Adam Smith's Equality and the Pursuit of Happiness by John E. Hill
I thought that I knew Adam Smith. Apparently not! "The political economy of the USA today is based on a laissez-faire interpretation of his Wealth of Nations," which, according to John E. Hill, "grossly distorts Smith's ideas." Furthermore, "correctly interpreting" (and implementing) Smith's thought would lead to greater happiness in all capitalistic political economic systems" (vii). The general slant of this book is that gross misinterpretations of Smith's theory of market capitalism have been used to justify the destruction of the moral standards on which market capitalism depends. In other words, market capitalism requires a moral infrastructure or foundation, which has been eroded by Smith's recent interpreters.
Smith advocated not only liberty but also justice and equality. His position did not shift between his Theory of Moral Sentiments and Wealth of Nations. He knew that a person's behavior is often motivated by self-interest, but also that self-interest is frequently tempered by sociability. Smith would have no use [End Page 92] for Volkswagen's skirting of pollution rules or for the financial shenanigans that resulted in the Great Recession.
Of interest is the author's inclusion in the introduction of the results of recent psychological and sociological studies of happiness. Smith, like many in the eighteenth century, wanted to increase everyone's happiness. Furthermore, happiness depends on promoting the happiness of other people, not on the exclusive self-interest Smith is often misunderstood as promoting. Hill's contention is that many people do not understand that the market is more productive when it is just. This would require a larger role for government.
Chapter 2 "is an argument for an egalitarian and just market economy to replace the laissez-faire capitalism that controls and weakens the USA today" (22). Hill made a survey of books and internet sources, from both ends of the political spectrum. About 70 percent of them incorrectly connected Smith and laissez-faire.
The famous quotation that we expect our dinner not from the benevolence of the butcher and the baker is dangerous when taken, as Smith did not, as a license to separate self-interest from concern about harm done to others. Indeed there are over forty examples in Smith's book of selfish behavior being inimical to society. Smith advocated an active role for government in the market to promote justice. But Smith urged not only government regulation to preserve fair markets; he also urged moral integrity. As Hill writes: "As a thought experiment, apply this integrity principle to financial institutions before the Great Recession. … Did they make every effort to avoid harm to those buying their fancy derivatives? Were they concerned about the impact on other stakeholders, such as workers, society, and future generations?" (43). The modern-day advocates of Smith would be surprised at the types of government involvement in the economy he urged: defense, public works (including infrastructure), education, and even religious instruction.
Chapter 3 focuses on applying Smith's ideas to the USA today. He was attempting to lay his proposals on a foundation of a scientific study of society with continual observation and readjustment of policies based on outcomes. This means that, to apply his ideas today, we need evidence-based research that leads to proposed solutions and is based on best practices anywhere in the world.
In chapter 4, Hill argues that Smith was not advocating absolute equality of wealth—a utopian fantasy—but rather equality of opportunity. He advocated higher wages and government programs to mitigate the deadening effects of repetitive work, and he opposed regressive taxation, such as road taxes. Although not opposed to wealth, he was very critical of concentrated wealth. [End Page 93] As he put it: "The affluence of the few supposes the indigence of the many" (75). He derided "the mean rapacity, the monopolizing spirit of merchants and manufacturers" (75). Hill cites shrinking unions, dominance of the finance sector, obscene executive pay, trickle-down tax policies, and a sudden move into free trade as all working to exacerbate inequality, contrary to Smith's advice.
Hill also cites a number of recent studies that link growing inequality with the decline in union membership and the ability of corporations to move to the Sunbelt or other countries. Unions currently "account for only 1 percent of the lobby expenditures, 1 percent of the amicus briefs, and 3 percent of the congressional testimonies" (82, citing Schlozman, Verba, and Brady, The Unheavenly Chorus). The American economy is now dominated by the financial sector whose practices, such as leveraged buyouts, result in the destruction of sound companies and massive layoffs. In previous centuries, Spain, the Netherlands, and Britain all moved from production to finance as the main driver of their economies and all had increasing economic inequality before their collapse. Another causative factor in rising inequality is the sudden move into free trade. Smith advocated a gradual move, advice that has been ignored as we moved into the global era. As Thomas Picketty noted, "If you have free trade and free circulation of capital and people and destroy the social state and all forms of progressive taxation, the temptations of defensive nationalism and identity politics will very likely grow stronger than ever in both Europe and the United States" (87).
Hill also delineates the negative effects of inequality on the total national economy, citing studies that show that inequality results in a slower growth rate for the economy as a whole. Another effect is the difficulty of affording adequate housing. To wit, 18 percent of the homeless are employed. Inequality also weakens democracy itself. Hill notes that "the financial, insurance, and real estate (FIRE) sectors are the largest contributors to political campaigns and employ thousands of lobbyists, several for each elected member of Congress" (92). The influence of such wealth also includes the funding of research and advocacy groups.
According to Hill, "Many fair-minded Americans are not aware that the American political economic system has, for well over a century, built up structural biases in favor of the wealthy and against the poor" (97). That so few people recognize these structural biases is a significant brake on badly needed change. Hill offers possible solutions, all of which assume a market system (or perhaps a mixed economy). First of all, equal opportunity means that all Americans should have access to quality health care. The USA lags behind other wealthy nations on most health metrics. Elderly Americans, for example, are more likely to suffer from heart disease, diabetes, and hypertension than [End Page 94] elderly residents of the UK. There are several causes for this, including poor health care and adverse economic conditions. This disparity has an economic impact, resulting in a workforce less healthy than other high-income countries. Without universal health care, both our health insurance premiums and the nation's total health bill suffer from the costs of emergency room visits by the uninsured. Besides universal health insurance, other policies would improve our nation's health, including paid parental leave and subsidies to promote healthier foods.
The book is well-but-unobtrusively documented. There is a fifteen-page bibliography. This book would be especially valuable for anyone having business majors in a class. Adam Smith may not figure in the standard histories of American philosophy. However, the misinterpretations of Smith that Hill holds up for scrutiny are rampant in American social, political, and economic thought. It is time for American philosophers and theologians to challenge these misinterpretations. Hill shows us how.