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Capitalism as a Moral System: Adam Smith's Critique of the Free Market Economy.

Adam Smith's writings have been read and interpreted in various ways by different writers. These varying interpretations can usually be grounded in the original works but represent the particular perspectives of the interpreters, altogether constituting a fundamental hermeneutic problem. One reading is not necessarily correct, though one can subjectively compare and rank different readings.

This perceptive volume can be read at four levels: (1) a close summary of Smith's ideas; (2) a critique of what the author considers the. gross misinterpretation and misuse of Smith's ideas; (3) the meaning of Smith's ideas on the basis of Smith's own theories of rhetoric, science, the impartial spectator, and the origin of moral and legal rules; and (4) the author's (brief but pointed) critique of the current moral status of capitalism.

First, Chapters 2 through 7 present reasonably comprehensive summaries of, or readers' guides to, Smith's works. Chapter 2 treats Smith's theories of wealth; division of labor; theory of value; inequalities caused by both the nature of the employments themselves and government actions; the behavior of landlords and capitalists; capital, private property and saving; and pro-labor attitudes. Chapter 3 treats Books III-V of the Wealth of Nations, focusing on Smith's analyses of economic history; systems of economic policy; and the functions, administration and financing of government. Chapter 4 is a showing that Smith was neither "a strict, dogmatic advocate of laissez-faire capitalism" [p. 51] nor in favor of regressive taxation. Here he, in part, examines regulation and other examples of governmental activism sanctioned by Smith.

Chapter 5, on the Theory of Moral Sentiments, considers human happiness as a function of status; the complexity of Smith's views on the motives for human behavior; and the role of the impartial spectator in the formation of moral judgments and the emergence and revision of moral, and legal, rules, the latter through the formation and internalization of social values and wants.

Chapter 6, dealing with Smith's Lectures on Rhetoric and Belles Lettres, emphasizes the human story-telling and imagination-soothing roles of science, especially the ways in which both represent the invisible chains which connect disjointed objects and introduce a sense of order into apparent chaos.

Chapter 7, based on Smith's Lectures on Jurisprudence, stresses that for Smith capitalism, with its particular legal-governmental arrangements, was the fourth of a four-stage model of social development. The Wealth of Nations was about that stage and its corresponding role of government, including the need to remove archaic rules and regulations.

Second, Pack argues that "Smith was not a dogmatic proponent of laissez-faire capitalism" and "actually had severe misgivings about the moral desirability of the system of capitalism," though he "nevertheless ultimately came out in favour of the system of capitalism" [p. 1]. He also argues that ideologies, policies and arguments, such as those of the Reagan administration, "flagrantly misused Smith's authority" [p. 21. Pack is insistent about the "vulgarization and ... bastardization of Smith" [p. 167]. Refutation of such misinterpretation and misuse, he finds, "needs to be made anew in every generation" [p. 70, n.21 (for example, by Jacob Viner and Nathan Rosenberg), but the job, he feels, needs doing again.

Correlatively, Pack argues in chapter 8 that Smith recognized and was pessimistic about the problems and moral defects of capitalism. He deals with what Smith had to say about the perversion of the character and ability of landlords, capitalists, and workers; the disingenuousness and dominance of business and property interests in the formation of law, made in their interests; and the perversion of self-interest and capitalism in the matter of colonies.

Third, in the final chapter Pack first brings together the complex but mixed view of capitalism held by Smith, and second argues that on the basis of Smith's own analysis we are involved willy-nilly, through the impartial spectator, in the task of reforming the moral and legal rules of capitalism. The latter is in part based on the recognition of the practical shortcomings of capitalism, e.g., instability, externalities and concentration of power, and on the evolution of our conceptions of virtue.

Fourth, Pack suggests that it may be "time to supersede capitalism" [p. 172], at least "time to put new rules and regulations on economic self-interest and greed" [p. 174].

Whatever one thinks of the fourth level, Pack is substantially correct and nonideological in his presentation of the first three. He is certainly correct that, in Smithian terms, we are continually engaged in reappraising the institutions of capitalism, in the process of the social reconstruction of the economy toward the type of society "we think would be most morally just and appropriate for us and our children" [p. 175]. As Pack says, "In Smith's view, we have nowhere else to turn" [p. 175]: we are necessarily engaged in that process whether we want to recognize it or not. At bottom, Pack's moral viewpoint is distinguished by both his positivist recognition of the ongoing need to revise the legal and moral rules of capitalism and by his normative disgust that the ideology of laissez-faire is used selectively and, hypocritically to support rules made by and in the interest of hierarchically superior powers, the very practices criticized by Smith.

What Pack needs to do next is to present his analysis of precisely how we should approach revising capitalism and its working rules and what kinds of changes should be made-not least with regard to the earlier changes introduced in the 1980s under the aegis of the ideologically and material-interest supported Reaganite cowboy capitalism. Pack feels both that a system "explicitly and consciously based upon production for monetary profit and individual self-interest has a certain repugnance to it" [p. 172] and that capitalism has been so successful in increasing the wealth of nations that he can query "whether the very success of capitalism does not now call for its supersession" [p. 168]. He is aware how complex, and perhaps contradictory, these questions are, and needs to deal with them. In any case, events in Eastern Europe and what once was the Soviet Union will provide ample insights into the processes by which economic institutions and their working rules are made and remade and these groups' presumable efforts to institutionalize a more humane capitalism, or market economy. A key Smithian question is whether one can have a market economy without domination by business and property interests (for example, in the making of law in their interests).
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Author:Samuels, Warren J.
Publication:Southern Economic Journal
Article Type:Book Review
Date:Jul 1, 1992
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