Forgetting Adam Smith

Scotland, I confess, is a likeable nation. The sky there is a mild, pastel blue; the soft clouds hang over the land’s crags and pastures patiently, like a melody that is in no hurry to reach the end of itself. When I was there, the rain came and went, sometimes two or three times each day, a gentle patter that lent a greater beauty to the sun when it came out and put a little sweat on my brow. The winters are dour but the summers are paradise – that is Scotland: gray and green, but not always in equal measure; stout, contemplative, lyrical.

The people, too, are likeable; that is, they are likeable when they are being contrasted with the English. During such moments, the Scots puff out their chests. The Scotch pride wells up in them like an aggressive reflex when being likened to their neighbors: the tartan pattern, Bonnie Prince Charlie, Bannockburn, the ideal temperature of whiskey – it is astounding how much the average Scotsman knows about his own history. When Scottish identity is in question, the Scots are proud to be proud. They know who they are. At no other time are the Scots so proud to be themselves than when they are being measured up alongside the English.

One part of Scottish history that is not mentioned much by Scots but is spoken of in whispers, perhaps on the sly, perhaps with a touch of embarrassment, is the man Adam Smith. Scots these days might just as well let the English claim him, like a murderer or a horse thief harried over the border.

I understand their reservations about the man. Capitalism has evolved over the centuries into an odd beast: on the whole, multinational corporations are today so sordid, so depraved that any prostitute or death row inmate, if well-informed, would sooner stand on their scruples or turn to Christ than defend the honor of these institutions. And I would sooner trust a prostitute or a murderer than most CEOs.

If the CEOs of Pfizer or Philips or Unilever have souls then an observer would have to squint awfully hard to see past the glint of Mammon in them. A soul must love something other than itself. It is the soul’s separation from other things that allows it to love and to hate. But most multinational CEOs, I have no doubt, love nothing more than the price of their stocks. Nationalism is irreconcilable with this mindset: as a nationalist, one agrees to love one’s nation first, and all other things in secular life second.

There are some critics who believe that it is the business of corporations to do business and to do nothing more than business – there are silly men in bow ties at libertarian meet-and-greets who will tell you that a corporation is first and foremost a profit-making enterprise. This is hogwash, of course. As Henry Ford said, “A business that makes nothing but money is a poor kind of business.” That is to say, the purpose of a corporation is to produce a good or render a service, while profit is a result of those two things. To place profit before service is to confuse the effect for the cause; to mistake the shadow for the man.

With this in mind, it isn’t hard to understand why I conclude that capital, in and of itself, is not the problem. American society isn’t suffering from too much capital any more than a man suffers by having too much steak; it’s the inability to ration his portions that leads to his woes. That, then, is the root of the issue: America doesn’t know how to leverage its capital intelligently because it doesn’t know how to make that capital serve the nation as a whole. Both the leftist and the libertarian make the same mistake. They look at a successful corporation and, based on their political prejudices, condemn or cheer that venture’s profit margin. Neither camp examines the service that corporation is providing. Both are capable of asking how or why Pepsi should make so much money; neither asks what Pepsi provides the nation as a whole. If they did, I doubt any company that peddles high fructose corn syrup drinks would still exist.

To this end, I contend that it isn’t crony capitalism that has led to anarchy – it’s anarchy that has led to crony capitalism. It’s because our public authority has for so long confused the means with the end, that it has fixated on profit and not on goods and services, its policies have been mostly ineffective at reigning in corporate power.

I realize that, to some observers, this is a ludicrous claim. The critics say that capitalism is ruining the nation and that the evidence is there because the nation is currently undergoing ruination. Never mind this fallacy. In order to deflate this fatuous claim, I will have to turn to the one man who is now very far out of vogue, both in the universities and in Scotland. I intend to show that what passes for capitalism today does not resemble the capitalism of the past. The world of business has been allowed to become its own beast, its own cult of cash, because our culture has forgotten how capitalism is supposed to work. It has forgotten that sensible Scotsman, that bean counter, that absent-minded man, Adam Smith.

Capitalism deserves a fair trial before we as a society condemn it. As such, we have to hear the words straight from the horse’s mouth; or in this case, the Scotsman’s.

Not surprisingly, when one reads Smith, one finds that there is a disjoint between what is said about Smith’s writings and what Smith actually wrote. Adam Smith might very well be stuffed and boiled in a pot by the libertarians of today. To them, no doubt, his words read too much like a socialist’s.

In truth, however, he was not a socialist any more than my neighbor’s yapping terrier is a Trappist. Smith envisioned capitalism as a form of economics that furthered the interests of the nation. And believing in the nation-state has nothing whatsoever to do with a dictatorship of the proletariat. This point, I think, is the critical piece of the puzzle that is missing from American discourse: capitalism was never intended to be at odds with nationalism. There are no capitalist values apart from the values prized by one’s nation.

Let’s investigate, then, how Adam Smith envisioned capitalism. Let’s turn to his seminal work, The Wealth of Nations. This will not be an exhaustive look at the book. Nor will it be an adoring defense of the system laid out in it. My intention is to reveal certain truths in snapshots – to show that capitalism, especially multinational corporatist capitalism with a progressive left-wing taint – is not genuinely capitalist.


I could have dallied in my analysis and slowly pieced together an impression of what constitutes capitalism, but I decided to take Churchill’s advice and use a pile driver instead. There are few things more irksome to the libertarian, the corporate shill, the angry individualist, than progressive taxation and so, by extension, there are few things more irksome to the libertarian than capitalism. Adam Smith was an unequivocal supporter of progressive taxation.

The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. The expense of government to the individuals of a great nation is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation. (Wealth of Nations, Book V, Chapter II)

The logic is simple enough: the more a man owns, the more benefit he derives from the government’s protection, therefore the more he should be expected to pay for those benefits. If he had to pay for his own private policemen, equip his own private army with tanks and mortars, staff an office tower with accountants and auditors – that is to say, if he had to live in a feudal system from Europe’s past, or in the present-day Middle-East – then he would either go bankrupt or become the de facto government.

This system is workable but it would ensure that only the richest of the rich would be able to prosper; even the moderately rich would find themselves licking a much richer man’s boots for protection. It would lead to both an inequality of income and opportunity; it would also revive the time-honored tradition of frequently recurring civil wars in Europe. By offloading the cost of protection to the state, all strata of society benefit, but the rich benefit the most by being able to pocket that revenue they otherwise would have been forced to spend for protection. It’s natural that the rich should pay the most in taxes.

But there is a flipside to this coin. To put this idea in a more American context, when the state reduces corporate taxes and provides a thousand loopholes to help the rich to dodge tax payment, it creates an absurd situation where the rich receive the most protection from the state without effectively having to pay for it; and, in turn, by getting something for nothing, the rich are able to use these funds to form their own private protection while still enjoying the protection of the state. This no doubt explains the rise of lawfare in American society. In harsher times, perhaps in the future, this situation might usher in a return of warlords and patchwork fiefdoms.

By giving the rich so much disposable income through corporations and personal assets, the American government is subsidizing the greatest challengers to its authority.

The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion. (WoN, Book V, Chapter II)

Although the poor in America are no longer short on food, nor do they spend the majority of their income on acquiring food, the principle that Smith is advocating is just as valid now as it was in 1776. Taking twenty-percent of a working man’s wage could mean the difference between fresh fish or canned tuna. Taking twenty-percent of a rich man’s wage could mean the difference between a BMW and a Bentley. The poor have less to spend in general, and therefore have more to lose and less to gain from taxation.

In an American context, the poor are reasonably comfortable. They aren’t taxed to the teeth and they receive generous welfare packages that are not only able to keep them fed, but fat; not only clothed, but fashionable. If anything, the American poor are so removed from squalor, genuine squalor, that their perception of destitution is what most of the world would call inconvenience.

In America, it’s the middle-class that feels the brunt of the tax burden. On paper, of course, rich people living in rich states should pay more, but as we all know, the rich are much better capable of diversifying their portfolios, hiding assets, and acquiring those much beloved tax write-offs. The middle-class man keeps his wealth almost entirely in the bank and in his home – there is nothing for him to hide. It’s all there, in plain view, and the IRS knows it. This explains, of course, the middle-class man’s obsession with tax cuts. If he were as capable of throwing his wealth under a blanket as the rich are, or if he received as many payouts as the poor, he might be less inclined to complain about taxes so often.


The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life… But in every improved and civilized society this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it. (WoN, Book V, Chapter I)

Modern life, considered not in economic terms, but as an experience that is lived from moment to moment, is a frantic, suffocating sort of drudgery. Imagine a Tudor craftsman, a cobbler, who no doubt had his moments of drudgery – the hammering of a hundred thousand nails, the meticulous stitching of hard leather – but who had a thousand other consolations for his toil: the children who would care for him in old age, the freedom to refine his style, the workshop he could organize in his own peculiar way, the wife who would devote herself to him and to whom he could devote himself, the wholesome food, the church on the hill that held the graves of his ancestors. Now ask yourself what consolation we have with our packaged cereals, our microwaves, our motorways, and our cubicles.

This is one area where even the rich are not immune. The soul-strangling drudgery of industrial life has only accelerated since Smith’s time. If you think the market alone can offer you anything more than cheap thrills or propaganda, then you are a person of much deeper faith than I. Netflix is not a suitable alternative to civic life any more than soy milk is a suitable alternative to a mother’s own breasts. This synthetic and superficial society of ours is a result of the market. Granted, it isn’t solely the result of the market, but it’s naïve to think that the market didn’t play a significant role in it. Beauty, faith, wisdom, family – these things are essential to human existence and these things can’t be quantified and industrialized, although that has not stopped more than one corporation from trying it.

America is a curiously inverted society: we design cities around the car and not the man; we pack food with preservatives to help with transportation and not with digestion; we watch families on television as we hug our cats and say that we will never have children. It is strange how the majority of Americans don’t see how this society is fundamentally in error.

Our government has failed us in this regard, and according to Smith, this is not a failure of capitalism, but a failure to achieve capitalism. One must remember, that despite the protestations of the libertarian and the Randian, capitalism is not about acquiring capital for the sake of capital; it’s acquired for the sake of those people living and working within the system.


One sore point between the economic left and right is a split over what is commonly called the “labor theory of value.” The libertarians feel, quite rightly, that the value of a product is not determined by the seller but by the purchaser and how much he is willing to pay for a good or service. The amount of labor that went into making the item is inconsequential. As such, the libertarian rejects the labor theory of value. The socialists feel, quite rightly, that labor is the basis of all economy, that nothing can be done without labor at some point in a production cycle, and so the price of a good or service ought to be determined by the seller on the basis of the labor that went into the item’s production. As such, the socialist accepts the labor theory of value.

Smith, to his credit, accepts the wisdom of both positions. He acknowledges that the value of labor is ultimately determined by the purchasers: being compelled to buy products at rates determined by the seller is nothing more than tyranny. But Smith also acknowledges that labor by itself is the basis of any sane economy: marketing men selling clouds in the sky is nothing more than fraud.

Labour was the first price, the original purchase-money that was paid for all things. It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased; and its value, to those who possess it, and who want to exchange it for some new productions, is precisely equal to the quantity of labour which it can enable them to purchase or command. (WoN, Book I, Chapter V)

One finds, yet again, that capitalism was never intended to be a system at odds with labor. Capital is a representation of labor. It is the director and the sustainer, the nurturer and the visionary of labor’s energies. Capital without labor is toothless; labor without capital is feckless. The two are one. Any attempt to separate the two is to render each inert.


Free trade is a contentious issue. It has been the unrecognized source of some men’s hypertension for well over one hundred years. The issue is so contentious that it not only splits the left and right-wings across the aisle, but it splits the room between the aisles, too. There are some on the left who see the merits of free trade, although free trade is typically favored by the right. Some socialists argue, for instance, that the working classes should retain solidarity regardless of their nationality. There are some on the right who vehemently reject free trade for its ability to compromise national security. True to form, Smith takes a nuanced approach.

There seem, however, to be two cases, in which it will generally be advantageous to lay some burden upon foreign, for the encouragement of domestic industry.

The first is, when some particular sort of industry is necessary for the defence of the country. The defence of Great Britain, for example, depends very much upon the number of its sailors and shipping. The act of navigation, therefore, very properly endeavours to give the sailors and shipping of Great Britain the monopoly of the trade of their own country, in some cases, by absolute prohibitions, and in others, by heavy burdens upon the shipping of foreign countries.


The second case, in which it will generally be advantageous to lay some burden upon foreign for the encouragement of domestic industry, is when some tax is imposed at home upon the produce of the latter. In this case, it seems reasonable that an equal tax should be imposed upon the like produce of the former. (WoN, Book IV, Chapter II)

To understand Smith’s meaning, we must first understand something about this “act of navigation” that he praises. The act of navigation was, in fact, a series of acts concerning England’s trade over the high seas. Scholars now call them the Navigation Acts. They were passed over the course of the 17th century mostly to counter the influence of Dutch traders who were, for a long time, out-trading and out-sailing the English. England resolved that it needed to protect its traders, its shipping, and its markets from the undue influence of the Dutch, lest its foreign trade industry collapse altogether.

The acts stipulated many things, but the essence of them was that English trade had to be conducted on ships built in England or its colonies, with English owners, and with a crew that was three-fourths English. It was England’s formal entry into mercantilism – and here we have Adam Smith, the father of capitalism, scribbling praise for it. It is damning, I should think, that so many self-proclaimed capitalists in the current era promote free trade so vociferously when capitalism’s first and foremost scholar would have never approved of it. Smith, no doubt, understood that there was more money to be had in free trade. He also understood that the national interest should come before the fat pockets of traders and politicians.

The act of navigation is not favourable to foreign commerce, or to the growth of that opulence which can arise from it… As defence, however, is of much more importance than opulence, the act of navigation is, perhaps, the wisest of all the commercial regulations of England. (WoN, Book IV, Chapter II)

Smith leaves no room for ambiguity in these words. The national interest comes first. Capital was never intended to be the master – it is the servant, the milk maid, the blushing babe in the hands of a mother. It is docile; dependent. Unlike the laissez-faire advocates of today, Smith understood that the enrichments of trade are worthless without a nation to be enriched.


As stated earlier, this essay was not intended to be a thorough defense of capitalism or of the writings of Adam Smith. These are snapshots. I provide them to reveal, in short glimpses, how wrong most political commentators are about capitalism. I want to expose the falsehood of the political consensus that is emerging: the commentators have fashioned their idols but these are false gods – and I mean to smash them.

Capitalism is a nationalist system. I must state this point again for emphasis. It is the most sensible, most desirable opposition to Marxism we have at the moment; not least because it has proven itself. Capitalism has shown that with suitable regulation it can serve the lowest and the highest alike, it can reward thrift and ingenuity, it can help a nation prevail over its enemies, even against those formidable Dutchmen and their flotilla of trade ships. If, by chance, a man takes issue with capitalism precisely because of its nationalism – then although I would think him a fool – at least he is not foolish enough to be deceived about the nature of capitalism.

To this end, I confess my own bias. I think Marxism is just as bad as that system that masquerades these days as capitalism: the corporatist, multinational, craven aggregations of capital that serve neither their mother nations nor their workers. That is not capitalism. What I support, then, is capitalism as it was intended to work, and did work, for long decades in the West. What I oppose is the pigheaded vigor of those right-wing reformers who want to throw capitalism into the dustbin without having taken the time to figure out what capitalism is.

3 Comments Add yours

  1. Peter Whitaker says:

    When a corporation owns real estate, the tax owed on that real estate should be distributed to all shareholders. When real estate is pledged to a bank as collateral for a loan, the bank should pay a portion of the tax on that real estate, in proportion to the principal of the loan, and the tax on the bank should then be distributed to all of the bank’s shareholders.


  2. Русский Человек says:

    Just because capitalism at this very moment rears its ugly head, doesn’t mean it’s not a true capitalism.
    The navigation act example suffers from tactical blindness, as it in the end served to enforce Anglo national interests across the globe. And since national Anglo interests are Big Gay and hypocrisy, naturally the modern capitalism was build upon them. So there is no conflict between what Adam said and what happens now.
    In fact he would gladly denounce his heretical thoughts if he were to be transported to our times and witnessing how Big and Gay the current globohomo is. Would be slightly upset that the Core had to be offloaded to America I guess.


  3. ” The libertarians feel, quite rightly, that the value of a product is not determined by the seller but by the purchaser and how much he is willing to pay for a good or service. ”

    As always, the libertarians are completely wrong. The value to whom? To the possible purchaser, at the point of purchase, the “product” has, to them, the value they are willing to purchase it for. This is by definition.

    Thus, libertarians pretending this basic definition, this trite axiom of the theoretical exchange of a “product” by two voluntary actors, is just about meaningless.

    “The amount of labor that went into making the item is inconsequential. ”

    Inconsequential to whom? Inconsequential to the purchaser? Of course. Inconsequential to everyone else, including the laborers who made the product? The society that provided the labor, the capital, and the market itself? Is the labor that went into the product “inconsequential” to them?

    Libertarian autistes are even worse than mainstream economists. “OK, on a deserted island, one guy has apples and the other guy has oranges.”

    From this, we can see that libertarians are good for teaching high school business class – and libertarians especially have a lot to say about the retail business, as you’ll notice virtually every libertarian idea is based on some variation of “two shopkeepers are selling a moderately priced consumer good…”

    Now, when it comes to the entire rest of human culture, and reality itself – what exactly does libertarianism have to say that is at all interesting?

    Again, if we’re interested in understanding the dynamics of two or three small retail stores in a closed, abstract, entirely fictional alternative universe created for teaching high school students how to manage small retail stores – we’ll call the libertarians.

    The reason why libertarians are always morally lecturing people like school marms is because they are hypocrites desperately trying to hide their own self-interested economic motivations and techniques.

    “The right,” conservatives, and libertarians belong to the “small business bourgeoisie” who “wants to enlist the power of the state to protect its members from proletarianization.”

    “To avoid being squeezed out of existence between big business and organized labor, the small business bourgeoisie has fought for generations on two fronts, demanding subsidies and exemptions from government regulations, while insisting on anti-union and anti-labor legislation and a reliable supply of cheap labor (preferably guest workers or illegal immigrants who cannot vote). The lobbies for the small business sector naturally oppose any “decommodifying” social insurance reforms. Examples are longer periods for unemployment insurance or universal health care, each of which can increase the bargaining power even of non-unionized workers by allowing them to hold out longer until employers are forced to make better offers.”

    Why would anyone take moral lessons from “libertarians” essentially shilling for a bunch of Taco Bell franchisees demanding more immigration and no social welfare to maintain their own bargaining positions?

    Especially since it takes a world-wide Empire to create the conditions favorable to Taco Bell franchisees?

    It’s simply impossible to take libertarian ideologues seriously about anything.

    Liked by 1 person

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