Piecing Politics and Economics Back Together

A review of Adam Smith's America by Glory M. Liu

I decided to read (listen to) this book after reading Branko Milanovic’s review over on his Substack. His review is well worth a read as he is infinitely more knowledgeable about political economy than I am.

This book was an excellent primer on Adam Smith generally and his most famous work, An Inquiry Into the Nature and Causes of the Wealth of Nations (The Wealth of Nations) more specifically. For someone who has not had the time, and until very recently the inclination to read a thousand page treatise written over 200 years ago (it was published in 1776, shortly before the adoption of the US Declaration of Independence), this book clarified so many misconceptions I had heard at one point or another about The Wealth of Nations and gave me a much deeper appreciation and understanding of Smith’s political economy and moral philosophy.

For anyone not very familiar with Smith, he was a moral philosopher of the Scottish enlightenment period and is widely regarded as the father of modern economics because of The Wealth of Nations. The book details the various factions in the US which have claimed Adam Smith as the foundation of their school of thought and breaks down the rhetorical strategies and arguments they have made. As Milanovic states in his review “One could divide the reception of Smith in America into three eras. The first that lasted from Independence until the early 20th century was dominated by the discussion of free trade vs. protectionism in the Wealth of Nations. The second, from the early to the mid 20th century by the debate on the roles played in Smith’s overall work by sympathy vs. self-interest. The third, which continues, was dominated by the disagreement over the roles of the price system (free market) and government. As these antinomies illustrate, the broadness of Smith’s oeuvre allowed a sensible discussion of all the themes, and made each of the six positions defensible.”

The great power of Liu’s work is that she deeply interrogates the positions of each of the ideological factions that argued over Smith’s work and presents concise summaries of their positions using their own words and the words of their critics. As an overview of the history of the philosophy political economy, this book provided me with an extensive list of authors and works to read later to deepen my understanding. She allows the philosophers, historians, and economists to speak for themselves and presents arguments and counterarguments without judgment. Especially when we get to the more modern period marked by the Chicago School, or neoliberal economists, from the late 1940s to early 2000s she presents their misinterpretation of Smith as a continuation of an American tradition of reading Smith through an ideological lens. She makes clear that while Smith is not the stalwart of laissez-faire, free-market ideology as the Chicago School confidently asserted, he cannot be boxed into other progressive, or even socialist conceptions of political economy either.

Put simply, Smith’s work has resonated with so many people for so long because he avoided dogmatic ideology and focused more on practical observations and interpretations of human institutions. In my view, the complexity and sometimes contradictory nature of Smith’s observations are likely a more accurate reflection of the complexity of humanity and human interactions than many modern thinkers have been able to capture. Liu highlights the difficulty of interpreting his work through a modern lens, or worse, taking an ahistorical approach. She lifts up expert voices such as Donald Winch who took a deeply historical approach and noted the vast differences in values and moral expectations when Smith wrote the text than today. Winch’s research tore down the narrative which tried to tie Smith and Scottish enlightenment philosophers to today through an unbroken tradition of liberal individualism, which just didn’t exist in Smith’s time of very different values. One segment in which Liu quoted Winch stated:

“Smith’s politics called for resilience in the face of ‘world weariness.’ It resisted the temptation to fall into convenient categories… as Winch wrote ‘there is certainly something to be said for a science of politics which finds itself with work to do, rather than simply standing as the monument to a philosophical stance.’ That Smith’s politics could not be found prepackaged with clear labels was, precisely what defined it.”

As Liu deftly shows by highlighting which Smith different economists quoted, and then immediately pointing out other passages in the Wealth of Nations which contradicted the pure ideological point of those economists, Smith understood that you cannot separate politics and the economy. He never tried to make a treatise solely on the economy, taken together with his writings on moral philosophy and jurisprudence, it is clear he was attempting to paint the best picture of the motivations of humans and the functioning of our societies that he could. This necessarily included contradictions and avoided dogma and simple ideology because Smith truly understood how complex human motivation is. He pointed out both the issues with an authoritarian government that exercised total control over commerce, and that the interests of landowners were different than those of farmers, and the interests of business owners often conflicted with the interests of the rest of the public. He railed against the flaws of monarchic government while allowing plenty of room for a more competent and less concentrated government to work to protect the rights and dignity of humans.

Liu has written a book at once accessible and deeply researched, full of insights and with a critical eye toward ideologues of “pure economics”. Adam Smith’s America captures the complexity of American economic thought and the ideologies behind the shifting landscape of the philosophy of political economy. This book, more than any other I’ve read in the past several years has helped me understand our current economy and society and can see myself revisiting it in the future.

For further reading on Adam Smith, I suggest this excellent article, also from Branko Milanovic about Smith’s Lectures on Jurisprudence, slavery, and how a narrow economistic view can obscure more than it enlightens.