Who is Adams Smith

EconomyMisunderstood thought leader

Adam Smith wrote just two great works in his life: "The Theory of Ethical Feelings" from 1759 and "The Prosperity of Nations" from 1776. These echo to this day. His work is often reduced to two core theses. First: division of labor is efficient. Second, a free market leads to prosperity.

Adam Smith is therefore considered to be the mastermind of the neoliberals - that group of economists who want to keep the influence of the state on economic activity as low as possible. In fact, that was precisely what Smith wrote in his biography:

"The author of the 'theory of ethical feelings' and the 'prosperity of nations' did not advocate an unrestricted market. Rather, in Smith's social model, the state should set legal guard rails for market participants that are oriented towards the common good."

Legal guard rails

But how did this historical misunderstanding come about? In order to record the work and work of the Scottish Enlightenment, Streminger has traced Smith's life in chronological form. He describes how the son of a lawyer came into contact with free trade at an early age due to the hustle and bustle in the harbor in his hometown of Kirkcaldy:

"Little Adam was apparently so used to it that he later describes this form of 'swapping' or 'trading' [...] as as natural as conversation."

Streminger outlines how Smith studied at Oxford and later rose to become a renowned moral philosopher in Glasgow, where he also published his first major work.

The work of the invisible hand

Only sixteen years later, after painstaking thought and writing, is his next book available: The Prosperity of Nations, which is now also referred to as the "Bible of Economics". In it, Smith describes that the unintended consequences of human action can lead to a social condition that is better than what is actually intended. He calls this the work of an invisible hand. Streminger comments:

"The observation that egoism and vanity of individuals can promote the economic situation of others is entirely correct. However, Smith's assertion that the effect of market mechanisms would achieve almost the same equal distribution of essential goods as through intervention by the state is highly problematic."

Positive and negative effects of the market

The historical misunderstanding of his work is based precisely on this assertion by Smith: It is easy to deduce from these sentences that the market can replace the state. If you place the passage in the context of Smith's oeuvre, however, it becomes obvious that this is not what the thought leader could have meant, Streminger analyzes:

"As explained in more detail in the discussion of the prosperity of nations, Smith [...] does not plead for the market as such, but for the establishment of an ideal market. Under ideal market conditions, the state does take on central tasks, for example with regard to infrastructure, the education and the control that market participants behave like fair athletes. "

This is especially true because Adam Smith saw not only the positive, but also the negative effects of the market:

"The institution that is responsible for economic wealth [...], the division of labor, has socially extremely dubious effects. It leads to the dumbing and mental impoverishment of the masses. This threatens democratic structures and regains feudal-authoritarian behavior Influence."

Innate sense of justice

In Smith's view, the state should therefore not only combat the worst excesses of poverty, but also ensure adequate education. For him, the latter was a central aspect of a functioning society. Education does not mean school knowledge or learning a certain profession, explains his biographer Streminger. Education means that a person can put himself in the shoes of others and judge something neutrally. In general: To look at things from a distance is an indispensable quality for the moral-philosophical concept of Smith. The educator assumes that everyone has an innate sense of justice, writes Streminger:

"Although we are also guided by self-interest, people are by no means trivial utility maximization machines. [...] People are multidimensional beings who not only enjoy their own betterment, but also find personal pleasure in it when others are doing well and the exchange of Goods are done justly and fairly. Whoever takes advantage of or cheats, in short: acts unethically, cannot get a license from Adam Smith. "

So Smith makes high demands on every single member of a society - possibly even too high, says Streminger. As a rule, we take an interest in the life of our relatives, friends and acquaintances. Genuine compassion for people with whom you are not in a direct relationship, on the other hand, is a feeling of luxury.

No license for unethical behavior

A feeling of luxury or not - Streminger manages in his biography to vividly depict such abstract moral-philosophical questions. This works because he not only describes Smith's world of thought, but also his essence. He reports how the absent-minded professor sometimes loses the thread in discussions. And he tells how the moral philosopher gesticulates so wildly during a lecture in a Scottish tannery that he accidentally falls into a pit filled with animal carcasses.

The analysis shows that Smith's work definitely has weaknesses. Much more important, however, is the realization that the Scottish economist never claimed in its pure form the strong role of the market, which is often promoted today. A society without a strong state can no more function than a society without a free market, so was Smith's thesis. As Gerhard Streminger points out, it can certainly help to revisit Adam Smith's works - and not just the first few pages.

Gerhard Streminger: "Adam Smith. Prosperity and Morality. A Biography"
C.H. Beck Verlag, 254 pages, 24.95 euros.