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INTRODUCTION

THE WEALTh of NatioNS

I. Adam Smith and his Environment

In the year 1776, the darkest year in the annals of the British Empire, one of the world's great books was published. Its author was Adam Smith (born on June 5, 1723) and its title An Inquiry into the Nature and Causes of the Wealth of Nations.1 The writer was a Scotsman, with the national sense and original humour of Scotland at its best. This Scotsman was in policy a liberal imperialist. Because he hated tyranny and was disgusted by shams, he was eager to see the project of an empire' (for as he saw it, it was nothing more) converted into a reality so free that it would endure. This imperialist was a man of cosmopolitan vision; and his appreciation of differences in national characteristics did not shake his faith in the universal application of those economic principles which would, he argued, benefit the nation that practised them not less than the world at large.

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The age, the country, and the experience of the writer were alike favourable to the creation of an economic masterpiece conceived in this mood.

The age was favourable, for the spirit of a new freedom was already in the air. In religion men were turning from the rigid gloom of Calvinism to the light of nature by which the Deity of the 18th century was rationalised and reduced to benevolence. The mediæval conception of an essential clash between private interest and public policy was all but dead. At every turn local regulations were collapsing before nation-wide enterprise, and the economics of Elizabethan England were remembered chiefly for their irritating survivals. Even as Adam Smith wrote, Britain was crossing the threshold of the Industrial Revolution, and Glasgow, Adam Smith's University, assisted the crossing by providing James Watt with a sanctuary where he could experiment in peace upon his steam-engine. In the text of the Wealth of Nations there is a reference to fire engines in which 'boy' is comically confused with 'buoy' (I. 11), but the word steam' does not occur. The division of labour

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1 All references are to the edition by Edwin Cannan. Methuen, 1904, 2 vols.

which Adam Smith observed in pin factories (I. 6) and elsewhere was still a division of hand-processes. But his analysis is altogether on the line of modern development, for the reason that the revolution in mechanical technique was preceded by changes of a commercial and financial order with which he was fully conversant. Indeed his constant emphasis on the cost of bringing a commodity to market puts him closer to us of the 20th century than were his successors who, dominated by the marvels of factory production, studied too little the economics of marketing and transport.

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The country, too, was favourable. The Scotland of 1750, like the Canada of to-day, was a country in the making, poor by comparison with its neighbour to the south, but growing and conscious of growth. As we read the subtle pages of the Third Book, in which Smith sketches out a dynamics of society with his eye on the centuries and on all the continents, we can feel him to be aware that his society is not one that is standing still,' and that his country at any rate had not yet received its 'full complement of riches.' Though Scotland was still 'much poorer' than England, it was evidently advancing' (I. 92). For the Act of Union had brought opportunities and markets. No longer did the Lowlands produce scarce anything but some miserable pasture, just sufficient to keep alive a few straggling, half-starved cattle' (I. 220). But in the biggest things of life, in church and school and university, Scotland-as Adam Smith could fairly claim-was richer than England. His master, the 'never to be forgotten Hutcheson,' had lectured to him and his fellow students at Glasgow in the mother tongue, and had held them spellbound. But in the university of Oxford the greater part of the public professors have for these many years, given up altogether even the pretence of teaching (II. 251).1

Equally favourable was the experience of the man. He studied widely before he taught, and he taught and travelled before he wrote. Born at Kirkcaldy, a small town on the north side of the Firth of Forth, he attended as a lad its excellent Burgh School. Thence he proceeded to Glasgow University, and from Glasgow with a Snell Exhibition to Balliol College, Oxford, where he taught himself much in its rich college library, residing continuously for six years 1740-6, term time and vacation. Returning to a lectureship in Edinburgh, he removed to Glasgow

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1 Note, however, that in 1758 the great Blackstone became first Professor of English law at Oxford, to deliver those bravura passages . . . which Blackstone so brilliantly executed before crowded and admiring audiences' (F. W. Maitland, Collected Papers, II. 162).

to become Professor of Logic in 1751, and of Moral Philosophy in 1752, published in 1759 his Theory of Moral Sentiments, and delivered for a number of years lectures on 'Justice, Police, Revenue and Arms,' a copy of which as taken down by a student has by rare good fortune come down to us (edited by Edwin Cannan, 1896). In 1763 he left at such short notice that he felt it incumbent upon him to return the lecture fees. The pupils were loth, but the professor insisted. You must not refuse me this satisfaction; nay by heavens, gentlemen, you shall not,' he said; and seizing by the coat the young man who stood next to him, he thrust the money into his pocket and then pushed

him away.

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The occasion of his going was the offer of a travelling tutorship to the young Duke of Buccleuch. He gained thereby an increase of income, and that which his catholic soul craved far more, the illuminating experiences of the Grand Tour-a visit to the great Voltaire at Geneva, conversations at Paris with Turgot the financier, the Abbé Morellet, Quesnay, that 'very ingenious and profound author' (II. 171) of the Tableau Economique —a copy of the jigsaw puzzle which goes by this name is reproduced in Cannan's edition of the Wealth of Nations, Editor's Introduction, xxxii—and others of the Physiocratic School. On this tour he began his great book in order to while away the time,' and returning from the Continent in 1766, he worked at his manuscript for the next ten years. Standing to dictate it with his back to the fireplace in his study at Kirkcaldy, he would rub his head on the wall above, to which there adhered for many years to come this greasy proof of the absent-minded agony of authorship (John Rae, Life of Adam Smith, p. 260). The book I was instantly acclaimed by the public, and ran through five editions before his death in 1790.1 It has been given to few men to achieve a world reputation by a single book, and to fewer still to prepare that work with such deliberation that, though it breaks much new theoretical ground and is intimately concerned with current policy, the author with a few strengthening additions is saying in the last edition essentially what he said in the first.

Adam Smith is the father of political economy. There is indeed a long roll of economic literature before his time, but where it was not Utopian or statistical, it was partial and unsystematised, and usually little more than a party pamphlet for or against a particular economic policy. A great part of it was occupied with the Doctrine of a Favourable Balance of Trade.This doctrine,

1 He was buried in the churchyard of Canongate Parish Church, Edinburgh. The headstone touches the wall of the Tolbooth of the Burgh of Canongate.

together with the policy known as the Mercantile System which it was employed to prop up, was ruthlessly attacked by Adam Smith, and the attack supplies the driving force of the Wealth of Nations. But the book is more than a polemic. For in smashing a policy he founded a science. He was the first to analyse in a comprehensive fashion the play of economic motive and the interaction of economic forces as these were actually at work in society. As Cunningham well says, 'Adam Smith's great achievement lay in isolating the conception of national wealth, while previous writers had treated it in conscious subordination to the idea of national power. By isolating wealth as a subject he introduced an immense simplification.' 1 That simplification had its dangers, but it is significant that the man who introduced it was also a philosopher and an historian.

2. His Debt to Others

Adam Smith did not evolve his theories out of an inner consciousness, or support them by imaginary examples. He made the thoughts and records of others his own, and used them to his purpose. But three British writers exercised a decisive influence on him-his master, Francis Hutcheson; Dr. Mandeville; and David Hume. From Hutcheson he got his philosophy and his first introduction to economics. Mandeville's Fable of the Bees (1714) encouraged his own inclination to satire. With David Hume, his life-long friend, he shared the give and take of intellectual friendship. If priority of publication is to decide, then it was Hume's Essay on the Balance of Trade in 1752 which first exposed the essential fallacies in the balance of trade argument; as similarly there are anticipations of Hume's conclusions in the writings of Sir William Petty, Sir Dudley North, and John Locke. But this is priority only in the sense in which all knowledge is a restatement of what has gone before.

The nature of Adam Smith's indebtedness to French writers has been greatly misunderstood. It is a matter of history that after being a Professor of Moral Philosophy in Scotland he went to France, and returned to write the Wealth of Nations. Hence it has been argued that he left Scotland an idealist and after three years of contact with the French economists returned a materialist. Less grotesque, but nevertheless misleading, is the view of William Pitt's biographer: 'It was by residence in France and contact with the economists, Quesnay and Turgot, that Adam Smith was able to formulate the ideas soon to be embodied

1 'Progress of Economic Doctrine in the 18th Century,' W. Cunningham, Economic Journal, Vol. I. 1891, p. 86.

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