Teaching the Real Adam Smith lessons: He was hardly the poster boy for free-market economics..

Paul Sagar chips in on the burning question on Adam Smith: Did Adam Smith really preach free market economics as we understand the term:

If you’ve heard of one economist, it’s likely to be Adam Smith. He’s the best-known of all economists, and is typically hailed as the founding father of the dismal science itself.

Furthermore, he’s usually portrayed as not only an early champion of economic theory, but of the superiority of markets over government planning. In other words, Smith is now known both as the founder of economics, and as an ideologue for the political Right.

Yet, despite being widely believed, both these claims are at best misleading, and at worst outright false.

Further:

Smith’s reputation, however, began to get away from him early on. Shortly after publication, The Wealth of Nations was fêted in the British Parliament by the Whig leader Charles James Fox. Ironically, Fox later admitted that he had never actually read it (few subsequent non-readers of the book have showed such candour, despite plenty of them citing it). Indeed, Smith suspected that those quickest to sing his praises had failed to understand the main arguments of his work. He later described The Wealth of Nations as a ‘very violent attack … upon the whole commercial system of Great Britain’. Despite this, his vocal political cheerleaders in Parliament continued to prop up the very system that Smith was railing against.

Yet if Smith was disappointed by his work’s immediate reception, he would likely have taken even less cheer from the future uses to which his name would be put. For it has been his fate to become associated with the strain of Right-wing politics that rose to dominance in the early 1980s, and which continues to exert a strong influence on politics and economics today. Usually known as neoliberalism, this development is most famously associated with Ronald Reagan and Margaret Thatcher. But it is in fact a movement with deep intellectual roots, in particular in the mid-century writings of the economists Friedrich Hayek and Ludwig von Mises. Later, the Chicago economist Milton Friedman and the British policy adviser Keith Joseph championed it during the 1980s, as did the extensive network of academics, think tanks, business leaders and policymakers associated with the Mont Pelerin Society.

Neoliberals often invoke Smith’s name, believing him to be an early champion of private capitalist endeavour, and a founder of the movement that seeks (as Thatcher hoped) to ‘roll back the frontiers of the state’ so as to allow the market to flourish. The fact that there is a prominent Right-wing British think tank called the Adam Smith Institute – which since the 1970s has aggressively pushed for market-led reforms, and in 2016 officially rebranded itself a ‘neoliberal’ organisation – is just one example of this tendency.

It is certainly true that there are similarities between what Smith called ‘the system of natural liberty’, and more recent calls for the state to make way for the free market. But if we dig below the surface, what emerges most strikingly are the differences between Smith’s subtle, skeptical view of the role of markets in a free society, and more recent caricatures of him as a free-market fundamentalist avant-la-lettre. For while Smith might be publicly lauded by those who put their faith in private capitalist enterprise, and who decry the state as the chief threat to liberty and prosperity, the real Adam Smith painted a rather different picture. According to Smith, the most pressing dangers came not from the state acting alone, but the state when captured by merchant elites.

Have read so many such pieces where people argue from both sides.

Only Adam Smith can really clarify what he really meant to write. But that obviously cannot happen..

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