The Scottish economist thought purely free markets were a myth and warned of crony capitalismby Bill Emmott / July 16, 2018 / Leave a comment
Published in August 2018 issue of Prospect Magazine
The greatest issue of our time in political economy is how to reconcile societies to the process we now call globalisation, with all the inequality and insecurity that have come with it. We only need to mention Brexit, Trump and the Five-Star League government in Italy to explain why this matters. But all too often, any use of the phrase “Adam Smith” produces strong negative reactions: you are either a heartless neoliberal saying that freer markets are always the solution, or a complacent elitist who believes we already live in the best of all possible worlds.
This is a terrible mistake, as the MP and government minister Jesse Norman explains in this excellent intellectual biography of the most influential political economist of all time. It is a mistake because the 18th-century Scotsman, author of the
famous Wealth of Nations of 1776 but also the less well-known Theory of Moral Sentiments of 1759, provided many of the insights we need today to unravel our current tangles.
Far from chiming with the often cited (but wrongly so) Margaret Thatcher quotation that “there is no such thing as society,” in Smith’s thought there was nothing but.
Markets may work thanks to the “invisible hand” of self-interest, but to Smith they are above all social constructs, bringing together millions of people in relations of exchange and empathy, and depending on rules, enforcement and other interventions by the state. They cannot and must not be simply left alone: truly “free” markets are a myth and private enterprise anyway often ends up as crony capitalism, a “conspiracy against the public,” in one of Smith’s better-known phrases.