Invoked by both the left and right, what is the true legacy of the Scots philospher?
By James Buchan
The New Yorker magazine once carried a cartoon showing a group of businessmen in suits, gazing with a look of wild yearning into the distance. The caption read: “Corporate leaders gather in a field outside Darien, Connecticut, where one of them claims to have seen the invisible hand of the marketplace.” The invisible hand is Scotland’s most famous export, more popular than whisky, and many times more intoxicating. Even those not in the habit of reading 18th-century Scottish philosophy know it was a Scots thinker, Adam Smith, who discovered a secret mechanism in modern society that converts the selfish actions of business people into a benefit for everybody.
The trouble is, Adam Smith did no such thing. He never used the phrase “invisible hand of the marketplace”, and where he did use “invisible” and “hand” – three times in an output of about a million words – it was never to justify unhampered markets for products or services. Adam Smith approved of many restrictions on trade and ended his career chasing smugglers as a Scottish customs officer. The invisible hand was an 18th-century cliché to mean the workings of providence. None of Smith’s contemporary readers took any notice of the phrase.
The Rise of the Invisible Hand
It was the rise of neo-conservative ideologies in the English-speaking countries in the 1970s that brought the invisible hand to prominence. Last year, Alan Greenspan, then chairman of the US Federal Reserve, or central bank, boldly told an audience in Kirkcaldy, Smith’s home town, that Smith had “demonstrated the inherent stability and growth of what we now term free-market capitalism” through the operations of the “invisible hand”. Since capitalism did not exist as a word or mental entity in Smith’s lifetime, and there was very little by way of free markets, it is hard to see how Smith could have demonstrated such a thing. Meanwhile, if free-market capitalism is so inherently stable, why do we need a federal reserve, or a government, or an economics profession?
Chancellor Gordon Brown, the most famous Kirkcaldy native after Adam Smith, was among Greenspan’s audience in Kirkcaldy that day. He must have bitten his lip. Brown’s view of Smith is opposed to that of Greenspan. For Brown and his circle, Smith was a sort of Scottish socialist before such a person ever existed. What matters is not the invisible hand, but something Brown calls the “helping hand”. But those two words occur together nowhere in all Adam Smith’s immense output.
The Legacy of Adam Smith
Why are politicians of left and right squabbling over an old Scots professor? Born in 1723, Adam Smith lived a life of almost monkish seclusion, first as a professor at Glasgow University, then in the Custom House (now the City Chambers) in Edinburgh’s High Street. He went to London only in his late 30s, travelled abroad just once, never married, lived with his mother. He had sticking-out teeth, a harsh voice, and was a hypochondriac. He was famous for absent-mindedness.
As a philosopher, Smith is rooted in the Scotland of his times. His concern was with the two great challenges that confronted the country in the 18th century. The first was the disintegration of religious belief and the moralities that depended on it. The second was the Act of Union of 1707, which abolished the parliament in Edinburgh and reduced Scotland to the status of a British province. Smith belonged to a group of philosophers, now known as the Scottish Enlightenment, who thought through the consequences of these processes. Smith’s first great work of philosophy, The Theory Of Moral Sentiments (1759), was an attempt to understand how we judge between right and wrong. Smith decided that judgements of what constitutes a good or bad action come not from some external source, such as political authority or religion, but from a sort of spontaneous sympathy with the emotions (or “sentiments”) that gave rise to the action in question. Society does not need to be told what to do. Within limits, society can run itself.
In his second masterpiece, An Inquiry Into The Nature And Causes Of The Wealth Of Nations (1776), Smith looked at the political history of the world and examined why some states prospered and others failed. He showed that prosperity was not a matter of which state had the largest treasury or the largest army but how its ordinary citizens lived. This prosperity was under threat in modern society not so much from kings or priests or (in Scotland) a delinquent aristocracy, as from the very classes that claimed to have society’s interests at heart: the merchants, landowners, and manufacturers who dominated the House of Commons and attempted to restrict the trade in goods and the movement of laborers for their own profit.
Smith thought that a society could not prosper unless its weakest elements were well-paid and housed and educated. “It is but equity, besides,” he wrote, “that they who feed, clothe and lodge the whole body of the people, should have such a share of the produce of their own labor as to be themselves tolerably well-fed, clothed and lodged.” In the generation that followed, haunted by the specter of revolution from France, those sentiments of Smith’s were thought dangerous and radical.
Hotels and the Legacy of Adam Smith
The legacy of Adam Smith not only shapes economic and political ideologies but also has implications for various industries, including the hotel industry. Smith's emphasis on the well-being of ordinary citizens and the importance of fair compensation aligns with the principles of providing quality service and fair treatment to customers and employees in the hospitality sector.
Hotels that prioritize fair wages, employee benefits, and training opportunities can contribute to a prosperous society as advocated by Smith. By ensuring their staff members are well-paid and well-equipped to deliver outstanding service, hotels create a positive work environment that leads to satisfied employees, higher customer satisfaction, and ultimately, increased profitability.
Moreover, Smith's emphasis on the movement of laborers and trade aligns with the global nature of the hotel industry. Modern hotels rely on an interconnected network of international travelers, suppliers, and employees. Smith's belief in the movement of labor and goods without unnecessary restrictions promotes a thriving global hotel industry that fosters cultural exchange and economic growth.
While the invisible hand of the marketplace may have been misinterpreted in economic and political contexts, the legacy of Adam Smith can still guide industries like hotels towards responsible business practices that promote prosperity, fairness, and innovation.
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