The Competitiveness of Nations in a Global Knowledge-Based Economy

A NEW VISION OF LIBERTY

By Alan Ryan

The New York Review of Books July 5, 2001, pp. 42-45

 

Economic Sentiments:

Adam Smith, Condorcet, and the Enlightenment

 By Emma Rothschild., Harvard University Press, 2001, 353 pp., $45.00

 

1.

One of the many virtues of Economic Sentiments is that it provides exactly what its subtitle says: an investigation of “Adam Smith, Condorcet, and the Enlightenment.”  Another, even more attractive than an unusual degree of truth in advertising, is that it casts an extraordinarily revealing light on many other writers and many other moments in history.  It is a book that does with great success two things that are usually thought to be wholly antithetical; certainly they are rarely attempted by the same writer.  On the one hand, it takes us back into the last third of the eighteenth century, and shows us what economic thinking was like before it became modern economic theory; on the other, it complicates the image of the Enlightenment in ways that are intended to make the political discussions of the twenty-first century more sophisticated, nuanced, and self-conscious than they often are.

The design of the book is artless; its implementation is anything but. In the demonology of the critics of the Enlightenment, Smith and Condorcet are blamed for two of its most frequently reviled outcomes.  On the one hand, Adam Smith, particularly in his Wealth of Nations, is seen as the theorist of the society held together by nothing stronger than the callous cash nexus of Marxian folklore, an alienated world where human relationships are reduced to self-interested bargaining and the worth of every man is the price at which his services can be bought.  On the other, the Marquis de Condorcet, the author of A Sketch for a Historical Picture of the Progress of the Human Mind, who died in a revolutionary jail in 1794 after a dazzling career in mathematics and politics, is portrayed as the theorist of universal civilization, leaving behind the vision of a world where perfectly rational moral judgments inform perfectly efficient policy, and a moral and political consensus reigns in much the way that a theoretical consensus reigns in physics or chemistry.

The first indictment focuses on the bleakness of a society constituted on the basis of market relations, the second focuses on the totalitarian potential of utopian rationalism.  The two have been yoked by the enemies of the Enlightenment from their own time to the present.  Edmund Burke’s Reflections on the Revolution in France was the precursor of many later assaults.  Contemplating the attempted assassination of Marie-Antoinette, he wrote:

I thought ten thousand swords must have leaped from their scabbards to avenge even a look that threatened her with insult. But the age of chivalry is gone.  That of sophisters, economists, and calculators has succeeded; and the glory of Europe is extinguished forever.

Before the outbreak of the French Revolution, Burke accounted himself something of a disciple of Smith; once battle was joined, he backed tradition against reason, the ancien régime against the Enlightenment.  Some of the contemporary diatribes against globalization are the direct inheritors of Burke.

Economic Sentiments does something more subtle than merely demolish these hostile reactions to Smith and Condorcet.  Emma Rothschild is not concerned to “rescue” Smith and Condorcet from their critics, rather show that they were engaged in something other than their later critics suppose.  This demands rather different tactics in each case, of course.  To put it rather crudely, she makes Smith’s aims much more political and in the modern sense of the word less economic than conventional criticisms of the Enlightenment would do.  In Condorcet’s case, nobody has ever supposed that he was a central figure in the development of modern economics; in Joseph Schumpeter’s monumental History of Economic Analysis, for instance, he is yoked with Auguste Comte as the progenitor of a particularly shallow form of “intellectualist” evolutionary sociology, and his economic writings dismissed as devoid of interest.  But what Emma Rothschild shows is that when he did write about economics, it was from a profoundly political and non-utopian perspective, and that when he wrote his notorious Sketch for a Historical Picture of the Progress of the Human Mind, he embraced the creative role of moral and political conflict with as much enthusiasm as Benjamin Constant in the 1820s and Isaiah Berlin in the 1950s.  Indeed, it was from Condorcet that Constant learned the distinction between “the liberty of the ancients” and “the liberty of the moderns” for which he is remembered.

This, however, raises the question of what was “enlightened” about the Enlightenment.  If it was not a matter of looking for elegant models of human interaction such as underpin modern economics and are thought to have put their origins in Smith’s discovery of the “invisible hand,” what was it?  If it was not a matter of seeking universal moral and political principles that could be grasped by the light of reason alone, and adopted in every society and at all times, what was it?  And if we can answer those questions, can we also understand why Smith and Condorcet acquired the reputations they did?

What is in question is not simply how they came to be saddled with evil reputations by their detractors.  Smith’s admirers have always seen The Wealth of Nations as one of the founding documents of classical economics, and liberals who have any use for the concept of progress have a great deal of respect for Condorcet.  Robespierre denounced him as a “timid conspirator,” and the triumph of the Jacobins sent him first into hiding, and then to his death; but a century later John Stuart Mill and Gladstone’s friend and biographer Lord Morley revered him. “Mill,” says Rothschild, “told John Morley ‘that in his younger days, when he was inclined to fall into low spirits, he turned to Condorcet’s life of Turgot; it infallibly restored his possession of himself.”

2.

To establish her view of what enlightenment meant to Smith and Condorcet, and what the Enlightenment might mean to us, Emma Rothschild takes the reader through a series of exemplary episodes in their ideas and in the creation of their posthumous reputations; and she accompanies those episodes with some wider reflections on what enlightenment - and therefore “the Enlightenment” - can mean to the twenty-first century.  It is an elegant as well as a persuasive way of making her point about the political impact of the thinking of Smith and Condorcet.  Historically, she begins with the question of how governments ought to respond to the periodic food shortages that plague almost all agricultural societies.

The pre-revolutionary French state, built around a passion for detailed regulation, and animated by what even its critics were ready to regard as a genuine desire for the welfare of its subjects, responded by further regulation of the trade in “corn,” i.e., grain, and attempts to regulate its price.  But Turgot, whose political disciple Condorcet became, implemented policies to defeat famine in the Limousin that took free trade in grain as their starting point, and used government intervention to make the grain market work, not to supplant it.  Because Turgot urged government measures against famine, his opponents accused him of inconsistency, as if a belief in laissez faire somehow entailed a belief in laissez mourir.  Not so, Rothschild writes:

At the height of the scarcity, he insists on royal ordinances to reaffirm the freedom to transport and store corn.  But he meanwhile implements a remarkable series of public policies against famine.  They include a program of public employment; support for food imports; selective reductions - and some increases - in taxes; and special regulations on land tenure relations.

Tax reductions left the poor with more income to spend on food; tax increases drew on the resources of the rich to finance public works.

This is the policy that Condorcet defended in his Reflexions sur le commerce des blés.  As Emma Rothschild describes the argument: “In such a case, the government must act.  But it should not expropriate or subsidize grain, thereby harming the establishment of commerce.”  It should instead “assure the poor work and wages in proportion to the cost of commodities; and it will always be cheaper for the Treasury to put the poor in a position to buy corn, than to bring the price of corn down to within reach of the poor.”  To argue, as Turgot and Condorcet both did, that it made good sense not only to allow a free trade in grain but also to find work for the poor that they could buy the grain that their money would bring onto the market is to side with economists of the late twentieth century.  Instead of sending the agents of government in search of hoarded supplies and coercing the hoarders to part with them, governments could let the purchasing power of the otherwise too hard up do the job instead.

Retrospectively, we see this as a question of efficiency, answering only one question - how do we get food into the mouths of the hungry?  Seen from the perspective of Turgot and Condorcet, it is a much more political question.  The argument for relying on free trade in corn is not simply embedded in a theory of markets in food, though it is that; more importantly, it is embedded in the politics of freeing producers and consumers from the arbitrary and vexatious superintendence of officialdom.  Indeed, part of the fascination of seeing the debate from this new direction is just how unconcerned with efficiency in the modern sense Turgot and Condorcet and Smith all turn out to be.

They were certainly concerned with welfare or well-being in a basic, common-sense sense of the word, and especially with the welfare of the poor.  But they were not in the modern sense concerned to maximize the utility of a whole society.  This is a crucial point.  It is a commonplace objection to Jeremy Bentham that his defense of the principle of “greatest happiness” for the greatest number leaves it open to governments to maximize the total happiness of a society by means that violate the rights of minorities, humiliate individuals, and might involve any degree of oppression so long as their effects are seen as good enough.

No doubt, it is in general true - so Bentham would argue - that less coercion is better than more because people dislike being coerced, and other things being equal, they are happier if subject to less of it.  But Bentham’s chilling defense of his perfect prison, the Panopticon, gives the game away.  In the Panopticon prisoners were subject to constant surveillance and their behavior manipulated by any means available.  Bentham saw no problem with this: “Call them soldiers, call them monks, call them machines: so they were but happy ones, I should not care.”

That is the true maximizing spirit, in which notions like justice, or a care for individual dignity and self-respect, have at best a subordinate place.  It is, also, exactly what Condorcet and Smith did not think.  For them, it is justice toward the poor that demands that their welfare take priority over all else; it is not the principle of the greatest happiness for the greatest number.  Nor is this because they did not understand what was at issue; they both thought that it was the task of government to secure justice, and that within the limits of just, predictable, minimally obstructive laws, individuals must then make what they could of their own lives in their own way.  Both deplored enthusiasts for systems, the sort of men who treated their fellow creatures as sheep to be organized into a docile happiness.

One central argument for the policies in time of famine that Condorcet and Turgot defended was therefore that they did not damage the creation of a free economy, and that they minimized the role of bureaucrats and regulators, officials with ill-defined discretionary powers.  Emma Rothschild highlights the moral objection to overreaching bureaucracy by recalling a term that today has lost much of its sting.  It was the “vexatiousness” of bureaucratic regulation that both Smith and Condorcet complained of; but to say that one might be “vexed” by bureaucrats considerably understates what they had in mind.  “Vexation,” Rothschild writes,

is the sort of oppression which flourishes in the circumstances of an uncertain jurisprudence, in which men use the power of their offices to pursue their personal grievances.  It is the oppression in which one’s oppressor knows one’s name, and one’s weaknesses, and where one lives.

The argument for freedom in the grain trade was thus political in a very simple sense, and it illuminates Smith’s claim that his Wealth of Nations was “a very violent assault” upon the commercial system of eighteenth-century Britain.

The issues went much beyond the way to deal with famine.  In France, as in Britain, the production of most goods, and the conduct of most trades, was encumbered by an extraordinary variety of statutory provisions about who was allowed to make and sell what, under what conditions, at what times, and in what places.  Entry to many occupations was controlled by corporations that could decide what fees might be demanded by masters to take on apprentices, how long the apprentice must serve, and how he was to work and price his products thereafter.  In Britain, many of the regulations permitting corporations to control their own trade were more or less dead letters, but they might at any moment turn out to be capable of revival by one or another vested interest to the detriment of competition and innovation.

One of Adam Smith’s particular but less well known targets was the system of apprenticeships.  But whereas Smith’s views on famine are all too relevant to the modern world, Rothschild writes that his

observations on corporations—on the silk weavers of London, the cutlers of Sheffield, the “universities” of master smiths, the ancient corporations of bakers, and other partial associations of trades - have attracted much less attention, at least since the late nineteenth century, than his observations on food.  This is a consequence, in part, of the conclusive success of efforts to reform the old apprenticeship corporations, both in England and in France.  The historian, searching the past for the seeds of the present, has little interest in disputes over long-forgotten institutions and long-concluded controversies.

Smith’s defense of what he called “the simple system of natural liberty” inevitably condemned these pockets of privilege and monopoly as both unjust and inefficient.  They were unjust because they restricted employment, and inefficient because they worked against competitiveness.  In view of the hostility of later generations to what was seen as the heartlessness of Smithian economics, it is worth noting that the injustice involved is above all an injustice to the poor.

Emma Rothschild separates Smith’s arguments against apprenticeships into four distinct categories.  The first is an argument about the damage done to the public interest by protecting particular occupations or localities.  The second, more interestingly, is the other face of Smith’s enthusiasm for public education.  He wanted to see universal, obligatory general education; training apprentices in particular trades was efficient neither in developing skills nor in promoting useful habits of industry.  Nor, for that matter, did it do anything to counteract the ways that the division of labor could undermine general education.  The third rests on the proposition that apprenticeship restricts personal liberty, and is unjust both to workers governed by apprenticeship regulations and to those who cannot get employment in regulated trades.

Finally comes the distinctively political objection that “apprenticeships are unjust because they reflect an oppressive combination of public laws and corporate bylaws - a ‘corporation spirit’ - in which laws are enacted for the benefit of the powerful, and enforced at the caprice of magistrates, masters, overseers, and churchwardens.  They are themselves a source of insecurity.”  Once again, in Rothschild’s analysis it is the great theme of the vexatiousness of anything but a system of uniform law that minimizes the discretionary authority of bureaucrats and regulators that comes to the fore.

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3.

Retrospectively, it is easy to think that Smithian arguments for “the simple system of natural liberty” must have immediately swept all before them.  This is entirely untrue.  What is more nearly true is that since Smith was too considerable a figure to be dismissed - there were those who tried to deride The Wealth of Nations as a chaos of conflicting observations, but they were few, and too lacking in intellectual firepower to have much success - the decades after his death in 1790 saw commentators engaged in a process of intellectual looting.  The parts of Smith’s thought that served their purposes were emphasized, the parts that did not were overlooked, and often quite deliberately overlooked.

So Smith’s critics on issues such as apprenticeships either took the line that Smith’s account was out of date - because the statutes he complained of had fallen into desuetude - or else that he had an unrealistic view of how much liberty was good for young persons.  The usefulness of an education in a particular trade was defended in parliamentary hearings as though he had never explained its deficiencies, and gradually, Rothschild shows, the interpretation of Smith that best suited conservatives took root.

One of her more astonishing vingnettes offered here is of a moment in the 1790s when the conservative reading of Smith was enforced in a fashion that was very far from gradual.  Smith died in 1790, before the French Revolution ran out of control.  Nonetheless, for those to whom “French opinions” had for a long time meant Voltaire’s cynical views on Christianity on the one hand and Rousseau’s republicanism on the other, Smith was a threat to good morals and good order, to be spoken of in the same condemnatory tones as were used for his close friend David Hume.  He had, after all, had French patrons, French correspondents, and French friends; he had even spoken warmly of Rousseau.

The Scottish courts outdid the English in the savagery with which they repressed what they decided was sedition in the early 1790s.  Emma Rothschild describes the cases of Thomas Muir, Thomas Palmer, William Skirving, and Maurice Margarot, who were sentenced to “transportation” to penal colonies for fourteen, seven, fourteen, and fourteen years respectively, on the strength of little more than Smithian views about the benefits of free trade and lower taxes, and the good sense of regarding our neighbors—that is, for the British, the French - as commercial partners rather than natural enemies in war.  Sadly she omits the response of Lord Braxfield, who sat in these cases, to a subsequent defendant, Joseph Gerrald.  When Gerald observed that Christ, too, had been a social reformer, Braxfield joked to his fellow judges, “Muckle he made o’that; he was hanget.”

This judicial terrorism was not simply an attempt to frighten the artisan classes.  Muir was a lawyer and Palmer a minister; transportation was intended to be a death sentence so far as men of their class were concerned.  Anyone who suggested that the principles of government and the reform of institutions might be matters for public discussion was a target.  Smith’s colleague and biographer, Dugald Stewart, received a letter from two of the Scottish Law Lords early in 1794. demanding an open recantation of a couple of favorable references to Condorcet in his Philosophy of the Human Mind.  When dealing with the only slightly less dangerous topic of Smith’s Wealth of Nations. Stewart found himself forced to defend the work as a piece of speculative theorizing, which had fastidiously been addressed not to the multitude but to those who had political power.  Their authority was not to be called in question; the humble economist was to offer only suggestions for the better conduct of affairs, it being unquestionable that they had nothing at heart but the welfare their subjects.

It is illuminating to see this as the moment when an important new intellectual cleavage is opened up, and to appreciate the politics behind it.  The establishment of the view that economists should produce technically interesting work, which is then open to use by governments of any political stripe, was one of the ways in which Smith was first defanged and then appropriated by the conservatives.  Nobody supposes that Smith would have been an enthusiast for the wilder ambitions of the French revolutionaries.  Much like Hume, he saw that political systems were vulnerable to sudden overthrow, and that once political passions were thoroughly aroused all manner of horrible things might happen.  Still, it is hard to avoid seeing the political implications of The Wealth c Nations in the same light as his critics did: if the governments of the ancien régime were not corrupt, they were a least incompetent and biased, and operated in the interests of the possessing classes alone.  Again like Hume, Smith thought that the best way to avoid violent outcomes was the establishment of rational, uncorrupt, non-arbitrary government.  An educated public would be governed easily by good governments and not at all by bad.  Burke might descant on the virtues of “prejudice,” and prefer superstitious reverence to the cool and cheerful acceptance of the need for sensible government; but Smith had no use for prejudice and superstition in any form.

Emma Rothschild’s account of Smith’s actual political views is not only gripping; it provokes a lot of secondary questions.  One is about the choice of the moment when the cleavage between economics and politics finally becomes established.  For her, the telling event was the publication of Mill’s essay “On the Definition of Political Economy; and on the Method of Philosophical Investigation in that Science,” in The London and Westminster Review of October 1836.  There, Mill characterizes economics as having the qualities of geometry: just as geometry ignores the drawing errors of children drawing triangles, the color of the paper on which they draw, and everything else other than the narrowly geometrical properties of the objects at hand, so economics leaves aside everything except the desire for wealth and the aversion people have to effort and self-denial.  Political economy is then defined as “the science which traces the laws of such the phenomena of society as arise m the combined operations of mankind for the production of wealth. so far as those phenomena are not modified by the pursuit of any other object.”

For Economic Sentiments, what is important in this account is its tidiness; economics is split off to one side, and concerns differentiated from those ethics, political science, aesthetics and much, else.  Emma Rothschild borrows the famous image from Ludwig Wittgenstein’s Philosophical Investigations in which Wittgenstein compares the growth of science to the expansion of a city, where the chaotic jumble of the inner city gives way to the tidy rectangularity of the suburbs.  In that sense, Mill’s formulation marks the end of the process with which Economic Sentiments is concerned.  Mill has created the intellectual box into which The Wealth of Nations is to be put, and its placement there badly distorts its political value.

But to the reader of Mill, his essay looks much more like the beginning of another process.  On the one hand, it is the first blow in the long campaign - one that continues to the present - against the imperialist ambitions of economic reasoning.  By emphasizing all the things that economists have to leave out in order to obtain the intellectual tidiness they aspire to, Mill warns us against accepting their advice.  We would not let a professor of geometry dictate our purchases of a painting or sculpture; and in spite of the late Gary Becker’s Nobel Prize winning attempts to apply rational choice analysis to family life, we would not generally ask an economist’s advice about whom to marry.  As for Mill himself, no sooner had he tidied up his reader’s ideas about economics than he set out to write his own version of The Wealth of Nations. Mill’s own allegiances were broad and open to a variety of human experience in just the way that Smith’s were.

The bearing of these thoughts on the argument of Economic Sentiments is indirect.  On the one hand, they suggest that Emma Rothschild’s account of what happened to Smith’s reputation may be a little too cut and dried.  The implications of assigning The Wealth of Nations to “economics” may’ be more contestable, and not such a clear-cut victory for a conservative interpretation of the work and its author than she suggests.  On the other, it may be that even two and a quarter centuries later, what we do with books like Smith’s is less constrained by what our predecessors have done than we sometimes think.  Indeed, that must be true, since otherwise we could hardly learn from them as she wishes us to do.

Emma Rothschild demonstrates more persuasively than any short summary can capture just how different Smith’s concerns were from those of later interpreters.  Her intricate and occasionally even difficult account of the multiplicity of ways in which be used the concept of the “invisible hand,” in particular, reminds reader not only of the nuanced and delicate fashion in which Smith kept a dozen different ideas in the air at once, but of how much subsequent accounts of his work have truncated it for their own purposes.  It is perhaps easiest to see this by recurring once more to the title of the book. Economic Sentiments is an enigmatic title, and unraveling the enigma takes us both to the heart of Emma Rothschild’s intentions and to the implications of her account for us, the twenty-first-century readers.

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4.

The eighteenth century’s use of the concept of “sentiment” is not a topic on which to embark lightly.  Happily, we need not embark on it at all to understand Emma Rothschild.  All we need to understand is that Smith, the author of The Theory of Moral Sentiments, did not divide his concern with human existence into a geometrical analysis of the cold, calculating world of the marketplace and a historical, discursive, richly rhetorical account of the hot, passionate world of moral enthusiasm and moral indignation.  For him the moral sentiments were guided by reason, and the calculations of the merchant and the shopkeeper were informed by sentiment.  The mutual sympathy that made human life possible was not uninformed by reason, and the marketplace was not bleakly calculating.  Sentiments can be more or less productive; they can be molded to make social intercourse more or less congenial; they are, in short, both the raw material of moral reflection and moral education and in a developed form the end product of reflection and education.

Condorcet’s vision of the world was not dissimilar.  For him, too, the feelings of the victims of injustice, oppression, and vexation were all-important.  This was part of his argument for the importance of conflicting moral and political allegiances.  He did not deny that there are in some sense universal values and universal feelings about morally serious matters.  Like Isaiah Berlin, and like many other eighteenth-century writers, he was certain that only a monster could be as indifferent to human suffering as he would be to seeing a stick break or a stone fall into the sea; and Condorcet was sure that it was sentiments - sympathy for others and resentment on one’s own behalf - that underpinned the universal passion for justice.  But, again like Berlin and other recent writers, he was sure that we could not soon expect to see people coinciding in their judgments of which injustices were greater than which others.

One important thing was therefore to encourage people to understand one another, to see into one another’s hearts and appreciate how they had come to feel the moral allegiances they had.  The other was to refuse the suggestion that some governments or some constitutional arrangements would infallibly produce justice.  Laws were not infallibly just so long as they were produced by a democratic process - no matter what Rousseau might suggest.  Paradoxically enough, the obsession with the mathematics of voting for which Condorcet is today remembered by political scientists sprang from his hostility to the death penalty.  In his view, no method of voting was so certain to produce a just result that a jury could rightfully sentence a criminal to death.

Neither Smith nor Condorcet wanted finality.  Both of them distrusted and mocked the theorist who wishes to design schemes to make others happy in just the way he thinks they should be happy.  This was one more reason why politics should aim at providing a predictable legal system within which individuals could work out their own destiny, and why politics ought to do as little more as possible.  This required that enlightened people should cultivate in themselves certain sentiments, in particular that they should learn to accept the anxieties of an uncertain world with reasonable cheerfulness.  Emma Rothschild ends Economic Sentiments with a discussion of life in a “fatherless world” that one would call inconclusive - if it were not for the decisive fact that conclusions are just what she is teaching us not to draw.

The open, laissez-faire world of the Enlightenment is a world in which we cannot be wholly free of anxiety.  It is a world with many offsetting benefits, however - and even anxiety has its rewards, as readers of crime novels know.  Backward-looking thinkers such as Alexis de Tocqueville thought that modern individualism must result in social isolation and loneliness - although he was a convinced agnostic, Tocqueville even argued that egalitarian democracies needed the warmth of the Catholic faith.  Smith and Condorcet both thought we could do without such props; we might, with luck, survive on the basis of a good-natured, conversational kind of sociability.  Independence is not isolation; we can be freed from subordination and make friends with our equals.

Other forms of nostalgia besides Tocqueville’s also have to be given up if we follow Condorcet’s thought.  The freedom of the moderns is not the participatory freedom of the ancient Athenians, and a modern Frenchman should not feel that his identity as a Frenchman is the most important thing about himself.  The more spectacular political virtues can also be allowed to atrophy.  Condorcet looked forward to a world where the courage of the Spartans at Thermopylae would no longer be needed.  Romantics - and most of us are romantics in this matter - sigh for what we would lose if we took this view wholly seriously.  Condorcet, looking forward to an epoch of peace and tranquility, seemed not to have had such regrets.  No doubt he was naive about the prospects for achieving this condition; no doubt he underestimated the ease with which the human propensity for violence, greed, and resentment can come to the boil.

But Emma Rothschild should have the last word on this question. Summarizing her scintillating account of Condorcet, she agrees that

The Esquisse is a deeply credulous book.  It is as though Condorcet had given himself up, hidden from the Terror in his room in the rue Servandoni, to a suspension of skepticism or disbelief.  He believed that simple moral sentiments are what all men and women have (or have once had) in common.  They are the foundation of virtue.  They are also the foundation of rights, and thereby of justice and liberty.  This is a utopian conception.  But it is not thereby false, and it is not a sinister utopia.

What the twenty-first century can decently learn from the Enlightenment of Smith and Condorcet is the need, not for credulity, but for a guarded optimism about our ability to suppress hysterical optimism and pessimism, and in the absence of governmental bullying to make common cause with the rest of humanity on the basis of justice, a respect for human rights, and concern for the welfare of the worst off.