Why did Adam Smith become – and remain - such a towering figure in the economic and political thinking of the United States for nearly 250 years? On a sunny June evening, this question was brilliantly unpacked in a Lights of Caledonia event in Adam Smith’s Panmure House in Edinburgh.
Dr Glory Liu, as a Harvard University academic and now a teacher at John Hopkins University in Baltimore, is among the emerging elite of economic and political historians who are helping to re-define the significance of Adam Smith for the 21st century.
Like an Egyptologist trying to formulate thoughts from the fading hieroglyphs on the walls of the ancient tombs, so scouring the complete work of Kirkcaldy-born Adam Smith, brings fresh perspectives and exciting insights.
Dr Liu was introduced by Professor Adam Dixon, the Chair of Sustainable Capitalism, whose academic chair is based at Panmure House.
As an American, Dr Liu is intrigued by the question of why Adam Smith is primarily known as an economist – specifically an exponent of the free market – rather than an 18th Century Enlightenment moral philosopher.
In her thought-provoking exposition, Dr Liu examined Smith by using ‘reception history’ techniques to help us understand how and why some ideas become powerful and meaningful, while others fall by the wayside. Her thesis is that reception history, where ideas are interpreted by the readers depending on their cultural conditions, has played a massive part in how Smith’s work has been encountered by different audiences at different times and places.
“Reception explains the difference between what Smith might have originally meant or intended, and what the subsequent reader made of his ideas,” she writes.
This is pertinent because Dr Liu outlines the thesis of her book, Adam Smith’s America: How A Scottish Philosopher Became An Icon of American Capitalism [Princeton University Press, 2022], to look at how his ideas on power and statecraft in The Wealth of Nations, which first appeared in London bookshops in March 1776, landed during a period of colonial fervour in America.
She expertly charts how Smith’s ideas gained a foothold and were taken up by influential statesmen during the Founding Era of the United States, particularly James Madison and John Adams.
The first American edition of The Wealth of Nations was printed in Philadelphia in 1789 by Scottish publisher Thomas Dobson, and it gained popularity among those attracted to power and interested in the many moral questions that would define the development of this new nation. Over a period of 40 years, as the discipline of political economy emerged and grew, The Wealth of Nations became the primary text for the study of political economy in numerous US universities. The book’s popularity as essential reading for serious economists has remain ever since, and Smith’s reputation as an economist is towering. She also explains how the post-World War Two Chicago School of economics, led by George Stigler and Milton Friedman, transformed Adam Smith into an American neo-liberal icon of the late 20th century, a symbol of self-interest, choice and freedom.
The Wealth of Nations has been assigned on over 5,000 college syllabuses nationwide in the United States. In 2021, the work was ranked 44th among books assigned in college courses, one place ahead of Homer’s Odyssey.
Reception history helps explain how each new era of economic change took elements of Smith’s book and forged them into the relevant thinking of their time. His views on free trade and tariff policy helped define the American economic system after the war with Great Britain which ended in 1815,
As Dr Liu points out that the debate during the antebellum decade, before the American Civil War, was riddled with contradictions: “For the Cotton South, free trade was essential for the profitability of the unfree labour in the regions; tariffs were seen as a tax on slavery itself. For cotton and woollen manufacturers in the North, protectionism provided an opportunity to break into an emerging ‘home market,’ but it was a market whose primary customers were those seeking to outfit enslaved bodies in the cheapest way possible.”
In an 1820 debate the tariff question was characterised as an intellectual problem that posed the difficult choices between the “pre-eminence of the agricultural and exclusive system” on the one hand, and the system of “the disciples of the celebrated Adam Smith on the other.”
This celebrated posthumous status of Smith helps explain why The Wealth of Nations became such a seminal work for the formulation of America’s political economy, while The Theory of Moral Sentiments, which had been available in the colonial states from 1760, and read by the likes of Thomas Jefferson, never received the same attention and adulation, and was cast out into the cold for many years.
Over the years, following America’s post Civil War reconstruction and expansion, through the massive industrialisation period of growth, and through to the Great Depression, numerous economic thinkers interpreted The Wealth of Nations as the American economy rose to become the largest in the world, a fact which Smith had predicted.
However, it was in post-war Chicago from 1946, as the economics and the law departments at the University of Chicago drew closer, that the likes of George Stigler and Milton Friedman became flag wavers for a robust free-market economic model, using Adam Smith as their intellectual inspiration. Stigler turned Smith’s idea of self-interest into a full-blooded axiom of modern economics.
“Whereas the earlier generation embraced the ambiguities, complexities, and tensions in Smith’s ideas, Stigler stripped those features away,” says Dr Liu.
Milton Friedman’s major work Capitalism and Freedom, which appeared in 1962, sought to demonstrate that competitive capitalism was a “system of economic freedom and a necessary condition for political freedom.”
In the 1970s, Friedman became the godfather of the ‘monetarism’ theory, which cast doubt on the prevailing view of Keynesian and mainstream theories of money, where the state intervened to stimulate growth. Moreover, Friedman became an economic advisers to several US Presidents and an influential economic commentator.
Friedman used Adam Smith to justify many of his views and spoke about the important of ‘the invisible hand’, which was an essential aspect of a free market and free society.
The Chicago School in many respects managed to hijack Adam Smith for a more right-of-centre political discourse, which paid scant attention to his idea of human empathy expounded in The Theory of Moral Sentiments.
Dr Liu is calling for us to look again at Adam Smith. Today, many international Smith scholars have been reassessing the two tomes together, plus his Letters of Jurisprudence. They want to see Smith recalibrated as a moral philosopher as much as the ‘father of modern economics’. They argue it is vitally important to appreciate and consider both books in determining Smith’s oeuvre.
In doing so, Dr Liu asks us to look again at Adam Smith's writing, arguing his relevance today is as strong as ever.
“We should read Smith because he asks interesting and important questions.”
For 250 years, many scholars and political theorists have turned to Smith because they wanted prescriptive answers to the particular questions of their time, such as what is free trade debt, what are the moral foundations of capitalism and what kind of a problem is poverty?
Dr Liu warned that by posing questions about Smith’s writing we are often searching for supportive answers which fall into line with our preconceived ideas and prejudices. This, she explains, has distorted Adam Smith for political and ideological purposes.
“We should read Smith not because we want iterative answers, or iterative positions but because we want a better understanding of the nature of his questions and his approach to problems. So rather than assuming that Smith has an answer to questions that we’re asking ourselves, we have to carefully reconstruct the way Smith posed questions, puzzles and problems and be attentive to the way these questions are generative of interesting insights.”
She also said we must read Smith because he doesn’t give answers when you want them. She recounted that a professor at Stanford instilled in her: “What is the question to which your dissertation is the answer?”
Dr Liu conceded that Adam Smith’s 18th century writing style in not always conducive to identifying what the central question is as his sentences are ‘declaratory’ and ‘extremely digressive’. However, by reading his work we can find out what kind of thinker he is and how he posed puzzles and questions.
In concluding, she said it is still worthwhile reading Adam Smith to understand how we frame the vital questions needed to resolve the great moral and political issues of our times.
In the questions and answers which followed, led by Professor Dixon, Heriot-Wat University Court member Graham Watson asked her how she thought Adam Smith might respond to the world of Artificial Intelligence. She replied with the same vigour and forensic application that he applied to the most pressing issues of his day.