The Founding-Fatherization of Adam Smith (with Glory M. Liu)

How did an eccentric Scottish philosopher become an icon of American free market capitalism?

He was a great thinker, a polymath, influential in his own day and now: the paradigmatic eccentric genius. In an age when it was still possible to do so, he read all the great works in what we now know as the traditional Western canon. To that canon he contributed a monster of a book called The Theory of Moral Sentiments, all about sympathy and sentimentality and ethics. Personally, he was odd. A lifelong bachelor, he lived with his mother, who was his best friend and died six years before he did. He was absent-minded and socially awkward. He walked around with his head in the clouds, talking to himself but not much engaging with others. James Boswell, who knew him, said that he kept quiet for fear of revealing too much of his knowledge and thus adversely impacting his book sales, but it’s more likely that he was simply not given to the small talk that lubricates popular conversation. Also, he was unhandsome, with a gigantic schnozz, bulging serial-killer eyes, and a weird, disorienting tic that manifested when he spoke. In short, Adam Smith was one of the biggest dorks of the 18th century.

But said dork was also the author of The Wealth of Nations. In the years since its publication in 1776—of all years!—that tome has been distilled to a few core concepts involving free markets and invisible hands and how naked, ruthless self-interest is good for the economy. And so modern-day libertarians and Wall Street sharks and Chicago economists have made this O.G. incel and apologist for sentimentality the poster boy for anything-goes, laissez-faire, all-regulations-are-bad, kill-or-be-killed capitalism. Adam Smith has been appropriated by the sort of cutthroat individuals who, in real life, would have sooner stuffed him into a locker than called him a friend.

They need him on their sideline. “Another way we can see Smith’s avatar-like nature…a mascot that everybody wants on their side, is very similar to the Founding Fathers,” says Glory M. Liu, a college fellow in social studies at Harvard University, the author of Adam Smith’s America: How a Scottish Philosopher Became an Icon of American Capitalism, and my guest on today’s PREVAIL podcast. “He gets Founding Fatherized. There’s a kind of reverence that’s associated with his identity, with what he wrote, with what he set in motion, and then people invoke that authority.”

And thus, as Liu lays out in her fascinating study, Adam Smith becomes, over the course of U.S. history, one of those dead white men perceived, rightly or wrongly, as some sort of ultimate authority—not just on economics, but on anything. He’s a heavyweight, an icon as Liu calls him, much beloved, and used by both sides of the political spectrum to form arguments. “Even Adam Smith said,” said the Reconstruction Era protectionists, just as Nancy Pelosi Democrats invoke Ronald Reagan to shoot down whatever horrible thing the GOP is up to.

We see this in historical debates about tariffs—the central economic issue for much of the 19th century. In the antebellum years, Liu tells me, “talking about tariffs was a way of talking about slavery without talking about slavery.” The South needed free trade to maximize profits on cash crops, and saw tariffs as “a tax on slavery itself,” as Liu writes in her book. “The very morality and political viability of expanding a system of political economy that depended on slavery lay at the heart of the tariff debates.” Before the Civil War, Smith’s name was often invoked by anti-tariff politicians with Southern sympathies.

After the war, this flipped, with Smith being claimed by the pro-tariff crowd. In her book, Liu describes an 1888 speech by James O’Donnell of Michigan. He was a Republican—still, at the time, the Party of Lincoln—and thus a staunch protectionist:

“We must rely upon the best market in the world, the home market, the market created by the people of our land—I repeat, the best market of the world,” he continued. This was more than a rallying cry of economic nationalism; from O’Donnell’s perspective, it was also an opportunity to delegitimize the ideas that free traders so heavily relied on. “Remember that the true saying of the great apostle of free trade, Adam Smith, who in his Wealth of Nations makes this admission, which you all overlook,” O’Donnell declared, quoting the following passage from Smith’s magnum opus:

Whatever tends to diminish in any country the number of artificers and manufacturers tends to diminish the home market, the most important of all markets….

Thus was Smith seized from the Democrats by the Republicans. He would remain in Republican hands, even as the polarity of that party shifted from left to right.

In the wake of the New Deal, with free market economics as out of fashion as white wigs, Smith’s remaining disciples found themselves clustered in Chicago. That city, and the university named for it, became, as Liu describes it, “synonymous with, first, a skepticism of socialist planning, and, later, an unapologetic free-market advocacy that belied the earlier generation’s views. As a result, what was previously a kaleidoscopic and complicated view of Smith transformed into a much more coherent—and radically different—picture.”

Adam Smith, the sensitive loner who spent so much time thinking about moral sentiment that he once found himself 15 miles away from home having no idea he’d walked so far, had been kidnapped by swashbuckling capitalist pirates like Milton Friedman and George Stigler. At a 1976 event in Glasgow to celebrate the 200-year anniversary of the publication of The Wealth of Nations, Stigler told the crowd: “I bring you greetings from Adam Smith, who is alive and well and living in Chicago!”

To the neoclassical Chicago school, Adam Smith meant pure capitalism—no regulations, no government interference of any kind, let the market sort itself out, unleash the invisible hand. This was both a misreading of Smith and a recipe for disaster, as the citizens of Chile found out first hand, when the application of Chicago school philosophies helped tank its economy under Pinochet. Just as Stalin blamed failures of Communism on it not being sufficiently pure in practice, so did the Chicago boys chalk up Chile to the market being contaminated by some force or another—something holding back the invisible hand.

What the Chicago crew could not grok is that government regulation is both necessary and good. Lack of regulation leads to corporate malfeasance and negligence: tainted meat, unsafe work conditions, slave labor, price collusion, monopoly. We don’t even need to go back to the early 20th century, or to Chile in the 1970s, to see examples of this. Lack of regulation of the crypto market—the same independence from pesky government oversight the Bitcoin bozos are forever touting—led to a “run on the bank” at FTX, Sam Bankman-Friend’s crypto exchange, after word got out that he was looting from it to cover losses at his crypto trading firm. Investors lost whatever money they could not extract, and SBF, as he’s known, saw his $11 billion personal fortune go poof in a few weeks. And Elon Musk’s disdain for regulation, which he disguises as “free speech,” has, in a month under his control, turned Twitter into a Nazi cesspool and cost the South African emerald mine scion some $100 billion, when his Tesla stock losses are factored in. Or maybe this is just the invisible hand smacking a thief and a chaos agent across the face?

As Liu recounts in her book, Adam Smith’s hallowed name has been invoked in recent years by Barack Obama, on the left, and on the right, Arthur Brooks of the American Enterprise Institute. The fact that this long-dead Scottish moral philosopher can be credibly used in such a way reveals “how we have come to depend on Smith for ways to think our way out of our current predicaments,” she writes. “We have become so confined by our hope that capitalism must survive, that we have to ‘get it right,’ that, rather than seeking out its alternatives, we insist that its lifelines lay in the body of work that Adam Smith created more than two and a half centuries ago.”

Before he died, Smith burned all of his unpublished works. Maybe the real lesson here is that if the ideas don’t work, we have to let them go.

---

LISTEN TO THE PODCAST

S4 E11:  The Founding-Fatherization of Adam Smith (with Glory M. Liu)

How did an eccentric Scottish philosopher become an icon of American free market capitalism? Greg Olear talks to Glory M. Liu of Harvard University about intellectual history, political economy, the relationship between tariffs and U.S. slavery, the Chicago school, and her new book, “Adam Smith’s America.” Plus: a new crypto currency.

Follow Glory:
https://twitter.com/miss_glory

Check out her website:
https://www.gloryliu.com/

Buy her book:
https://press.princeton.edu/books/hardcover/9780691203812/adam-smiths-america

Sponsored by BetterHelp. Get 10% off your first month at betterhelp.com/greg

REMINDER

Watch The Five 8 tonight at 5pm Pacific / 8pm Eastern.