Where does Adam Smith fit into the history of economic and political thought? D’Amato surveys the disputed ideological territory.

David S. D’Amato is an attorney, a regular opinion contributor at The Hill, and an expert policy advisor to the Future of Freedom Foundation and the Heartland Institute. His writing has appeared in Forbes, Newsweek, The American Spectator, the Washington Examiner, Investor’s Business Daily, The Daily Caller, RealClearPolicy, Townhall, CounterPunch, and many others, as well as at nonpartisan, nonpartisan policy organizations such as the American Institute for Economic Research, the Centre for Policy Studies, the Institute for Economic Affairs, the Foundation for Economic Education, and the Institute for Ethics and Emerging Technologies, among others. He earned a JD from New England School of Law and an LLM in Global Law and Technology from Suffolk University Law School. He lives and writes in Chicago.

The “industrialist” theory of class owes no small debt to the ideas of Smith, channeled through the work of Comte and Dunoyer’s teacher, the great economist Jean‐​Baptiste Say. In particular, Smith had developed a theory of history, notably divided into four stages, which became central to the radical liberalism of Comte and Dunoyer. Hart notes that, due to the outsized influence of Marx, the very idea of “historical evolution through economic stages” now smacks of socialism, many on the left forgetting that such theories originate in the work of free market thinkers. Smith’s final stage, “the age of commerce,” is the obvious model for the “industry” that is the ultimate period in Comte and Dunoyer’s work, and both “conjectural” histories 1 closely parallel, for example, Hegel’s conception of history. Such histories are pedagogic devices as much as they are attempts to set forth actual historical facts, intended to advance certain normative ideas. And the ideas so advanced cannot be reckoned conservative in any plausible sense. Against the orthodoxies of his day, Smith counseled “allowing every man to pursue his own interest his own way, upon the liberal plan of equality, liberty, and justice,” a formula that we should expect to make Smith much more popular on the left.

Recent scholarship that attempts to “reclaim [Smith] as a hero and inspiration for the political left” has regrettably reduced the meaning of leftism to government redistribution of wealth (see Craig Smith’s “Adam Smith: Left or Right?”). Perhaps this stands to reason. For as philosopher Samuel Fleischacker observes, “[T]he main issues of [Smith’s] day did not include the most prominent question for progressives today: whether or not governments should intervene in the economy to redistribute wealth.” Yet that seems to be the very question to which Smith addresses himself in his masterwork, albeit in such a way as to make it difficult for contemporary progressives to apprehend. Smith’s indictment of mercantilism describes it as a government‐​created system that unjustly enriches manufacturers and merchants as the expense of the broader population—that is, as a wealth‐​redistribution scheme, though not an egalitarian one. While it may escape today’s left, this fact did not go unnoticed in the years and decades following The Wealth of Nations. Teasing out the implications of Smith’s ideas, liberal thinkers such as Thomas Hodgskin employed them in a distinctly left‐​wing denunciation of “capitalists and landlords.” Twentieth century libertarians have emphatically denied that Hodgskin’s work represents a strain of socialism, insisting that he is a forerunner of libertarianism, as a natural‐​rights individualist and free marketer. But perhaps both can be true, with Hodgskin’s thought sitting at a point of intersection between liberalism, socialism, and libertarianism that at one time did not seem so very baffling. The literature on the development of early socialism in Britain has focused much attention on the derivation of Hodgskin’s thought in the classical economics tradition—in particular, on whether Hodgskin’s true master was Ricardo or Smith. 2 For the purposes of this discussion, however, it will suffice to point out the constitutive centrality of the whole classical paradigm in subsequent theories of class and exploitation. This liberalism lent its class analyses to nascent socialism through several different channels. Gunnar Myrdal, co‐​winner, along with Friedrich Hayek, of the 1974 Nobel Prize in economics, went so far as to say that “[a]ll British socialists at the end of the eighteenth and the beginning of the nineteenth century claimed Smith as their master.”

Another nineteenth century figure sitting at the strange and fascinating intersection of liberalism, socialism, and libertarianism is the American publisher Benjamin R. Tucker, whose work also bears the telltale marks of Smith’s influence. Smith was a pioneer in the use of the concept of economic equilibrium, a hypothesized state of balance toward which free markets are constantly tending. This chimerical idea of an economy in equilibrium, with perfect competition and perfectly stable prices, provided American individualist anarchists like Tucker with their distinctive theory of exploitation. They believed that genuinely free competition, defined very much as today’s libertarians define it, would mean a perfect identity between cost and price, competitive pressures allowing for no space between the two. This conclusion has been much less than clear to the free market faithful in the time since individualist anarchism of the Tucker kind went extinct. 3 The salient class analysis lessons of this individualist anarchist tradition nonetheless remain: free market competition is not to blame for the inequalities and prevalent abuses of corporate power of which the commentaries of the left quite justifiably complain. If the state is the root cause of these problems, then looking to state planning and intervention to solve them would seem to be absurd.

For Murray Rothbard, Smith’s impact on socialism and his apparent role as “a necessary precursor of Karl Marx” was problematic. Rothbard is famously rough in his handling of Smith’s esteemed legacy in Economic Thought Before Adam Smith, Volume I of An Austrian Perspective on the History of Economic Thought. And Rothbard as much as admits that he has an ax to grind, that he has set out to right the record and repair some of the damage of “Smith‐​worship.” He doesn’t pull punches, challenging Smith’s “superhuman” reputation with characteristic verve: “Smith actually took the sound, and almost fully developed, proto‐​Austrian subjective value tradition, and tragically shunted economics on to a false path, a dead end from which the Austrians had to rescue economics a century later.” Rothbard of course goes too far in this characterization of Smith as “the destroyer of a previously sound tradition of economic theory.” But certainly he is correct that what we now call economics existed in some form prior to The Wealth of Nations, and further that earlier thinkers like Richard Cantillon and the physiocrat Jacques Turgot are regrettably underappreciated, eclipsed by the towering Smith. Of course Smith himself cannot be blamed for such oversight, and most libertarians today agree: his contributions far outweigh any errors. If Rothbard highlighted the debate about whether Smith is the truly the Father of Economics, then there are similar questions about whether he is the Father of Capitalism. Smith, of course, never uses the word, which doesn’t come into vogue until much later, after “capitalist” 4 had been in use for decades (probably centuries); and indeed, even once “capitalism” passes into the vernacular, Smith’s heirs, liberal and libertarian free‐​traders of various kinds, do not adopt it as a name for their free market philosophy. Only later did twentieth century libertarians begin to use “capitalist” and “capitalism” favorably, perhaps in defiance, much as Pierre‐​Joseph Proudhon used “anarchist” and Ayn Rand “selfish.” As Alfred E. Eckes writes, “Probably Adam Smith would have been surprised at how recent generations interpreted his message and made him the ‘godfather’ of modern capitalism.” Insofar as we treat Smith as an icon or symbol of capitalism, we may miss out on the worthwhile contributions of Smith the class warrior, whose ideas championed the politically powerless and the poor.

All forms of economic planning still belong on the right, as essentially authoritarian systems like feudalism, mercantilism, and fascism. As the great economist Don Lavoie teaches:

When the story of the Left is seen in this light, the idea of economic planning begins to appear not only accidentally but inherently reactionary. The theory of planning was, from its inception, modeled after feudal and militaristic organizations. Elements of the Left tried to transform it into a radical program, to fit it into a progressive revolutionary vision. But it doesn’t fit. Attempts to implement this theory invariably reveal its true nature. The practice of planning is nothing but the militarization of the economy.

Given these rather uncontroversial historical connections, the contemporary conversation about wealth inequality, social justice, and class conflict as it exists within the capitalist system seems to beg for a radical rethinking. Pundits on both left and right seem to have forgotten what old‐​time liberals and libertarians articulated so compellingly—that liberty and equality come and go together, a mated pair. The liberal thought revolution of the eighteenth and nineteenth centuries, led by giants like Smith, created a world in which we just assume that people of all backgrounds and classes are equal in their rights and deserve to be free. Carried to their conclusions, these simple principles have much transformative work left to do.

1. See Jacqueline Taylor’s “The Idea of a Science of Human Nature” in The Oxford Handbook of British Philosophy in the Eighteenth Century, edited by James A. Harris (Oxford University Press 2013), page 69.

2. The term “Ricardian Socialism” emerges, in the writing of economic historian James Bonar, specifically within the context of discussing Hodgskin’s development of the surplus value idea. Still, subsequent generations of scholars have, citing important commonalities between Hodgskin and Smith, challenged the applicability of the label. In Nature and Artifice: The Life and Thought of Thomas Hodgskin (1787–1869), David Stack notes that the historian Noel Thompson rechristens Hodgskin a “Smithian” socialist.

3. For a more complete look at individualist anarchism, see “On Voluntary Socialism.”

4. Of the two definitions of “capitalist” offered by Merriam‐​Webster (of the noun form, that is), the first is the manner in which eighteenth and nineteenth century speakers and writers would have used the word: “a person who has capital especially invested in business; broadly : a person of wealth : plutocrat.”