Dugald Stewart’s Assessment Of Adam Smith

Even if the work done by Smith and his Scottish contemporaries finds parallels and precedents, it nevertheless appears to have been remarkable for the weight of emphasis that was placed on economic factors. There were really two applications of the general thesis. First, there is the argument that the development of productive forces ultimately depended on the ‘natural wants’ of man; the point being that man is first subject to certain basic needs which, once satisfied, allow him to pursue more complex goals (Stewart, 1793). The same point was made by Adam Ferguson when he remarked that ‘refinement and plenty foster new desires, while they furnish the means, or practice the methods, to gratify them’ (Arrow, 1951). John Millar also linked these natural and insatiable desires to the development of productive forces, and even went so far as to argue that the latter would emerge in a sequence that corresponded to the four socioeconomic stages. (Lehmann, 1960).

The second application of the thesis is to be found in the link that Smith established between economic organization and the social structure, particularly with regard to the classes involved and the relations of power and dependence likely to exist between them. As we have seen, the fink that was established between the form of economy and the social and political structure was remarkably explicit, so much so indeed as to permit William Robertson to state the main propositions with economy and accuracy. First, he noted that ‘In every enquiry about the operations of men when combined together in society, the first object of notice should be their form of subsistence. According as that changes, their laws and policy must be diverse. Secondly, Robertson drew attention to the relationship between property and power, noting for example so as to, ‘Upon realizing in what state belongings was at any exacting period, we may decide with precision what was the amount of power possessed by the king or by the dignity at that juncture’ (Mill, 1994). While such statements apply equally to Smith’s approach to the history of society, they should not be taken to imply that Smith was an economic determinist. Three points may be noted by way of illustration.

First, while Smith did argue that the ‘commercial’ stage of socioeconomic growth would have certain recognizable features, he did not suggest that it was incompatible with ‘absolutist’ government. For example, both France and Spain could be regarded as ‘developed’ economies from a historical point-of-view, yet both were associated with monarchical systems which pretended to be absolutist (Mill, 1994). Smith also made this point with respect to England, in arguing that the first effect of a developing manufacturing sector had been to increase the power of her kings (for example the Tudors) at the expense of the lords; the point being that the decline in the power of the lords had taken place before the same underlying causes raised the House of Commons to a higher degree of power. Secondly, Smith argued that England was really a special case, and that she alone had escaped from absolutism (Arrow, 1951). To a great extent this was the reflection of her own natural economic advantages (Stewart, 1793), but Smith also emphasized other factors, many of which were of an extra-economic type. For example, he argued that Great Britain’s situation as an island had obviated the need for a standing army, (Skinner, 1979) and thus denied her kings an important instrument of oppression. He added that Elizabeth I had also helped to weaken the position of her successors by selling off Crown lands, a policy that was not unconnected with the fact that she had no direct heirs. As Smith presents the case, it was the growing weakness of the Stuart kings (reflecting in part their own peculiarities of character), and the growing significance of the Commons, that had ultimately combined to produce that particular system of liberty that was now found in England. In England alone, he emphasized, liberty is secured by ‘an assembly of the representatives of the people, who claim the sole right of imposing taxes’ (Stewart, 1793). Smith was to deploy the principles involved in his treatment of the American question. But if Smith preferred the English model, he was very far from suggesting that this model represented the best of all possible worlds. In his ‘Early Draft’ especially, Smith adverted to the ‘oppressive inequality’ of the modern economy, (Arrow, 1983) and elsewhere he drew attention to the fact that the House of Commons, whose power provided the foundation and protection of the liberty of the subject, could easily become a clearing-house for those sectional interests on which that power was collectively based (Stewart, 1793). Smith was also well aware of corruption in politics and of the fact that the institutions of British government were markedly unrepresentative. ‘It is in Britain only that any permission of the people is necessary, and God knows it is but a very symbolic metaphorical consent which is given here. And in Scotland still more than in England, as but very few have a vote for a member of Parliament who give this metaphorical consent’ (Stewart, 1854).

Stewart introduces at the next stage of his survey ‘another idea of Natural Jurisprudence, essentially distinct from those hitherto mentioned’. Its object is ‘to ascertain the general principles of justice which ought to be recognized in every municipal code; and to which it ought to be the aim of every legislator to accommodate his institutions’. It is to this idea of a third kind of Jurisprudence, according to Stewart, that Adam Smith has given his sanction in the conclusion of his Theory of Moral Sentiments (Stewart, 1854). As to Smith’s identification of this idea of Jurisprudence with that of Grotius (Smith, 1759), Stewart throws doubt on this by claiming that Grotius had often been led to overlook the ‘immense difference between the state of society in ancient and modern Europe’ (Stewart, 1854). Stewart’s comment on these systems of Natural Jurisprudence considered as ‘models of universal legislation’ is that ‘their authors reason concerning laws too abstractedly, without specifying the particular circumstances of the society to which they mean that their conclusions should be applied’ (Stewart, 1854). It was Montesquieu, according to Stewart, who, under the ‘grand idea of connecting Jurisprudence with History and Philosophy’, gave ‘the first fatal blow to the study of Natural Jurisprudence’ by affording the proofs of the ‘absurdity of all schemes of Universal Legislation’ (Stewart, 1854); and it was Adam Smith who, despite his sanction of the idea of Natural Jurisprudence as a model of Universal Legislation, in fact took his cue from Montesquieu. Stewart, therefore, concludes his survey with Montesquieu’s views which, together with those of his followers, might be called the fourth, or rather the new, view of Jurisprudence.

Montesquieu, according to Stewart, combined the science of law with the history of political society, ’employing the latter to account for the varying aims of legislator; and the former, in its turn, to explain the nature of government, and the manners of the people’ (Mill, 1994). Convinced that the general principles of human nature are everywhere the same, he searched for ‘new lights’ among ‘the subjects of every government, and the inhabitants of every climate’ and, while thus opening ‘inexhaustible and unthought-of resources’ to the student of Jurisprudence, he indirectly marked out to the legislator ‘the extent and the limits of his power’, and recalled the attention of the philosopher from ‘abstract and useless theories’, to the ‘only authentic monuments of the history of mankind’. This view of law which unites history and philosophy with jurisprudence, after the publication of the Spirit of Laws (1748), became ‘so fashionable’, particularly in Scotland, that many seem to have considered it ‘not as a step towards a farther end, but as exhausting the whole science of Jurisprudence’ (Stewart, 1854). Montesquieu’s own aim in his historical discourses was, however, ‘much more deep and refined’. His speculations were directed to the same practical conclusion as that pointed out by Bacon, which essentially coincides with ‘the very shrewd aphorism of Lord Coke’, that ‘to trace an error to its fountainhead, is to refute it’ (Arrow, 1983). In this respect, in order to have a just conception of the comparatively limited views of Grotius, it was necessary, according to Stewart, to attend to ‘what was planned by his immediate predecessor [Bacon], and first executed (or rather first begun to be executed) by one of his remote successors [Montesquieu]’ (Stewart, 1854). As the last result, the plans of Bacon and Montesquieu have been since combined ‘with extraordinary sagacity’, by some of the later writers on Political Economy, and above all by Adam Smith, ‘who, in his Wealth of Nations, has judiciously and skillfully combined with the investigation of general principles, the most luminous sketches of Theoretical History relative to that form of political society, which has given birth to so many of the institutions and customs peculiar to modern Europe’ (Stewart, 1854).

The reference to Montesquieu (as well as to Smith) in that part of the ‘Dissertation’ which deals with the ‘Progress of Philosophy during the Seventeenth Century’ was made just as a digression, and the further development of Jurisprudence by writers on Political Economy as well as ‘the mighty influence which his [Montesquieu’s] writings have had on the subsequent history of Scottish literature’ (Stewart, 1854) were to be explained in the third Part of the ‘Dissertation’, which was never to be published.

Reform

A major task of the state is thus to ensure that the conditions of economic freedom are in fact satisfied, so far as possible, by sweeping away all legal and institutional impediments to it. Generally speaking, these obstructions can be condensed to four main groups. First, there is the problem that, in all societies subject to a course of evolution, ‘Laws frequently continue in force long after the circumstances, which first gave occasion to them, and which could alone render them reasonable, are no more’ (Stewart, 1793). In such cases, Smith suggested that arrangements that were once suitable but are not anymore so should, ideally, be detached, quoting as examples the rules of succession and necessitate, laws that had been suitable in the feudal era but now had the result of limiting the sale and development of land.

Secondly, Smith brought attention to particular institutions which had their source in the past but still controlled active support, for instance the privileges of conglomerates with regard to the domination of trades and the control of dealerships. Such regulations were disapproved of on the basis that they were both unwise and unfair: unwise in that controls over qualification for entry to a trade were an infringement of ‘this most sacred property which every man has in his own labor’ (Stewart, 1793); unfair in that regulations of apprenticeship constitute no guarantee of competence. Smith emphasized that such regulations adversely affect the operation of the market mechanism, and pointed out in this connection that ‘The statute of apprenticeship obstructs the free circulation of labor from one employment to another, even in the same place. The exclusive privileges of corporations obstruct it from one place to another, even in the same employment’ (Becker, 1976). In a very similar vein, he remarked on the problems offered by the Poor Laws and Laws of Settlement, and he summed up his appeal to government in these words:

break down the exclusive privileges of corporations, and repeal the statute of apprenticeship, both of which are real encroachments upon natural liberty, and add to these the repeal of the law of settlements, so that a poor workman, when thrown out of employment either in one trade or in one place, may seek for it in another trade or in another place, without the fear either of a prosecution or of a removal. (Stewart, 1793).

Thirdly, Smith opposed positions of privilege, such as domination powers, that he regarded as essentially creatures of the law. The establishment is again symbolized as unwise and unfair: unwise in that a monopoly position was one of opportunity and lead, and consequently ‘contrary to that justice and equality of treatment which the sovereign owes to all the different orders of his subjects’ (Stewart, 1793); unjust in that the prices at which goods so controlled are sold are ‘upon every occasion the highest that can be got’ (Mitchell, 1949). ‘The monopolists, by keeping the market constantly under-stocked, by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate’ (Hopfl, 1978). He further said that monopoly is ‘a great enemy to good management’ (Stewart, 1793), and that it had the extra defect of limiting the flow of capital to the trades exaggerated because of the legal barriers to admission that were concerned.

Finally, we may usefully distinguish Smith’s objection to monopoly in general from his disapproval of one phrase of it: that is, the mercansystem that he explained as the ‘modern system’ of policy, best tacit ‘in our own country and in our own times’ (Stewart, 1792). Here Smith considered regulations that defined the trade relations between one country and another and which, he felt, often reflected the state of animosity between them. In this context he examined a policy that sought to produce a net inflow of gold by means of such ‘engines’ as bounties on exportation, drawbacks, and controls over imports. Smith proposed taxes on the trade and sale of alcoholic beverages with the intention of discouraging the multiplication of breweries (Stewart, 1793) and disparity in rates on alcohol and spirits so as to decrease the sale of the second (Skinner, 1979). To take another example, he advocated taxes on those proprietors who demanded rents in kind rather than cash, and on those leases that lay down a certain form of farming. In the same area, we find Smith in conflict with the practice of advertising a future revenue for the sake of ready cash should not be encouraged on the basis that it decreased the working capital of the occupant and all together moved a capital sum to those who will make use of it with the intention of consumption (Stewart, 1855), instead of saving it.

Conclusion

The examples are few, but the basic principle involved is extremely important and capable of wide application. Smith is here suggesting that the state is justified in intervening to offset the consequences of ignorance, lack of knowledge, or lack of forethought on the part of individuals or groups of individuals. Smith was also well aware, to take a second point, that the modern account of the ‘circular flow’ was based on paper money and on credit-in outcomes, a scheme of ‘dual circulation’ concerning a myriad of dealings linking manufacturers and merchants, traders and consumers (Stewart, 1793), transactions that would involve cash at the level of the household and credit (at the level of the firm). It is in this context that Smith backed control over the price of interest, placed in such a way as to make sure that clear-headed people are generally preferred, as loaners, to ‘prodigals and projectors’ (Stewart, 1793). He was in addition willing to control the small note matter for the welfare of a stable banking structure. To those who opposed this proposal, he responded that the interests of the community requisite it, and summarized that ‘the obligation of building party walls, in order to prevent the communication of fire, is an infringement of natural liberty, precisely of the same kind (with) the regulations of the banking trade that are here proposed’ (Mitchell, 1949).

Even though Smith’s monetary analysis is not thought of as being among the most robust of his contributions, it should be kept in mind that the spectator of the collapse of major banks in the 1770s was deeply aware of the troubles generated by a complicated credit structure. It was in this circumstance that Smith expressed a very general standard, explicitly that ‘those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments; of the most free, as well as of the most despotical’ (Whately, 1832).

References

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Arrow, Kenneth. 1983. Social choice and justice: Vol. 1 of Collected Papers of Kenneth J. Arrow. Cambridge, MA: The Belknap Press of the Harvard University Press.

Becker, Gary. 1976. The economic approach to human behavior. Chicago: The University of Chicago Press.

Hopfl, H.M. 1978. From savage to Scotsman: Conjectural history in the Scottish enlightenment. Journal of British Studies 17:19 — 40.

Stewart, D. (1792) Elements of the Philosophy of the Human Mind, London, vol. 1, in Stewart (1854-60), vol. 2

Stewart, D. (1793) Outlines of Moral Philosophy: For the Use of Students in the University of Edinburgh, Edinburgh; reprinted, New York: Garland, 1976

Stewart, D. (1855-56) Lectures on Political Economy, Edinburgh, 2 vols, in Stewart (1854-60), vols 8-9

Skinner A.S. (1979), A System of Social Sciences: Papers Relating to Adam Smith (Oxford).

Stewart, D. (1854-60) The Collected Works of Dugald Stewart, edited by Sir William Hamilton, 11 vols, Edinburgh; reprinted, Bristol: Thoemmes Press, 1994

Stewart, Dugald. (1793) 1980. Account of the life and writings of Adam Smith, LL.D., edited by I.S. Ross. In Adam Smith, Essays on philosophical subjects, edited by W.P.D. Wightman and J.C. Bryce, Oxford: Oxford University Press.

Mill, James. (1994) Dugald Stewart’s Elements of the Philosophy of the Human Mind. The British Review 6 (August 181:5): 170-200.

Mitchell, Wesley Clair. Types of Economic Theory from Mercantilism to Institutionalism. vol. 1. 1949. Reprint. New York: Augustus M. Kelley, 1967.

Smith, Adam. 1976b. An inquiry into the nature and causes of the wealth of nations. Edited in two volumes by W.B. Todd. Volume 2 of The Glasgow edition of the works and correspondence of Adam Smith. General editing by D.D. Raphael and Andrew Skinner. Oxford: Clarendon Press.

Smith, Adam. 1977. The correspondence of Adam Smith. Edited by Earnest Campbell Mossner and Ian Simpson Ross. Volume 6 of The Glasgow edition of the works and correspondence of Adam Smith. General editing by D.D. Raphael and Andrew Skinner. Oxford: Clarendon Press.

Whately, Richard. Introductory Lectures on Political Economy. 1832. Reprint. New York: Augustus M. Kelley, 1966.