In Praise of Enterprise

Adam Smith in His Time and Ours: Designing the Decent Society.
by Jerry Z. Muller.
Free Press. 272 pp. $22.95.

For Aristotle, politics was the highest sphere of human activity because it regulated and directed conduct toward the communal (as opposed to the individual) good:

For even if the good of the community coincides with that of the individual, the good of the community is clearly a greater and more perfect good both to get and to keep.

Commerce, on the other hand, was bad in Aristotle’s eyes:

In the community that is most finely governed, the citizens shall not live a vulgar or a merchant’s way of life, for this sort of life is ignoble and contrary to virtue.

Ever since Aristotle, Western society has been at war with itself about the value of commerce and, in the end, of economic liberty: so necessary (at least to those who, unlike Aristotle, do not live in a slave-owning society), and yet so base, so self-aggrandizing, so antithetical to the general welfare. Even in laissez-faire circles the notion of virtue in the pursuit of wealth is seen as something of an oxymoron: instead, the motto is, Harness Greed!

Thus we come to what is by now a familiar contradiction. Communism has been shattered and discredited, and the focus of much economic thinking on the Left has shifted away from the virtues of socialism (which turns out to be “imperfect,” after all). Nevertheless, the free-market forces that helped lead to Communism’s dissolution are still widely held to be not only deficient but conducive to antisocial, even immoral, behavior.

All the more reason, then, to welcome this thoughtful and accessible book by Jerry Muller, who teaches history at Catholic University in Washington. Muller has taken the discussion of free enterprise’s notorious principle of self-interest back to its roots in the Scottish Enlightenment, and has shown it to be a refutation of Aristotle: not only a necessity for the economic well-being of society, but also a necessary basis for social virtue. Homo economicus is not only successful, he is good.

In making his case, Muller returns to the primary source: the works of Adam Smith. The principal text is not The Wealth of Nations (published in 1776) but Smith’s ethical treatise, The Theory of Moral Sentiments (written in 1751 and rewritten many times before Smith’s death in 1790), and the reconstructed notes of Smith’s unfinished work on politics and government, published as Lectures on Jurisprudence. There is much here to conjure with, since Smith—a classicist of note, professor (at age twenty-eight) of logic and rhetoric at the University of Glasgow, in his mature years commissioner of customs for Scotland—was first and foremost a moral philosopher, whose main intention, in his own words, was

to animate the public passions of men, and rouse them to seek out the means of promoting the happiness of the society.

The happy society, according to Smith, had a name: commercial society. In making that assertion, Smith revealed himself to be a revolutionary, the founder not merely of a scientific economic discipline but also of a social morality and an ethics. The good society, he contended, repudiating the idea of commercial activity propounded by landowning aristocracies and Christian teachers over the centuries, was one based on “universal opulence,” by which he meant the well-being of all its members.

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Yet far from glorifying greed and private acquisition, Smith, as Muller reminds us, defined wealth in social terms. He saw the foundation of opulence in the social division of labor and in the principles of exchange which made that division possible. These gave people who had previously been chattels a new basis for affirming their human dignity. The man who “lives by exchanging, or becomes in some measure a merchant,” was free. And Smith went a crucial step further: the same man was likely to be virtuous.

At bottom, Smith argued that man, “naturally sociable,” was a victim of passions that could nevertheless be channeled into virtues—and not merely by the “invisible hand” of the market. That image, which has supplied perennial ammunition for anticapitalists, in fact appears only once in The Wealth of Nations. Smith’s point was far more subtle: for “weak and imperfect” man to gain wealth in commercial society, he would be required to exercise “economy, industry, discretion, attention, the application of thought”—the opposites of antisocial vice and passion. In a word, the cardinal virtue of commercial society was self-command.

True, the basis of that self-control (as Smith saw it) was self-interestedness, or pride, the fundamental sin of medieval theology. But therein lay the fruitful paradox. Human egotism modulated by social interaction was, in Smith’s view, the basis of morality. Rather than loving our neighbor as ourselves—egotism extended—we learn in commercial society to “love ourselves as we love our neighbor”—egotism restrained. To Smith, man’s improved moral and ethical condition would be a function of the institutions in which he lived and worked.

As Muller argues repeatedly, the man who collected excise taxes for Scotland was no fanatical enemy of government or the state. (In Smith’s formulation: “To say that government is expensive and the people not oppressed is to say that the people are rich.”) He saw a clear role for government in national defense, the protection of life and property, public education—and in the breakup of monopoly, rent-seeking, and other forms of noncompetitive self-aggrandizement. Above all, Smith saw the domestic role of the state as helping to ensure that no one—even when dispensing public goods—could avoid the market, the wellspring of social discipline and thus of virtue.

There is plenty here for modern policy wonks to consider, as the U.S. enters a new era of debate over the leading role of government versus free enterprise. Muller’s contribution to that debate is to remind all sides that free enterprise has a purpose—and a good one.