An Anarchist on Adam Smith

Paul Bowman publishes an article, “What is Communism?” (“An anarchist analysis of the history and meaning of communism”), in Anarkismo.net, Oct 21 2005 .

In his long article, Paul Bowman states:

“Political economy begins with the work of Adam Smith in the late 17th [sic] century. Smith's "Wealth of Nations" was a project of leaving behind the religious discourse of the previous century's Civil War where political tendencies couched their class aspirations and ambitions in the language of theology. To do so he followed the enlightenment push to create a secular, rational and "scientific" discourse which attempted to avoid the murderous and indeterminable controversies of religion by reference to "facts". The aim was to determine the best course of government action or policy directed to the end of increasing overall wealth. In order to do this the challenge was to define a reliable measure of wealth or "value". Given the history of inflation, currency alone was clearly not viable as a direct measure. In the end Smith settled for a theory of value based on the amount of labour embodied in goods produced.

This was the basis of what was to be further developed by subsequent political economists such as James Mill and David Ricardo as the "labour theory of value" - that is the theory that the underlying value of that makes a given amount of grain exchangeable for a given amount of wrought iron or cloth is determined by the average amount of labour time necessary for the production of each product. The main question addressed by Smith's political economy was how changes in the distribution of wealth affected the rate of growth of the overall wealth of the nation. The main argument was that those government policies which, through taxation, re-distributed wealth from the manufacturing and commerce sectors to the land-owners retarded growth as the latter group, being unwilling to re-invest the extra income into more wealth-generating industry, simply frittered it away in excess personal consumption.

From the outset political economy was a subject with an agenda, namely that of defending the interests of the rising manufacturing classes against those of the dominant land-owning gentry and aristocracy who had a monopoly on governmental power. At the same time, through the arguments of political economists like Thomas Malthus, they argued against the effectiveness of the Poor Relief taxes the manufacturing bosses had to pay for the feeding of the poor and unemployed during periods of economic slump and high unemployment. This latter aspect came particularly to the fore in the great economic slump that followed the ending of the Napoleonic wars in 1815 [?] and the struggle around the proposed legalisation of unions in 1824.”

Comment

There are several points to be made about these extracts. It follows the norm for ideological analyses of ideas in the constant allusion to the ‘conspiracies’ of ‘collusion’ between authors, like Adam Smith, and members of a ‘ruling class’, who, secretly, control everything.

Bowman asserts that to increase “overall wealth” the “challenge was to define a reliable measure of wealth”. He chooses to call this "value", and in particular the “labour theory of value”. That assertion exaggerates the role of a labour theory of value in Smith’s arguments. Smith follows John Locke’s idea that in the ‘rude state of society’ (hunting) the prey belonged to the hunter, and this was probably true, though Smith also discusses plausibly how arguments over prey and products of gathering were also common. None of Smith's analysis of commercial society required a labour theory of value; he showed in his 'natural' and 'market' theory of prices (demand and supply!) how wealth, as he defined it, is created and distributed between rent, wages and profit. That Ricardo and Marx continued down the labour value dead-end (19th century) was their responsibility, not Smith's.

The labour theory of value became non-relevant when the production of wealth (the annual produce of agriculture, trade and manufacturing) depended on the division of labour and the ownership of property.

Measuring Smithian wealth is not a complicated process, and certainly not as complicated, vague and ultimately implausible as it became many decades later in the mid-19th century (see my review of Marx’s labour theories of value and ‘surplus value’ in ‘Capital’ in the Articles button on the left column).

There must be something paradoxical in the image Bowman presents of 18th century political economists “defending the interests of the rising manufacturing classes against those of the dominant land-owning gentry and aristocracy who had a monopoly on governmental power” and his own obvious disapproval of the same landowners, from an historical perspective, for frittering their profits “away in excess personal consumption” instead of investing it to create more wealth, the bulk of which was consumed by the labouring poor (sheer weight of numbers, not generosity)!

Smith’s trenchant critique of the agricultural owners in the 18th (not the 17th!) century was certainly aimed at the ‘non-improvers’ among them, but not the improvers and the yeoman farmers of Britain (and those in the American colonies, of whom he had great hopes – he predicted the America farmers would make their country the richest in the world by 1870 as measured by real output, not, er, ‘labour value’).

I know of no evidence that he was writing in this manner on behalf of the "merchants and manufacturers" of mid-18th century Britain (of whom he expressed his suspicions in many places in "Wealth of nations"), and he could not have been doing so on behalf of capitalists in 19th century Britain (he died in 1790). And that's the problem with conspiracy theories; they are unprovable - untestable, too! - and answer everything and nothing. Because they are asserted, it does not follow that they are true or believable, or even credible.