Comments on Adam Smith’s America: How a Scottish Philosopher Became an Icon of American Capitalism, by Glory Liu, Princeton University Press, 2022

This short piece is a review and commentary of a new book by Harvard professor, Glory Liu, titled Adam Smith’s America: How a Scottish Philosopher Became an Icon of American Capitalism.  The book has great merit, which will be discussed below.  Unfortunately, it must be stated that there is a great weakness in the book, and it is not so much in what Ms. Liu says, but what she leaves out.  What Ms. Liu presents is essentially a case study of one topic—the way in which Adam Smith and his writings have been interpreted and used, and then re-interpreted and re-used over and over again by various political factions over the last 200-plus years.  Although extremely thorough in examining this subject, the book never ventures into the realm of the real world.  The subject matter remains in the arena of academic debate and never dares to examine, for example, the reality of the 19^th and 20^th century British Empire.  More on this will be discussed in the concluding section of this review.

The Many Reincarnations of Adam Smith

The strengths of the book are impressive, and where it really shines is in the chronology and dissection of the “Smith revival” in the 50 years following World War II.  What is presented is not really history, nor biography, nor economics.  Rather, it is more in the form of a meticulous forensic study, an investigation into how the rotting corpse of Adam Smith has been dragged out and patched up in succeeding eras to bring about policy shifts deemed necessary by the ruling elites.

The story, as it unfolds, is strewn over a 250-year-long landscape, but key areas of focus are:

1. The initial impact of Smith’s writings in his lifetime and the early years of the United States,
2. The “free trade” versus “American System” conflict in the mid-19^th century,
3. The late 19^th and early 20^th century spread of Smith’s influence,
4. The post-1945 emergence of the Chicago School and the Mount Pelerin Society,
5. The 1970-1990 reinterpretation of Smith by the neo-cons and the neo-liberals.

Certain early phases of Liu’s analysis are far too superficial.  She is explicit that the origin of Smith’s “moral philosophy” flows from the so-called Scottish Enlightenment and the influence of individuals such as Francis Hutcheson and David Hume, but she neglects to examine the philosophical axioms of these individuals at all.  Instead, she is content to merely report anecdotes, such as Hume’s 1776 letter to Adam Smith congratulating him on the publication of the Wealth of Nations.

Even worse, her treatment of Alexander Hamilton is woefully incompetent.  There are only 13 references to Hamilton in this book of nearly 400 pages, and they focus entirely on attempting to establish—largely through mere assertion—Smith’s influence on Hamilton and on a flimsy analysis of Hamilton’s protectionist trade policies.  There is no discussion of Hamilton’s banking and credit policies, nor of his overall economic philosophy, whatsoever.

Liu is more successful in her historical excavations as to how Smith’s influence took hold in the young American Republic.  She reports that as early as 1783, Thomas Jefferson and James Madison both included the Wealth of Nations on a list of recommended books for Congress, and that in 1790 Jefferson hailed it as “the best book extant” on political economy.  Liu also reports on John Adams’ reliance on Smith’s Theory of Moral Sentiments in writing his own Discourses on Davila in 1790, where Adams refers to Smith as “the great writer.”

Liu provides a road map showing how Jefferson was key to the promulgation of Smith’s ideas in America.  She quotes from an 1807 letter by Jefferson to John Norvell (later an avid supporter of Andrew Jackson), where Jefferson says, “If your views on political inquiry go further to the subjects of money and commerce, Smith’s Wealth of Nations is the best book to be read, unless Say’s Political Economy can be had.”  The latter is a reference to Jean-Baptiste Say, the leader of the Smith-admiring French school of free trade economics.  Jefferson became the leading American acolyte of these French économistes.  He popularized Say’s Treatise on Political Economy and even personally translated and published the Commentary and Review of Montesquieu’s Spirit of Laws by Destutt de Tracy, an ally and collaborator of Say.  Jefferson proclaimed that Say’s Treatise shone “with all the lights of his predecessors” but with “more discussion and greater maturity of subject,” and he declared the French économistes to be the first thinkers to turn political economy into the “form of a regular science.”

Liu also discusses the great influence of David Hume on James Madison and how Madison and Jefferson together were responsible for introducing an emphasis on the Scottish Enlightenment, Adam Smith and the French économistes into the curriculum of the University of Virginia, where The Wealth of Nations would be used as the primary text in political economy after 1825.  She also provides a revelatory portrayal of Thomas Cooper, the president of the College of South Carolina.  Cooper, a protégé of Jefferson and rabid supporter of both slavery and the ideas of Thomas Malthus, was the architect of the treasonous South Carolina actions in support of nullification and secession.  He was also the state’s premier proponent of Adam Smith, writing to one colleague that it was “Smith’s Wealth of Nations that created an era in the science; and … contributed more than any other [work] to make known the principles of political economy and to impress on the public mind the importance that ought to be attached to them.”

Far less successful is Liu’s analysis of the mid-19^th century conflict between free trade and the “American System.”  As stated above, her discussion of Alexander Hamilton is both paltry and incompetent.  Additionally, she gives Henry Carey, the great proponent of anti-imperial American economics, only one brief mention in the entire book, and entirely omits any mention of Carey’s devastating critique of the British Imperial Economics in his Harmony of Interests.  Instead, she provides a lengthy—but very narrow—focus on the singular issue of tariffs.

There is a brief discussion of both the American System economist, Daniel Raymond, and the German émigré, Friedrich List, with a mere mention of List’s 1827 Outlines of American Political Economy, but, again, the content of what Raymond and List actually wrote is entirely omitted.  Almost unfathomable, Abraham Lincoln, the creator of the Greenback policy, and himself a sharp critic of Francis Wayland (one of the leading Smith propagandists in America) does not appear at all, with not a single mention of Lincoln’s name in the entire book.

Which Smith is Smith?

Almost half of Liu’s book is devoted to the 20^th century, and the bulk of that to events following World War II.  Her narrative really comes to life with the 1947 founding of the Mount Pelerin Society and the rise to prominence of Friedrich von Hayek.  It was with Hayek that the interpretation of Smith was repurposed as the avenging angel of free markets, the slayer of big government, and the champion of the “invisible hand.”  Essentially, Adam Smith was transformed into a johnny-one-note weapon against “big government.”  Accompanying this were the “greed is good” prescriptions of later Chicago School activists such as Milton Friedman and the Nobel laureate George Stigler, infamous for his quote that the Wealth of Nations was a “stupendous palace erected upon the granite of self-interest.”

Liu then proceeds to discuss, however, that just as the Gordon Gecko model of individualism appeared triumphant in the era of Margaret Thatcher, a new re-working of Smith began to make its appearance.  But as early as 1976, the former Trotskyist and new-born neo-conservative, Irving Kristol, published an essay, titled “Adam Smith and the Spirit of Capitalism,” wherein he proposed a rejection of the Chicago School’s one-dimensional “economic” Smith and a return to the “moral” Smith of the Scottish Enlightenment and Smith’s Theory of Moral Sentiments.

According to Liu, Kristol rejected the Friedman/Stigler vision of “the pure rationality of markets with an indifference to morality” and proposed to re-make this amoral landscape, by demonstrating how, in Liu’s words, “Smith’s view of human nature in The Theory of Moral Sentiments provides the moral presuppositions for capitalism and [thus] grounds Smith’s promise of universal opulence.”  Kristol, together with his wife, Gertrude Himmelfarb, became devotees of Leo Strauss, and their obsession became to resolve the chasm between Smith’s emphasis on self interest and their own notions of public and private virtue.

Liu then shows real insight by demonstrating how this new “moral” version of Smith became palatable to liberals and conservatives alike.  The reimagined Smith became the perfect ideology for the free market Christian right—as we see today in the Ron DeSantis electoral and fundraising base.  At the same time, Smith has now been adopted by many “on the left” as the promoter of “humane capitalism.”

At one point in these pages, she states that as the battle over the interpretation of Smith’s ideas intensified in the 1970s, “multiple Smiths coexisted,” as various factions sought to use Smith for their own political ends.  It is fascinating reading.

Liu identifies the Clinton administration as the watershed where a public embrace of Smith became de rigueur in the Democratic Party, and she points to the repeal of Glass-Steagall, the North American Free Trade Agreement (NAFTA), and the Personal Responsibility and Work Opportunity Reconciliation Act (the “Workfare” Act), as products of this.  She could have easily included the Financial Services Modernization Act (the Gramm-Leach-Bliley Act) of 1999.

The way that Liu puts it is, “The interpretation of Smith as a moral theorist of capitalism, I argue, has become a convenient ideological holding pen for beliefs on opposite sides of the political spectrum, with those on the “Right” appealing to Smith in order to defend conservative moral sensibilities, and those on the “Left” appealing to Smith in order to defend a view of capitalism that also promoted social justice.  Both sides have found common ground in the idea that Smith's vision of capitalism was and is defensible on moral bases.”

What About Empire?

Earlier in this review I spoke of omissions.  To name but a few, there is no mention of Lord Shelburne, Jeremy Bentham, or Lord Palmerston.  The subjects of the British East India Company and the British Empire go almost unmentioned.  Her references to Alexander Hamilton omit all discussion of his intentions for National Banking and his system of Public Credit.  There is zero discussion of Lincoln’s Greenback policy.  The issue of oligarchical Central Banking is ignored, as is the U.S. Federal Reserve.

Additionally, despite the fact that Smith’s Theory of Moral Sentiments comes up repeatedly in the book, there is no serious discussion of this work at all.

The problem here—and this is by no means unique to Ms. Liu or a condemnation of her—is that she really doesn’t understand the history of the last 250 years.  This is not surprising given the current level of instruction at our major universities.

What is missing is any comprehension of Empire versus sovereign Republic.  In 1688 Britain was invaded and occupied by the forces of the Dutch Empire.  Within a few short years, the key imperial financial institutions of Amsterdam—the Bank, the Bourse, and the East India Company—were cloned in the City of London.  What was created was the modern form of maritime/financial oligarchical empire.  After the defeat of France in 1763, that London-based empire became hegemonic, particularly in matters of finance and banking.  The cultural and economic intention of that empire was announced by Bernard de Mandeville in his shameless 1713 Fable of the Bees, and Mandeville’s thesis that “evil produces good” is echoed in Smith’s Theory of Moral Sentiments:  “Hunger, thirst, the passion which unites the two sexes, the love of pleasure, and the dread of pain, prompt us to apply those means for their own sakes, and without any consideration of their tendency to those beneficent ends which the great Director of nature intended to produce by them.”

John Locke, Thomas Hobbes, and their epigones were not independent “scholars” but mouthpieces for the policies and culture of this new form of empire.  They promoted an oligarchical culture that denied the Christian and Platonic concept of a creative human identity.  The so-called 18^th century enlightenment, be it English, or Scottish, or French, in all its varied forms, was based entirely on the methodology of empiricism—sense certainty and linear mathematics—and was grounded in axioms absolutely antithetical to the principles of the Declaration of Independence and the Preamble of the U.S. Constitution.

Ms. Liu shows that Britain began pursuing free trade in the 1780s, but she neglects to point out that this policy came about as a result of a collaboration between Adam Smith, David Hume, Jeremy Bentham, and Lord Shelburne, on determining how to perpetuate British imperial rule.  It was Shelburne—William Petty Fitzmaurice, 1^st Marquess of Lansdowne, Earl of Shelburne—who announced Britain’s turn toward free trade in a speech to the House of Lords in 1783.  What we are looking at here is not economic or moral “theory,” but changes in imperial financial and trade policy designed to perpetuate imperial rule, similar to the decision by the British aristocracy in the mid-18^th century to abandon their dominant role in the African slave trade and to shift into becoming the world’s hegemonic power in narcotics trafficking.

Also absent from Ms.  Liu’s discourse is any discussion of central banking and monetary issues.  Again, this is a failure to understand how the financial oligarchy has run the world over the last 250 years.  The lesson from all of this is that we do not live in a classroom.  The issue before us today is identical to the one we faced in 1776: submit to Imperial Finance, or build a Sovereign Republic.