Occupy Wall Street, Adam Smith, and the Wealth of Nations
By Louis René Beres
As the year draws to a close, we’ve been reflecting on all the wonderful books published in 2011, and in doing so, we’ve also realized there are some classics worth revisiting. The authors and friends of Oxford University Press are proud to present this series of essays, which will appear regularly until the New Year, drawing our attention to books both new and old. Here regular OUPblog columnist Louis René Beres tells us why Wealth of Nations by Adam Smith is still relevant today.
“Eat the rich.” This palpably unappetizing sign can still be seen at certain Occupy Wall Street demonstrations. Although obviously silly at a literally gastronomic level, the uncompromising message’s sub-text remains deeply serious. Above all, it reaffirms the steadily hardening polarities of growing class warfare in the United States. Plainly, America’s Edenic myth of “equality” continues to unravel before the sobering and relentless statistics of a continuously-entrenched plutocracy.
Whatever its chances for actually making a tangible policy difference (and these odds are certainly unclear at this point in the movement), Occupy Wall Street does have an essentially unassailable argument. The richest 1% of Americans now possess 40% of the country’s overall wealth. This same top 1% takes home 24% of the nation’s income, and owns over half of the nation’s stocks and bonds. If these fiscal asymmetries were not sufficiently disconcerting, the top 1% of Americans also hold less than 5% of the country’s personal debt.
Enter Adam Smith, and his Inquiry into the Nature and Causes of the Wealth of Nations (1776). In many ways, Wealth was an aptly revolutionary book, but it did not consciously seek to favor the monetary or social interests of any one class over another. Smith sought an optimal market of goods and services that would somehow promote the wealth of all competing classes simultaneously.
Famously, in an assessment that remains fashionably au courant with most present day conservatives, Smith claimed to have discovered an “invisible hand”, a critical convergence of satisfactions whereby the unstoppable compulsions of individual self-interest, and the equally insistent needs of an entire nation, might somehow seamlessly coincide.
What does this 18th-century stance have to do with our present and uncertain economic moment? For one, the classic argument of Adam Smith remains an axiomatic mainstay of conservatives. Smith, after all, had reasoned persuasively that a system of private property, though naturally unequal, could nonetheless permit the poor to live tolerably.
Rejecting his contemporary Jean Jacques Rousseau’s contrary position, that “the privileged few…gorge themselves with superfluities, while the starving multitude are in want of the bare necessities of life”, Smith saw in capitalism not just an enviably rising productivity, but also the indispensable foundation for political liberty. Later, of course, Marx saw in these very same and allegedly harmonious competitive dynamics an execrable source of unavoidable self-destruction.
In his time, Adam Smith was undaunted. Through capitalistic modes of production and exchange, he reasoned, an inextinguishable social inequality might still somehow be reconciled with steady and desirable trajectories of manifest human progress.
Today, interpreters of Adam Smith usually ignore, deliberately or unwittingly, the admirable depth of his complex thought. A system of “perfect liberty”, as he had described it, could never be based upon any foolish encouragements of needless consumption. The inexorable laws of the market, he insisted, driven by competition, and by a consequent “self-regulation”, demanded a principled disdain for all vanity-driven consumption.
In other words, “conspicuous consumption”, a phrase that would later be used more effectively by sociologist, Thorsten Veblen, could never be a rational engine for economic and social improvement. Today, this ineluctable point should resonate clearly and contentedly with Occupy Wall Street.
Adam Smith understood the dynamics of conspicuous consumption, but he also loathed and feared them. For him, it was only reasonable that the market should regulate both the price and quantity of goods according to the “natural” arbiter of public demand. This market, he urged accordingly, ought never to be manipulated
We have lost sight of Smith’s “natural liberty”. In vain, we attempt, instead, to construct a viable economic recovery upon whole oceans of demeaning slogans and empty witticisms. Our key problem of orchestrated hyper-consumption is not primarily economic. Instead, spurred on by personal doubts of self-worth and self-esteem, it is a determinably psychological problem.
While the point seems lost even upon Occupy Wall Street protestors, the financial community’s persisting fragility, and our consequent social inequality, is largely a mirror image of hyper-consumption. This manipulated drive, so objectionable to Adam Smith, has recently prompted learned economists to warn us against “saving too much”.
Whether Democrats or Republicans, Occupy Wall Street demonstrators or hedge fund managers, all Americans believe, more or less, that our national economic effort must somehow be oriented, conspicuously and unceasingly, toward buying more. Oddly, and disregarding Adam Smith, almost no one seems to inquire: What sort of society can we expect from an economic system that is shamelessly based upon social imitation and endless conformance?
Writing in the middle of the nineteenth century, the American Transcendentalist philosopher, Ralph Waldo Emerson, remarked presciently on ”self-reliance”. Any foolish “reliance upon property”, Emerson warned, is the regrettable result of “a want of self-reliance”. What corrective was needed? Emerson answered succinctly, and without hesitation: “High thinking and plain living”.
Nonetheless, the relentlessly conformist call of American mass society remains loud, crass and persuasive. In an unwitting reinforcement of Emerson, it even leads many of our fellow citizens to hold up signs that demand plaintively: “Live simply, so that I can simply live”.
In his Theory of Moral Sentiments (1759), Adam Smith first noted that human beings are not made happier by their possessions, but that the rich, in seeking the “gratification of their own vain and insatiable desires”, may still advance the “interest of society”. With remarkable originality, Smith explained, the wealthiest members of the nation, without ever intending any such generalized benefit, “are led by an invisible hand” to bring forth reductions in social inequality.
But, in 2011, where shall we actually discover these desirable “reductions”?
Back in the 18th century, Adam Smith would have likely shuddered with any foreknowledge of Occupy Wall Street, not because he would have been unsympathetic to the beleaguered foes of an ineradicable plutocracy, but because he had already recognized the implacable consequences of any economy that is based upon delusion. As long as our American economy remains animated, at its core, by both conspicuous consumption and unaffordable accumulation, an accelerating class warfare will be our tell-tale narrative. Here, distressingly, the seemingly inherent beauty of Smith’s “self-regulating” market, a dynamic flow of goods and services that is its own efficient guardian, will crumble inelegantly before the excessive wants of “ruthless profiteers”.
In such an omnivorous economy and society, an utterly agonized convulsion that would play havoc with Adam Smith’s “invisible hand”, there could be no asymmetrical Occupy Wall Street argument to “Eat the rich“. Rather, and in ironic consonance with recognizably Marxian “laws of motion”, rich and poor would be consumed together.
Louis René Beres was educated at Princeton (Ph.D., 1971) and is Professor of Political Science at Purdue University. He is author of many books and articles dealing with international relations and international law. Read his previous OUPblog posts here.