Smith, Commerce & the Common Good

“Adam Smith and the Commercial Republic.” The Public Interest No. 61 (Fall 1980): 106–122.

In Prof. Miller’s judgement, however, the proper relation of “special interests” to American democracy, as the Founding Fathers conceived it, is not so simply put. In Federalist 10, Publius (pseudonym of Madison, Hamilton, and Jay) speaks of the beneficial “necessity” of diverse commercial interests in a civilized, progressive society. Publius’ sentiments closely paralleled those of Adam Smith, an author read carefully by all “enlightened statesmen” of the time. However, the real Adam Smith was a much more complex figure than (as conventional wisdom would have it) the unflinching exponent of the market system. In fact, neither Publius nor Smith would have supported nineteenth-​century dogmatists such as E.L. Godkin, who regarded all deviations from laissez-​faire as an assault on republican government.

The full title of Smith’s book, An Inquiry into the Nature and Causes of the Wealth of Nations, might mislead the casual reader. The work is less a treatise on developmental economics than a disquisition on what might be called the political philosophy in order to dignify the calculations of profit and loss in the eyes of thinking men.

Like Hume and Hobbes, Smith feared the instability that “factions” would engender under a regime of liberty. He thought, nonetheless, that violent factions were probably a thing of the past in Great Britain. The expansion of commerce, he reasoned, had made it less likely that Englishmen would embroil themselves in religious controversy, less likely that they would join parties of principle rather than parties of interest. Thus, according to Smith, special interests may bolster the stability which is essential to a liberal polity.

Despite his praise of the market economy’s “invisible hand,” Smith conceived a wide and elastic range of activities for government. He was prepared to extend these activities if government proved itself worthy of increased public trust and if the private sector was not performing adequately in areas vital to the common good.

Smith, of course, favored free trade, but only because he was “proconsumer.” Business assured the real prosperity of the commonwealth (goods, not gold), including that of the poor. Despite this position, Smith continually attacked businessmen. Merchants and manufacturers, he argued, are not naturally proconsumer or free traders. More likely than not, they harbor protectionist sentiments, preferring short-​term gain to their real interests, which closely correspond with the public good.

The wisdom and breadth of vision of the legislator would substitute for the narrowness and expediency of businessmen. Smith, Hamilton, and Madison all believed in what may be called a “two-​track” polity, consisting, on the one hand, of a “natural aristocracy” of hero ic and disinterested virtue and, on the other, of a commercial class characterized by such pedestrian, but highly necessary qualities as moderation, thrift, calculation, and compromise. This sober, somewhat hopeful, though hardly compelling vision was scorned in the nineteenth century by such thinkers as Nietzsche and Marx, who propounded theories of societies untainted by the motive of self-​interest. In the twentieth century, we have seen those dreams turn into the nightmares of Nazi and socialist man. By contrast, the considerably less ambitious views of Smith and the Founding Fathers have fostered the unprecedented prosperity and political stability enjoyed by the American people for more than two centuries.