by Gary Alexander
June 13, 2023
It’s time to take a mid-June break to honor the 300th birthday of Adam Smith, who is likely the man most responsible for global growth over the last 250 years. His baptism was listed as June 5, 1723, but that was according to the old-style Julian calendar. According to today’s updated calendar, he was born on June 17.
The three most influential economists were born in late spring. All three wrote in Great Britain, but their ideas spread sequentially around the world. Adam Smith was born 300 years ago this weekend in Scotland. Karl Marx was born 205 years ago (May 5, 1818) in Trier, Germany. This year marks (Marx?) the 175th anniversary of his Communist Manifesto (1848), but his most influential work, Das Kapital, was penned in penury, in London. John Maynard Keynes was born 140 years ago (on June 5, 1883) in Cambridge, England. These three are considered the godfathers of the right (Smith), left (Marx), and the golden mean of a democratically elected but centrally controlled economy (Keynesian) “mixed (up) economy.”
It’s ironic that China suffered under Marx (via Mao) for 30 years (1949-78), then flourished with a mixed brand of capitalist vigor for 40 years and now seems to be retreating back to Marxism under Xi, while Europe and America crawl along under Keynesianism. At the 2018 Freedom Fest, to “celebrate” Marx’s bi-centennial, I interviewed economist Dierdre McCloskey about her latest book, “Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World” (2016). It was the third of her “Bourgeois” trilogy of books (by bourgeois, she meant to steal Marx’s denunciation of capitalism by defining the bourgeois as “the hiring or owning or professional or educated class,” basically the entrepreneurs).
Among many fascinating insights, she said, “The Big Economic Story of our times is that the Chinese in 1978 and then the Indians in 1991 adopted liberal [i.e., Adam Smith] ideas in the economy and came to attribute a dignity and liberty to the bourgeoisie formerly denied. And then China and India exploded in economic growth.” India and China certainly had no help from the British, who subjugated India for 90 years and also hooked China on opium. Instead of exporting Adam Smith’s ideas, Britain exported Fabian socialism to the future leaders of India. Jawaharlal Nehru, the first leader of independent India, learned socialism in England. He told Indian businessmen, “Don’t talk to me about profit. Profit is a dirty word.”
India’s spiritual leader, Mahatma Gandhi, agreed, declaring that “there is nothing more disgraceful to man than the principle ‘buy in the cheapest market and sell in the dearest.’” As a result, Indians referred to a 1% rate of growth in the first 40 years of Indian independence as the “Hindu rate of growth.” Since 1991, however, after economic liberalization took root, India has been growing at about 7% per year. The latest edition of The Economist now lists India as the most rapidly growing economy during 2023 (at +6.1%).
These changes are also reflected in India’s culture. Economist Nimish Adhia has shown that India’s leading “Bollywood” films have changed their heroes from government bureaucrats to business leaders and changed their villains from factory owners to corrupt policemen. The same shift is evident in the editorial pages of the Times of India –they now cover businesses more fairly, not as automatic villains.
Sample Adam Smith Quotes in the Context of Today’s Economy
Adam Smith only wrote two books, first “The Theory of Moral Sentiments” (1759), written while he taught at the University of Glasgow, and then his masterpiece, “An Inquiry into The Wealth of Nations,” published March 9, 1776, made possible by a lifetime pension for tutoring students. The key insight Smith made is refuting mercantilism, with its emphasis on protectionism, promoting “favorable” (exports over imports) balance of trade vs. Smith’s unfettered free trade, based on traders’ comparative advantages.
A sample Smith quote on free trade:
“What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better to buy it of them with some part of the produce of our own industry.” – Wealth of Nations.
Smith’s underlying message, however, is that central planning is misguided and often counter-productive:
“Every man, as long as he does not violate the laws of justice, is free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty…of which no human wisdom or knowledge could ever be sufficient: the duty of superintending the industry of private people, and of directing it towards the employment most suitable to the interest of the society….
“The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which can safely be trusted not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.” – Adam Smith, in The Wealth of Nations.
Smith’s earlier book laid the moral case for these bold statements by defining the “man of the system” (a government overseer with detailed plans) vs. the entrepreneur. See if this “rings a bell” with today’s news.
“The man of the system, on the contrary, is apt to be very wise in his own conceit and is often so enamored with the supposed beauty of his own ideal plan of government that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interest or to the strong prejudices which may oppose it.
“He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chessboard. He does not consider that the pieces upon the chessboard have no other principle of motion besides that which the hand impresses upon them; but that, in the great chessboard of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it.”
– From Adam Smith’s “The Theory of Moral Sentiments” (1759)
Broadway Brings Adam Smith to Life
The 1960s were a time of peak expansion of Marxism in Russia, China, and the Third World, as well as on campuses, as Keynesian took over Washington DC and Europe, but as the Berlin Wall and the Cuban missile crisis hit the headlines, Broadway reflected the spirit of freedom as well as anything in America.
Two Broadway lyricists turn 99 this year and may celebrate their centennials in 2024. The first wrote about “a lot of living to do,” not realizing that he and most of his cast would still be living at age 95+.
Lee Adams (born August 24, 1924) wrote songs for “Bye Bye Birdie” (April 1960), including two great songs about capitalism – one about, steaks, Cadillacs, and living long – another about a long life ahead:
Sizzlin’ steaks all ready for tastin’
And Cadillacs, all shiny and new!
Gotta move, cause time is a-wastin’
There’s such a lot of livin’ to do!
And here’s Lee Adams’ answer to the perma-bears – turning “tragedy” into “glad ya decided to smile.”
Gray skies are gonna clear up: Put on a happy face
Wipe off the clouds and cheer up: Put on a happy face.
Take off that gloomy mask of tragedy; It’s not your style.
You’ll look so good that you’ll be glad you decided to smile.
More to the point of capitalism vs. socialism, In Fiddler on the Roof (1964), Tevye the Milkman debated Perchik, the young socialist, with song lyrics by Sheldon Harnick (born April 30, 1924), reflecting Adam Smith in the opening “Tradition,” when Tevye asked the rabbi if there is a blessing suitable for the Tsar.
Later on, the young radical, Perchik, confronted Tevye with his own Marxist manifesto: “Money is the world’s curse.” But Tevye quickly answered, “May the Lord smite me with it. And may I never recover.”
In 2008, this capitalist economist writer had the honor of playing Tevye, addressing a sincere young socialist, playing Perchik, on stage eight times in one week. What a delight! I like to think Adam Smith would enjoy these memorable lyrics about living long, selling milk and cheese, and dreaming of riches.