A Longer Look at... Adam Smith. Not a capitalist?
A collection of stuff looking at Adam Smith's infamous phrase 'by an invisible hand', to consider what he meant by that and when he used the phrase:
“led by an invisible hand to promote an end which was no part of his intention.”
-The Wealth of Nations IV.ii.9: 456)
Section of the book in which the context is given:
"As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it." - The Wealth of Nations (1776) Bk 3 Chapter II, p. 488-489.
* Let's bring our old pal, Noam Chomsky, in here. He draws upon points by Adam Smith to criticise capitalist work place hierarchy and 'the dumbing down' affect on us :
"If by freedom we mean self-government, then it is clear that being subjected to hierarchy in the workplace subverts our abilities to think and judge for ourselves. Like any skill, critical analysis and independent thought have to be practised continually in order to remain at their full potential. So a workplace environment with power structures undermines these abilities. This was recognised by Adam Smith who argued that the "understandings of the greater part of men are necessarily formed by their ordinary employments." That being so, "the man whose life is spent in performing a few simple operations, of which the effects too are, perhaps, always the same, or nearly the same, has no occasion to extend his understanding . . . and generally becomes as stupid and ignorant as it is possible for a human creature to be . . . But in every improved and civilised society this is the state into which the labouring poor, that is the great body of the people, must necessarily fall, unless government takes pains to prevent it."
[quoted by Noam Chomsky in his book Year 501, p. 18]
A similar point about capitalist work place hierarchy and it's negative affect on our psychological abilities:
"Smith's argument (usually ignored by those who claim to follow his ideas) is backed up by extensive evidence. Different types of authority structures and different technologies have different effects on those who work within them. Carole Pateman notes that the evidence suggests that "[o]nly certain work situations were found to be conducive to the development of the psychological characteristics" suitable for freedom, such as "the feelings of personal confidence and efficacy that underlay the sense of political efficacy." [Carole Pateman, Participation and Democratic Theory, p. 51]
"She quotes one expert who argues that within capitalist companies based upon a highly rationalised work environment and extensive division of labour, the worker has no control over the pace or technique of his work, no room to exercise skill or leadership and so they "have practically no opportunity to solve problems and contribute their own ideas." The worker, according to a psychological study, is "resigned to his lot . . . more dependent than independent . . . he lacks confidence in himself . . . he is humble . . . the most prevalent feeling states . . . seem to be fear and anxiety." - quoted by Pateman, Op. Cit., p. 51 and p. 52]
Most of the above info is from the section
'1.4.2 Why Do anarchists desire to abolish work?' of this page:
http://anarchism.pageabode.com/afaq/secI4.html
* Here's a quote from Smith that Chomsky often draws on. Hardly the words of some supporting capitalism:
“All for ourselves and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.”
- The Wealth of Nations Bk 3 Chpt 04 p. 448.
And a quote from Smith that seems to go along with the idea that society makes class differences and inequality:
"The difference between the most dissimilar characters, between a philosopher and a common street porter, for example, seems to arise not so much from nature, as from habit, custom, and education." - The Wealth of Nations Chapter II, p. 17.
* And now a long section from a blog by an expert on Adam Smith, looking at Chomsky's left wing take on our bonnie lad from Fife:
"Chomsky errs (unintentionally, I am sure) in consequence from his too hasty read because he misses Smith’s emphasis on the reason why they do so (mentioned several times, in fact), namely and specifically– their feelings for the “insecurity” of their capital once it is out of their sight….
Hence, neoclassical theorists with their fantasies of “invisible hands” of markets, supply and demand, maximising “utility” functions, and so on are disingenuous. They clutch a flimsy straw and manufacture a mental image to explain the wonders of markets - which Smith did in Books I and II of Wealth Of Nations without mentioning the IH metaphor …
Except, these imaginary inventions of modern, neoclassical, economics, had nothing to do with Adam Smith and his use of the IH metaphor, nor of the invented simile that Noam Chomsky brings into being when he undermined in his half-right version of Smith’s use of “led by an invisible hand”, by adding the wholly invented words “as if” to Smith’s own pristine words, “led by to invisible hand”, thereby making it a simile.
Now, we can be sure that Chomsky knows the difference between a simile and a metaphor (after all he is highly distinguished linguist)…
The object of “an invisible hand” in Moral Sentiments was the absolute necessity, so obvious that it is invisible (cannot be seen by others) – that is, not thought about by the “unfeeling landlord” – yet still operates by leading him to distribute basic necessities to his slaves, serfs, peasants, and etc., form the mutual dependence on them (no food, no work) and their mutual dependence on him (no work, no food). In consequence, his dependents survived and procreated, and early agricultural society continued, with interruptions to the initiation of the “Commercial Age” with the Fall of Rome in the 5th century, and emerged again, gradually, after its reconstitution in the rule of War Lords, and then Feudal Lords, a thousand years later.
The object of “an invisible hand” in Wealth Of Nations was the “concern of some merchants for their capital’s security”, which, invisible to others operates in their heads, and leads them to invest in “domestick industry”. In consequence, domestic GDP grew and commercial society continued."
http://adamsmithslostlegacy.blogspot.jp/2011/08/noam-chomsky-almost-gets-adam-smith-on.html
* And another long section from the same source:
"I am pleased – and surprised – to say that Noam Chomsky has got Adam Smith’s use of the invisible hand metaphor right (almost). From merely repeating the modern invention of the myth of the “invisible hand”, as attributed to Adam Smith by modern economists, following Paul Samuelson (1948) and an oral tradition among some economists (A.C. Pigou) at Cambridge University, UK, and, a later, George Stigler, et la, Chicago (USA), namely that Adam Smith supposedly said that selfish motives led to the public good and equilibrium (he didn’t), Chomsky has correctly identified that Smith supposed that “the merchants and manufacturers in England might decide to do their business abroad” (many of them did).
This is a mighty step forwards in re-discovering Adam Smith’s legacy and I congratulate Noam Chomsky for so doing. It is based on Chomsky actually reading of what Adam Smith wrote in Book IV, Chapter 2, paragraphs 1-9 of Wealth Of Nations, and not just a couple of sentences in paragraph 9, as Lost Legacy has been banging on about (almost to little avail) each week since 2005. ..
Smith’s use of the IH metaphor was not a new theory, a new concept, or a new paradigm, nor a discovery of the ‘hand of God’. It was not a game changer, as they say today. It was the statement of a notable fact of life….
Smith’s point was about some, but not all, merchants considering exporting capital of foreign countries and the colonies in America who were put off by the risks implicit and actual in the “foreign trade of consumption” (of course, many weren’t). Among these risks are those associated with commercial trust in dealings with distant traders in foreign countries, also a real problem when trading locally, but a relatively lesser problem in the home-trade with traders he could meet, with known reputations, and proven creditworthiness.
“he can know better the character and situation of the persons whom he trusts, and if he should happen to be deceived, he knows better the laws of the country from which he must seek redress” (WN IV.ii.6: 454).
Smith use of the IH metaphor referred to specific domestic and manufacturers” who were risk averse sufficient to prefer to invest in the “domestick industry” (identified twice) and Smith makes it clear that in so doing he prefers “domestick to that of foreign industry”. This introduced his use of the IH metaphor: “led by an invisible hand to promote and end which was no part of his intention.” (WN IV.ii.9: 456). In short, the ‘invisible hand” was a metaphor for the insecurity of their capital, which by investing locally in “domestick industry” instead, they added to “domestick revenue and employment” (i.e., the whole is the sum of its parts; so every capital invested locally adds to what we now call GDP). [Note: there was no "as if by an invisible hand" mentioned by Smith.]"
http://adamsmithslostlegacy.blogspot.jp/2011/11/welcome-surprise-noam-chomsky.html
* A closing point by myself:
One small, but annoying point for a Scotsman like me, is that Chomsky (who I admire and have worked with on a book called PARECOMIC about participatory economics) almost always refers to the UK as just 'England'. An odd habit that most Americans have, but one that i would have thought the very erudite Chomsky would easily avoid. Since Adam Smith was a Scot and Scotland had already been in a political union with England for 16 years before Smith was born it is factually correct to say that Smith was referring to the economy of Britain/the United Kingdom, and to the British in general.
This is from his otherwise brilliant discussions on Adam Smith, within 2 paragraphs right next to each other he says:
"He was talking about England and India. He bitterly condemned the British experiments they were carrying out which were devastating India...
in England, which is what he’s discussing…the principal architects of policy are the “merchants and manufacturers,” and they make certain that their own interests are, in his words, “most peculiarly attended to,” no matter what the effect on others, including the people of England who, he argued, suffered from their policies….”
Here he freely mixes up ‘England’ and ‘British’ as if it was the same thing, interchangeable terms. and specifically says that Adam Smith thought only about the affects of capitalism on the people of England. Sadly, Chomsky has done this 1000s of times. So easy to just say ‘UK’ instead, and be right every time. so its odd that someone so smart has not noticed this bad habit.
As i say, otherwise Chomsky is fantastic - a treasure trove of info, clear, well made arguments and an impressive 60 year commitment to left wing efforts that is probably without equal. Wit a lad!
Below is a 3 page summary of the life of Adam Smith that I made with Neil Cameron