomies illustrate, the broadness of Smith’s oeuvre allowed a sensible discussion of all the themes, and made each of the six positions defensible.
In fact, it could be said that whenever there was an important economic issue in America on which two sides were formed, Smith always played an important part in debate because each side could, some with justification, bring Smith’s views to their support. This may be due to some internal inconsistencies in Smith (especially if one includes The Theory of Moral Sentiments and Lectures on Jurisprudence too, and not only The Wealth of Nations), but the more important reason is that Smith’s work always had a pragmatic and eclectic character. Absence of dogmatism allowed him to take nuanced positions and then these different nuances provided the matériel with which the two sides attacked each other. For example, even in the case of free trade that Smith, according to all readings, strongly championed, he nevertheless extolled the Act of Navigation. Why? “As defence, however, is of much more importance than opulence, the act of navigation is, perhaps, the wisest of all the commercial regulations of England” (WoN, Ch 2).
Liu fails, in my opinion, to acknowledge sufficiently that there never was nor there ever will be a “real” or “true” Smith: our readings of Smith will always be colored by what is the issue at hand, by our interests, location and time (as the book indeed shows). Moreover, the way that people come to Smith, precisely because his work is so vast and he influenced many, are diverse. I came to Smith through Marx. That particular channel played no role in the American intellectual discourse but illustrates the spread of Smith’s influence. My original Smith was the one of the stadial theory of development, labor theory of value, definition of the three key classes in capitalism, their conflict over the distribution of the net product, and the dumbing effect of the division of labor. Do these themes remind you of somebody else? They do. Is this the entire Smith? No. But this is nevertheless the Smith that was, at one point of time and location, of interest.
Similarly, the Smith argued about in the early decades of the US Republic was the one of free trade. Although there was a ritualistic invocation of Smith’s name by many Founding Fathers (there are in the book the quotes from Jefferson, Hamilton, Adams etc.), his policy prescriptions were ignored. The young Republic, under Hamilton’s impulse, went for protectionism. As Liu shows, it was Friedrich List, whose ideas developed while he lived in the United States, that was much more influential. Even in terms of textbooks, Smith’s Wealth of Nations was eclipsed by the translation of Jean Baptiste Say’s Treatise (first published in French in 1803; American translation in 1821).
There are ironies aplenty in the use of Smith during that period. The strongest supporters of free trade were, as is well known, the Southerners. They liked Smith’s stance on free trade, but disliked his condemnation of slavery. The very opposite was true for Northern intellectuals and industrialists. Moreover, once we take free trade/protections, and slavery/abolitionism as political positions, we have four quadrants that will be filled by various people. Some, in the North, might agree on abolitionism, but disagree on trade. As we see here clearly, every side took from Smith what it found convenient, and questioned, or even simply ignored what it did not like.
This becomes very clear in chapters 5 and 6 that are in my opinion the best in the book, and that deal with the first and second Chicago school. The Chicago school disregarded entirely Smith’s political philosophy, considered the TMS an inferior work and decided the ignore the whole second era of the discussion of Smith in America that revolved around the contrast between the advocacy of sympathy in the TMS and an equally strong advocacy of self-interest in the WoN. The Chicago school took only the economic part. The older Chicago school (Frank Knight and Jacob Viner), more sensibly saw Smith not only as a partisan of laissez-faire but also ready to accept a limited role for government: “economics must be political economy” as the chapter title says, quoting Frank Knight.
The second, and to us better known and influential, Chicago school (George Stigler and Milton Friedman) continued with the reductionism of Smith. Not only was he shorn of moral philosophy, his work was now shorn of political economy as well. It became price theory. The emphasis turned entirely to the informational role of prices, the invisible hand, and (the ”granite” of) self-interest. Liu rightly emphasizes a very narrow and reductionist view of Smith taken by the Chicago school. But going back to my previous question: was this wrong? The answer is “No”. Was this the entire Smith? The answer again is “No”. Chicago’s “filleting” of Smith may be disagreed with, but Chicago did not invent a new Smith. It took key elements that were there, jettisoned the rest, and created a Smith that it needed for its purposes. I do not think that it is an illegitimate approach—simply because every ideological movement, when it needs to “cloth” itself in earlier writers and to appropriate some of their aura, must do it.
All three elements of the Chicago school mentioned in the previous paragraph are extremely important and are present in Smith. But many others, perhaps equally important, are present too, and they can be, no less legitimately, taken and defended. The (slight) weakness of the book is, as I mentioned, that it does not fully accept this point of view, and does not realize that every description of reception of an influential author will always be a story of intellectual development in that location and place. The mirage of “recapturing” the real Adam Smith does float in the book, especially in the beginning and the end.
The most recent (post-Chicago) period is dominated by Irving Kristol and Gertrude Himmelfarb’s “reintegration” of Smith, where TMS (that was earlier supposed to support a more benign, even socialistic, interpretation of Smith) has now been repurposed for “bourgeois” virtues. The conservative reinterpretation reunified the “two Smiths” but again at a cost of significant simplification, and possibly misinterpretation. The discussion in the last Chapter (“Turning Smith Back on the Present”) includes also a discussion of some, in my opinion, silly issues (namely whether Smith really thought that the metaphor of the invisible hand was important or not), and strangely does not mention Amartya Sen’s important contribution to a different reading of the TMS (and even its argued superiority to the contractarian theories like Rawls’s).
Regarding the style, I would have one small complaint. Liu does not always wear her formidable scholarship lightly: there is, at times, a surfeit of quotations that are only tenuously related to the subject-matter. Finally, the reader, or at least this reader, may get annoyed by the excessive use of “[sic]”. There is no need to “sic” the differences in spelling between the English of Smith’s time and ours. The use of “sic” often tends to convey the feeling of the author’s superiority both with respect to the author he or she is citing, and with respect to the readers (who may not be, in the author’s view, sufficiently aware of the problem). It must therefore be used sparingly.