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Few issues are more central to our present predicaments than the relationship between economics and politics. In the century after Adam Smith's Wealth of Nations the British economy was transformed. After Adam Smith looks at how politics and political economy were articulated and altered. It considers how grand ideas about the connections between individual liberty, free markets, and social and economic justice sometimes attributed to Smith are as much the product of gradual ...
Few issues are more central to our present predicaments than the relationship between economics and politics. In the century after Adam Smith's Wealth of Nations the British economy was transformed. After Adam Smith looks at how politics and political economy were articulated and altered. It considers how grand ideas about the connections between individual liberty, free markets, and social and economic justice sometimes attributed to Smith are as much the product of gradual modifications and changes wrought by later writers.
Thomas Robert Malthus, David Ricardo, James Mill, John Stuart Mill, and other liberals, radicals, and reformers had a hand in conceptual transformations that culminated in the advent of neoclassical economics. The population problem, the declining importance of agriculture, the consequences of industrialization, the structural characteristics of civil society, the role of the state in economic affairs, and the possible limits to progress were questions that underwent significant readjustments as the thinkers who confronted them in different times and circumstances reworked the framework of ideas advanced by Smith--transforming the dialogue between politics and political economy. By the end of the nineteenth century an industrialized and globalized market economy had firmly established itself. By exploring how questions Smith had originally grappled with were recast as the economy and the principles of political economy altered during the nineteenth century, this book demonstrates that we are as much the heirs of later images of Smith as we are of Smith himself.
Many writers helped shape different ways of thinking about economics and politics after Adam Smith. By ignoring their interventions we risk misreading our past--and also misusing it--when thinking about the choices at the interface of economics and politics that confront us today.
"This is an important, sound analysis of the interrelation between political and economic theory in the century after Adam Smith. . . . This book exemplifies the best contemporary work on the nexus of political and economic theory."—Choice
"Milgate and Stimson produce a very careful and detailed analysis of early economists' ideas on issues shaping the modern concept of the political order, in the process displaying a rich array of competing ideas. . . . [T]his book provides a striking perspective on classical political economy. The reader will benefit from some prior familiarity with Smith, Malthus, Ricardo and J. S. Mill, along with the Utilitarians."—Donald Frey, EH.net (Economic History Association)
"In the last decade, scholars have moved away from the interpretation of Smith as a simple economic determinist who espoused lasissez-faire economics, and Milgate and Simpson have advanced their undertaking immensely with this book."—Donald Stabile, Australian Economic History Review
"Milgate and Stimson have undertaken . . . enormous scholarship in writing their book. Scholars and students of the history of economic ideas, as well as of the history of political economy and political thought in nineteenth-century Europe can benefit enormously from this book."—Farhad Rassekh, History of Economic Ideas
This book considers a number of the key political and economic themes and concepts that emerged in the early period of political economy up to the final quarter of the nineteenth century. We trace the manner in which a systematic interrelationship between politics and political economy was developed, altered, and refined in those years. Many writers and many circumstances contributed to the formation and development of politics and political economy. Who these writers were, what contexts might be useful in understanding their ideas, and how those ideas shaped the discourse of politics and political economy form the object of our analysis. That Adam Smith and John Stuart Mill have garnered by far the most attention in this arena-and that the secondary interest in their work shows no sign of diminishing in intensity-goes without saying. Yet there exist only a few substantive attempts either to connect those ideas and arguments about politics systematically to the economic thinking of those two individual writers, or more importantly to trace the interdependent development of politics and political economy in their as well as others hands.
Our interest is to show how, and in what ways, political economists sought to influence and alter the understanding of politics and political life in these years. We are concerned with a transition that took place between an eighteenth-century discourse on commercial society and the liberty of trade, and an understanding of these same subjects as they came to be exemplified in later nineteenth-century considerations of both politics and political economy. Our canvass covers the landscape, then, of what is now called classical political economy-and our object is to chart the conceptual transformations in politics and political economy, and the perceived relationships between them, that took place after Adam Smith.
In the years between 1750 and 1870 there appeared a range of efforts to develop a new and sophisticated framework of concepts through which, it was believed, one might secure a better understanding of the commercial and subsequently industrial character of civil society. From these efforts was to emerge not only an identifiable discipline known as political economy but also, in the hands of some, a science of politics. Questions of how and to what effect order and good government, justice and individual liberty, might be enhanced or compromised by the workings of the market were widely canvassed-and the findings of the new discourse of political economy came increasingly to inform (and transform) the answers. Politics and political economy began to be seen as systematically interrelated, and it has remained so ever since.
These developments often overlapped, often drew on each other, and were often forged in the hands of the very same writers. They took shape over time, and by way of mutual theoretical interaction and criticism, as part of an ongoing and sometimes volatile conversation concerning both the nature of market society along with the characteristics of the polity and policies appropriate to it. In these years, political economy was at the epicentre of new and unfolding understandings of society; it could illuminate, it seemed to some, not only the movements in the price of provisions but also the very basis of liberty and progress.
1. Smith's Wealth of Nations and Mill's Principles of Political Economy stand, in a sense, at the beginning and the end of the nearly one hundred years of developments that concern us here. Of course, not all issues were treated in the same depth or with the same intentions by Smith and Mill, and not all of their arguments proceeded to entirely satisfactory conclusions. On this point or that, one might more usefully consult Baron Montesquieu or Jean-Jacques Rousseau, Anne-Robert-Jacques Turgot or François Quesnay, or Jeremy Bentham. On yet other points one might wish to look to Immanuel Kant or Edmund Burke, and on still others to David Hume or Adam Ferguson, or Bernard de Mandeville. But what Smith did manage to do in the Wealth of Nations, and for the first time, was to examine in a systematic way what much of the earlier literature of political economy had approached in a piecemeal manner-as a set of individual, largely disparate or unconnected economic phenomena and problems. Regardless of his intentions, the effect of Smith's efforts was to provide a deep reservoir of ideas and arguments for later political economists to draw on in framing some of their own concerns, gloss their own interpretations, and against which to provide their own corrections, clarifications, and criticisms as their needs required.
If political economy in the eighteenth century was more than what was to be found in Smith alone-and its conceptual apparatus more extensive and, in places, more developed than it was even in its presentation in the Wealth of Nations-then by the middle of the nineteenth century there was little objectively left of Smith's original arguments in the literature of political economy. The ideas and arguments of Thomas Robert Malthus, David Ricardo, and Mill had risen to dominance, and had moved considerations of the interdependence between politics and political economy into new and different directions. Nevertheless, on consulting the vast secondary literature on these subjects one sometimes comes away with the impression that this simple point is often forgotten. In much of that literature, for example, Smith's name appears again and again; one gets the impression that the relationship he forged between politics and political economy was not only decisive but that it was born fully formed too. In some of that literature, whether from the political Left or Right, it is almost as if all of the essential ingredients of, say, a twentieth-century welfare state or its neoliberal counterpart actually emerged complete in 1776 in the Wealth of Nations. Nothing could be more anachronistic and misleading.
Smith invented neither the principle of population nor the doctrine of comparative advantage; he invented neither the theory of the division of labour nor the quantity theory of money; he resolved neither the analytical problem of price determination nor adequately explained the distribution of income between the classes. Smith did not establish the priority of the market over the state nor is he responsible for the reduction of politics to economics. He is not the strictly lineal descendant of John Locke in some putative progression towards modern liberalism, although he certainly integrated considerations of political and economic life into one coherent discourse. He is not the champion of unregulated competition, nor the moral purveyor of possessive individualism, nor the architect of an economic theory of capitalist democracy-not, at least, as these ideas are understood today.
The political economy that forms the subject matter of this book, however, should not be understood as just a body of economic thought and doctrine-although to be sure, there are certain unifying themes and concerns that characterise its landscape, and mark it out from what came before and what followed it. Nor yet should it be understood simply as a catalogue of the diverse, and often conflicting, ideas and arguments produced by a group of thinkers writing on economic affairs between the middle of the eighteenth and the middle of the nineteenth century-although without doubt, those years do broadly define the period of its heyday. Such conceptions, while perhaps well suited to other ends, seem at once too narrow, too self-limiting, and too static to capture its essential character.
Furthermore, the history of the accumulated historical scholarship sometimes seems to be nothing if not a series of grand tournaments between contemporary minds seeking to appropriate the past to various partisan causes of the present. The regularity with which the historians have charged each other with this sort of offence against the past-and in so doing, the regularity with which one encounters implicit claims to be doing better history-may even be an indicator of its ubiquity. Within the doctrinal camp itself, for example, there has been not a little argument about which doctrines actually define the movement in the first place. For their part, more contextual accounts have sought to expose the narrowness, thinness, and (sometimes) ideological biases of doctrinal reconstructions. Within the contextual camp, however, there is always the delicate problem of what context to choose.
A glance at the work of the historians of economic thought, for instance, readily reveals a distinct ebb and flow in their views about these thinkers. On the one hand, some have chosen to cast their political economy as being essentially different from the economics of today. This view stresses discontinuity-not just in economic theory and method but also with respect to the kinds of problems each addresses. On the other hand, there are those who have chosen to accentuate the similarities between them and modern theory and method, and/or between the economic problems faced then and those faced now.
On the first line of argument, while it is true that political economy is said to differ from the economics (and the economic problems) of today, it might yet be said to be either relevant or irrelevant to the present concerns. If different and irrelevant, it might be found to be, say, outdated, wrong, or wrongheaded (or some combination of all three). It might also be, say, that the progress of economic science, and/or the very development of the economy itself, had rendered these ideas and arguments irrelevant to the present concerns. If different and relevant, these thinkers might be shown to have had, for example, a more robust economic theory or have provided invaluable insights (theoretical or practical) now lost. On the second line of argument, an emphasis on continuity customarily goes hand in hand with a quite favourable image of political economy.
In addition to the historians of economic thought, there are also historians who seek to recover a much broader understanding of political economy. But the catalogue of their findings is often no less redolent of their current concerns than is that of doctrinal historians. Even among the ever-dwindling ranks of Marxist historians, similar tendencies are apparent. There are some of their number who see political economy as apologetics, and who set out their position against it. Others of their number link political economy to Karl Marx's contributions by way of a rational reconstruction of the analytical connections between them.
2. We begin with what appears to us today as Smith's political odyssey. We consider his contributions to the discourse of political and economic thought as it has been viewed through a lens provided by the myriad of characterisations of both his personal politics and the politics to which his political economy putatively gave rise. Here we find that a challenging complexity in Smith's own presentation is reflected in wide disagreement among his interpreters as to his contribution-whether theoretical, historical, or ideological. In particular, it would seem that attempts to understand Smith from much later vantage points fail to give sufficient weight to either the process through which his framework of concepts had been transmitted to them or the subtle, but substantial transformations that had been worked on his ideas before they reached them. By attending to those transformations, we may find ourselves in a better position from which to draw out the basis as well as content of Smith's original idea of perfect liberty in both its market and governmental manifestations-and to understand how it was developed and altered after him.
3. In that task, we first consider the deployment of an older notion of civil society-but in what seems to have been an increasingly distinctive guise-immediately before and after the Wealth of Nations. There is a real sense in which it was eighteenth-century political economy that established the presumption that civil society should be conceived as comprising the economic aspect of social life. Still, just what such an economic understanding of civil society entailed, what institutions, social groups, and voluntary associations were taken to be formative of its anatomy, and how civil society itself was thought to relate to the polity all underwent important changes after Smith.
These changes were partly the result of a historical development that saw the mercantile and commercial character of economic society of the eighteenth century give way, quite rapidly, to its industrial counterpart in the nineteenth century. But they were also the result of changes in the approach to the theory of political economy itself that took place over the same period. What began in the writings of Ferguson and Smith as an attempt to outline a picture of civil society more suited to the newly emerging characteristics of an economic world dominated by market exchange, changed over time to become, by the 1870s, a world modelled as being one of isolated, individual decision making in an austere, putatively universally applicable context. Civil society was thereby emptied of much of the earlier social, institutional, cultural, and historical content that it was initially thought to embody. We present these developments as the rise and fall of civil society in chapter 3 below.
4. From the anatomy of civil society, so to speak, we turn to a consideration of its main organs, and the framework of concepts deployed by the classical political economists to examine them. The relationship between economic and political life more generally is the subject of chapter 4. Viewed in perspective, it would appear that Bentham's utilitarian calculator, modified (perhaps) by some of Mill's later moral embellishments, became in the hands of the neoclassical writers of the 1870s not only the accepted view of the personality of economic man but also the model of man from which to deduce the very laws governing market exchange and the distribution of income. Self-interested action, now thought of as constrained optimisation, was to become not only a component part of economic life in civil society but rather its only component. Where once stood Smith's rich description of morally regulated, prudent behaviour to describe self-interested action-derived from a model of a socially constructed self-now stood a rational calculator of exclusively private costs and benefits.
5. The set of organising concepts and themes introduced into political economy to aid in understanding the operation of the economy-free competition, the economic machine, natural conditions, and the invisible hand-form the subject matter of chapter 5.
From this plurality of views, we then consider the more self-consciously uniform picture of Smith's enterprise created by Dugald Stewart. Stewart altered the figure of Smith for both political economy and political theory in decisive ways. He altered Smith's views on the input that political economy might have into both legislative practice and constitutional reform. Stewart created a figure of Smith for whom political economy was exclusively a science of the legislator, but one that had nothing to contribute to debates over forms of constitutional order. In Stewart's figure of Smith, the former could enact progressive reforms without touching on the latter in revolutionary ways.
6. Despite Stewart's effort to build a coherent basis for the further development of a now-Smithian project-one that moved political economy significantly away from Smith's own picture-he was not entirely successful. When Malthus first entered the conversation (admittedly anonymously) at the end of the eighteenth century, he reworked Smith's understanding of the relationships between the wealth of nations and prosperity and progress in quite fundamental ways. With the introduction of the principle of population, along with the possibility that there might arise in the progress of wealth a general overproduction of commodities, political economy and politics could no longer ignore, or put to one side as Stewart had suggested, the question of the moral integrity of market society. Malthus's interventions cast new and grave doubts on the moral and political content of economic progress itself-doubts that later critics of unbridled market life, as diverse as Marx and John Maynard Keynes, would later seize on. An examination of this reworking as well as its impact on thinking about moral and political reform is presented in chapter 7 below.
Excerpted from After Adam Smith by Murray Milgate Shannon C. Stimson Copyright © 2009 by Princeton University Press. Excerpted by permission.
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