If you want to understand the arguments that separate the left and right, Adam Smith is a good place to start. He is usually acknowledged as the father of economics, but he was not an economist. Neither economists nor economics really existed when he published his book, “The Wealth of Nations,” in 1776.
Smith was a moral philosopher, and his thoughts and observations on commerce, markets and investment changed the world’s view of economic activity. And, unsurprisingly, the fulcrum of that revolutionary change was a moral judgment.
Economist and economics were not the only words missing in 1776. The word “capitalism” wouldn’t exist until the next century. Smith legitimized the free market system and gave it moral standing in modern society. His “invisible hand” that guided self-interest in a free market freed participants from guilt from exercising their self-interest. Individuals in a capitalist society no longer needed to apologize for things like profits, which had been looked at as immoral or, at the very least, anti-social. With apologies to Smith, it was a long-form version of “Greed is good.”
Despite any residual moral reservations, the free market system expanded rapidly throughout the 19th century. Critics began to emerge, too, as capitalism and its then-alter ego, industrialization, began to make its visible impact on environment and society. It was these critics, in fact, that coined the word “capitalism” as a pejorative to describe the free market system and its distribution of rewards.
The critics with the highest and most lasting impacts were Charles Dickens and Karl Marx. Our images of Ebenezer Scrooge remain vivid today and still color some people’s view of businessmen. And of course, Marxism is still with us, even though in many respects he was less a critic of capitalism than its analyst. He believed that capitalism’s side effects, especially unemployment, would eventually cause it to self-destruct and be replaced by socialism.
There were many other critics of capitalism, though, some with interesting insights and compelling arguments, primarily on moral grounds. Tim Rogan, who teaches history at St. Catherine’s College of Cambridge University, has written a book, recently published by Princeton University Press, entitled “The Moral Economists.” In it, he presents the origins and history of free market critics and why they ultimately failed to change capitalism’s trajectory, and selects three of these critics whose analysis of capitalism from a moral standpoint had a significant impact on economic thought: R.H. Tawney, Karl Polanyi and E.P. Thompson
All three, to be sure, were leftist thinkers, as we would expect critics of capitalism to be. Rogan’s interest, though, is in investigating the moral arguments they made and finding out why morality-based critics of capitalism failed to gain traction. But they didn’t fail immediately. As he notes, the moral criticism of capitalism “… was a success before it was a failure.”
The moral critics selected by Rogan are the three that stayed the closest to economics and economic theory in their work — even though, like Adam Smith, they were not economists. Rogan’s book addresses their work in an effort to explain why moral criticism of capitalism has virtually disappeared from the scene, leaving us with pallid and unconvincing statistics showing income inequalities.
Of the three critics of capitalism selected as “The Moral Economists,” undoubtedly the best known in America is R.H. Tawney, whose book, “Religion and The Rise of Capitalism,” had a significant impact on both economists and historians. His central thesis that capitalism drives away values and motivations other than acquisitiveness remains very much alive today.
Still alive, also, are the works and thoughts of E. P. Thompson on the development of the working class, and Karl Polanyi on how the market system came to be adopted by society. Still, these theoretical works, and moral-based criticism are forced to sit at economic theory’s kiddie table.
Metrics today dominate determine the menu of economic thought; economics-based criticisms of capitalism are limited to pallid statistical studies of the income inequalities of capitalism. Without economic thought and theory, though, these criticisms lack the cause or causes of this maldistribution and we are left guessing at a remedy. The latest and most elaborate of these statistical studies is French economist Thomas Pinketty’s “Capital in the Twenty-First Century,” which has sold over 2½ million copies. Unfortunately, while its statistics are informative, an apparent mix-up of cause and effect causes readers to consider a conclusion that is in direct conflict with the fundamental precepts of economics: the laws of supply and demand.
Why should we be interested in this stuff? Because it helps us understand the political standoff of left and right and, more importantly, to gain some insights on how we might find a way out of it. Worthwhile? You bet.
James McCusker is a Bothell economist, educator and consultant.