Adam Smith in His Time and Ours: Designing the Decent Society.

BOTH enemies and doctrinaires of the free market have become accustomed in recent years to representing Adam Smith as a species of proto-libertarian, an advocate of market institutions who believed that they needed only the motive of self-interest to make them work for the general good. On this interpretation of his thought, as a precursor of the modern antinomian heresy of libertarianism, Smith viewed the market as a kind of perpetual-motion machine, which, once it had been emancipated from governmental interference, needed none of the traditional virtues to remain at work as an engine of wealth-creation and a motor of human progress. Market institutions on this view were free-standing expressions of a system of natural liberty which is no way needed the support of strong moral traditions for their stability or justification.

It is this view of markets, as amoral devices of wealth-creation, that has been adopted by the most unreflective defenders of free enterprise, and which has exposed the market to moral criticism by liberals and socialists that has not always been unwarranted. This view of markets has indeed set the tone of much recent conservative thought, which proceeds on the unspoken premise that, whereas the market may have little of virtue about it, there is no alternative to it, now that socialism has everywhere collapsed. Or else it is maintained by latter-day libertarians who see themselves as the heirs to classical liberalism that the market needs no moral foundations beyond those it has in individual freedom.

It is among the many merits of Jerry Muller's profoundly erudite and timely study that it shows beyond any doubt that these simplistic views have no warrant in the thought of Adam Smith. For Smith, it was certainly one of the benefits of the market that it harnessed self-interest to the public good, thereby enabling men to serve others without making too great demands on the scarce resource of benevolence. It is nevertheless a complete caricature of his thought to represent him as neglecting the dependency of well-functioning markets on a cultural inheritance of moral traditions, or to ignore the concern he frequently voiced that the workings of markets day, such as the conquest of the teaching profession by antinomian doctrines which repudiate the disciplines necessary for the transmission of a cultural inheritance, and, even more ominously, the transformation of the family into a vehicle of self-fulfillment, whereby it is fractured by frequent divorce, and childhood is conceived not as a hard apprenticeship to adulthood but as a paradisal state devoted to play rather than learning.

Again, Smith was certainly right to focus on the dangers confronting commercial societies in which the martial virtues have lost status and popular recognition, but his reliance upon a professional army equipped with the latest firepower seems less than convincing today. It hardly does justice to the dangers that lie ahead for us, partly because technologies of mass destruction become ever cheaper with scientific advance and their proliferation in the anarchic Third World ever harder to stem, and partly because the Western democracies seem unwilling even to shoulder the burden of defense expenditure needed to protect themselves--as the recklessly imprudent and strategically ill-considered cuts in defense proposed in the United States by the Clinton Administration, and replicated throughout much of the Western world, suggest. Smith's remedies do not seem adequate to a situation in which only wars without significant Allied casualties can be justified to Western public opinion, and in which even the expenditures needed for high-tech weaponries are regarded as unjustified transfers from welfare.

It is difficult to resist the conclusion that, despite their extraordinary capacity for wealth-creation, the Western commercial societies lack the virtues needed for survival in an intractably disordered world. One may go further and note that the link between flourishing market institutions and an individualist morality has been shown by the experience of the East Asian countries in our time to be accidental. It may even be--as Schumpeter conjectured--that individualism is a self-limiting episode, so that the future of market institutions lies in non-individualist cultures. It is one of the many merits of Smith's thought, and of Muller's fine study, that it inspires these hard questions, so alien and uncongenial to the self-congratulatory triumphalism that passed for conservative thought in the Eighties.