Adam Smith would have been more concerned about the economics of the farm (rather than the mechanics and the temperament of the of actual cows) as he toured us around the global (actually, Western to be more accurate) economy of the 1780s, but I chose this video advisedly. The world of Adam Smith was a decidedly agrarian world. It was also written from the unique vantage-point straddling the times of feudalism and the Industrial Revolution.
In a lot of ways, I found the book to be an anachronism. While parts of it were of great interest to me, there were also these sprawling sections listing prices of what something or other cost in Scotland in the 1780s or a tax on the Continent that probably hasn't existed for over 100 years, in values that are nothing like contemporary values. I found a great deal of food for thought in the topics he covers, but one of my major takeaways was that this work does not fit into the contemporary economic box. I would add that I certainly don't think it's a work that I would suggest we attempt to return to either. It is my opinion after having read the entire work that we have gone too far from the world of Adam Smith to try to apply his models in our time.
Here is a partial list of some important forces which have evolved in current Western economics that Adam Smith had no category for: insurance as we know it, healthcare, social security or even the basic concept of retirement, the military industrial complex and the reasons why we go to war, Bitcoin, a national debt of our staggering proportions, subscription based discount warehouse stores, any form of communication advanced beyond handwritten letters, advertising, Paypal, the Federal Reserve, credit cards, China, the Euro, outsourcing, welfare, national parks, public education as we know it, farming subsidies, the whole barrel of worms revolving around petroleum, copyrights on intellectual property in the age of eBooks and iPods, Berkshire Hathaway, pharmaceutical companies, lobbyists, Karl Marx, John Kenneth Galbraith, heck, even John Maynard Keynes for that matter, the housing bubble, the bursting of the housing bubble and certainly sub-prime mortgages, labor unions, hidden fees in banks, our baroque taxation structure (not that his was any less "vexing" as he puts it), environmental concerns and the extinction of entire species, and these are just what I'm rattling off the top of my head after reading the book. It is by no means comprehensive and merely an attempt to illustrate that we are not in the days of Adam Smith and any attempt to superimpose his world over ours strikes me as injudicious.
As the work progressed, more of Smith's personal opinions emerged. He attempts to frame them within an economic framework, but economics is an imperfect science. With economics, there is always the unspoken elephant that this is simply the model which we are operating under presently and is not "The Way It Must Be" as opposed to, say, the laws of physics. It is, in fact, arguably one of the sciences most subject to the socio-political point of view of the economist.
"So, what DID he talk about?" I hear you cry.
He talked about a lot of things, but mainly, I thought, he focused on three topics from which he elaborated outward to give a full picture of economics as he knew it. The three topics were: trade and labor, money, and taxation. He actually divides the piece into five "books" but I found those three topics to be the key points.
In the trade section, we discuss materials, wages, labor, apprenticeship and craftsmanship. One of the most striking points of the entire piece to me, in its relevance to my own life, was when he spoke of productive and unproductive labor. I should put a fine point on the fact that he is not making a qualitative judgment, at least not in saying that unproductive (or menial) labor is not important. Rather, he is saying that productive labor is one who mines, produces, or improves a material. In this section I thought quite a bit about how I have never been a productive laborer in my life. It reminded me of when I was in college and one of the men who worked in the technical side of the theater department urged me to go to a local community college and take a welding class. He told me that if I did I would never want to for work. Like a darned fool, I did not take his advice and, I confess, have had periods of my life since in which I have regretted that choice.
There is also a sort of proto-Industrial Revolution argument made for specialization. He talks about how, for example, a shoemaker does not raise and cut his own beef, the baker does not tailor his own clothing, and so forth. This is because their labor is deemed worth payment for those other services that humans find necessary and also because it would be too expensive for them to try to do everything. We see modern examples in purchasing bread at the grocery store for $1.85, while baking my own bread at home would be around a $4 loaf.
In the section of money, he discusses inflation and valuation, stock, and coinage (one of the more fascinating sections I thought. Turns out there was a problem for some time with variations of the amount of metal used in coins. People would hoard the heavier coins, melt them down, and wind up with more money than the coins were worth!)
In the section about taxation, he starts to say things like,
"There is no art which one government sooner learns of another, than that of draining money from the pockets of people."Which sounds rather toward the Right to our modern ears. He then goes to on to talk about the proper uses of funds gleaned from taxation on the part of the sovereign. One is to protect the citizens of the nation while within the nation from other nations attacking them. One is justice within the nation. And one, I was charmed to see, is the funds required to maintain the necessary dignity of the sovereign. He also states that the citizen ought to pay taxes without vexation due to the citizenship that they provide, the position within a community. He encourages the citizen that taxes are not enslaving, as some would say, but rather liberating in that they are a sign that one is, in fact, capable of owning enough privately to be taxed.
Speaking to this, however, I get the impression that Mr. Smith would be a little shocked and scandalized by Laurie and my recent predicament. He states that proper taxation will not cut into the necessities of life for the citizen. I think Mr. Smith would take some issue with the working lower-middle-class cutting into the necessities of life by the current rates of taxation while nothing but some of the luxuries of the wealthy are touched by their taxation.
I was also a little charmed that he chides Great Britain a bit at one point near the end in accusing them of attempting to create a nation of customers with North America. He says words to the effect of "and look how that turned out" from his point of view in the 1780s. From my point of view in 2012, I thought "My goodness! That's pretty much what we've become, isn't it?"
This really was the briefest of flyover reviews of an almost 600 page book. There was so much more to it that I couldn't possibly cover in one blog entry without losing followers. But I also want to say a few words about why someone should read it today. First of all, it is clear that this book was highly influential on the early thinkers of the United States (so, yes, at least as far as ideas were concerned, Mr. Smith did go to Washington.) I don't think that Mr. Smith's ideas are to blame for our current predicament of a society collapsing under the weight of its own covetousness. At one point, I felt, he addresses human nature indirectly.
He talks about smuggling towards the end, specifically that smuggling will be on the rise in times when importation taxes are high. He suggests two ways of stemming smuggling. One is to lower the importation taxes and the other is to hound smugglers out of existence by oppressive police measures. I think, here, he speaks to something deep within human nature. He also talks, earlier, about provision for the poor and those who cannot provide for themselves (although the British 1780s version is vastly different from the Chico 2012 version of handling those issues.) I felt that this shows a human concern. More to the point, however, I feel that Smith exhibits, throughout his text, a concern towards a reasonable and, I daresay, wise economy. All of the short term profit views, the pulling up of the planks of our own boat to sell while we're still at sea, that mark our sinking global economy would be folly and horrific to Mr. Smith.
More to the point, I think that returning to such an early piece that talked about such incubating versions of the economy that we know and rue today, we can get a better grasp on where exactly we diverted course, ideally with an eye specifically toward where we've gone agley. Not that I think that Adam Smith had all of the answers or that he was particularly correct in his model for how, essentially, humans treat one another during this brief tarriance on the mortal coil. More to the point, I feel like this book, especially now, might be a source of some relief to those holding the pieces of a broken dream and crying out "Why?!!?" to the silent heavens.