Adam Smith: is democracy always better for the poor?

Who has read Adam Smith’s Chapter 7, Book IV in The Wealth of Nations? It is an unusual chapter, located towards the end of book (Book IV) that deals with the systems of political economy, more exactly with mercantilism (and physiocracy briefly at the end), and discusses at great length mercantilist trade policies of European empires from Portugal to England. It is no surprise that Adam Smith has very few nice words for imperial policies, including ban on production of goods that may compete with metropoles’ production (like the famous case of steel in North America), prohibition of direct exports to other markets than metropole’s, and obligation to carry trade using metropoles’ ships (the Navigation Act). Smith is even more scathing about merchant companies, the two famous East India Companies, the Dutch and the English (“The government of an exclusive company of merchants is, perhaps, the worst of all governments for any country whatever”).

The chapter “On colonies” is the second longest chapter in the Wealth of Nations. In the edition I was using, it has more than 100 pages which is about 8% of the entire book (the whole book is about 1200 pages long in the same edition). Having been written in 1774, it spends considerable time on North America  and the “disturbances” that were brewing there. As is well known, Smith was right in both seeing the inevitability of American secession and in forecasting the great future for the continent.

But he also presented a ledger where the British expenses on behalf of American colonists were much greater than what Britain received in return (“under the present system of management, therefore, Great Britain derives nothing but loss from the dominion which she assumes over her colonies”)--and this despite discriminatory trade policies mentioned in the previous paragraph. He explained British stubbornness in not granting independence by pride (“No nation ever voluntarily gave up the dominion of any province, how troublesome soever it might be to govern it, and how small soever the revenue which it afforded might be in proportion to the expense which it occasioned”) but also, and importantly, by the economic interests of the English elite that, unlike ordinary people, did benefit from colonies: “[granting of independence] is always contrary to the private interest of the governing part of [a nation], who would thereby be deprived of the disposal of many places of trust and profit, of many opportunities of acquiring wealth and distinction, which the possession of the most turbulent, and, to the great body of the people, the most unprofitable province seldom fails to afford”.

This Smithian sharp distinction within the metropole between the interests of the elite and the rest of the population is something that Thomas Hauner, Suresh Naiduand I use in the forthcoming paper on the world prior to 1914 to argue that the imperialist expansion in the 19^th century was driven by the narrow interests of the metropoles’ rich, that is, by the people who disproportionally owned colonial assets which provided them with returns superior to what they could have obtained at home. Now, we can “rope” in Adam Smith to our case, in a foundational book on political economy written more than a century before the period we discuss. (We do not quote Smith in the current version of the paper but might decide to do so in the next.)

Overall, Smith comes to the conclusion that British colonies are treated better than any others,  but in one very important respect he qualifies this statement.  It is in relation to the treatment of slaves. There he makes an interesting, and I think not sufficiently appreciated (at least I have not seen it mentioned), observation. More democratically-governed colonies (like the British) treat slaves worse because the elite which, in a system of oligarchic republicanism, controls the levels of power is reluctant to punish its own members who are particularly brutal towards slaves. An authoritarian or autocratic state however has less compunction about punishing members of the elite whose behavior is especially outrageous (even if the state does not care much for the welfare of slaves as such). Here is the full quote from Smith:

In every country where the unfortunate law of slavery is established, the magistrate, when he protects the slave, intermeddles in some measure in the management of the private property of the master; and, in a free country, where the master is perhaps either a member of the colony assembly, or an elector of such a member, he dare not do this but with the greatest caution and circumspection. The respect which he is obliged to pay to the master renders it more difficult for him to protect the slave. But in a country where the government is in a great measure arbitrary, where it is usual for the magistrate to intermeddle even in the management of the private property of individuals, and to send them, perhaps, a lettre de cachet if they do not manage it according to his liking, it is much easier for him to give some protection to the slave; and common humanity naturally disposes him to do so. The protection of the magistrate renders the slave less contemptible in the eyes of his master, who is thereby induced to consider him with more regard, and to treat him with more gentleness.

That the condition of a slave is better under an arbitrary than under a free government is, I believe, supported by the history of all ages and nations.

Smith’s lesson here has broader applicability. An oligarchic democracy may be worse for the poor than an arbitrary government. A state, relatively autonomous from the elite, may care more about the “general interest” than an ostensibly democratic government that is in reality the government of the rich.  Smith highlights, I think, in both his discussion of social cleavage in interests when it comes to colonies and in his discussion of slavery, the ambivalence of the connection between the state and class. In more democratic (but exclusivist) settings the state may be less autonomous and more directly “hitched” to the interests of the ruling class. In an autocracy, the state may be less subject to the power of moneyed interests, and more concerned with the position of the poor. Our facile and somewhat lazy approach that more democracy implies a greater concern or improvement for the poor is shown here, by the founder of political economy, to be possibly—at times—wrong.

      

The illusion of degrowth: Part II

I read Jason Hickel reply to my post on degrowth carefully, and I think that I can report some progress in the sense that, on some issues, Jason and I seem to agree.

In his reply Jason acknowledges that, if the present distribution of global income and thus absolute poverty of a quarter of humankind, is not to be maintained, and the overall GDP must not increase, then a significant reduction of Western incomes is inevitable. This was exactly what I stated in my original post.

But Jason does not believe that the reduction of rich countries’ incomes is  a big deal because people in Costa Rica are happy with an income level only one-fifth of the United States, and West European countries are no less prosperous and happy despite the fact that their per capita incomes are 40 percent lower than American. In other words, we can reduce Western incomes a lot and change the type of goods being produced (universal health care and nationalized housing instead of cars and airplanes) without major loss of welfare. Perhaps even with a gain as the new economy would make people work less and lead more interesting lives. For good measure, Jason would also cancel all debts, and (it seems) abolish all lending and fractional banking.

I do not think that this program is illogical. It is just so enormous, outside of anything that we normally can expect to implement, that it verges, I am afraid, on absurdity. It is simply impossible to put in practice, not only in democracies, but probably in North Korea either. I do not want to be impolite or insulting, but I think that only Kampuchea came up with anything similar. Many countries have lost large fractions of their overall income through wars or civil strife, but none has impoverished itself voluntarily. If put to test in real life, rather than at conferences and blogs, Jason’s program would receive support from almost no one.  

Capitalist societies, after several centuries of exposure to market ideology and way of life, are structured in such a way that populations have fully accepted, and reaffirm in their daily lives, the objectives that make capitalism thrive. We want more and newer “stuff” every year. The ideology of commodification and commercialization has never been stronger: it is as present in the UK and the United States as in China, Nigeria, Congo, Russia or Brazil. We are not only working for a wage, we are cheerfully renting our homes and cars for money, networking at our children’s birthdays, and having kids who beat each other to grab a new model of smart phone or shoes. In other words, we have global capitalism with a population that has internalized the objectives needed for capitalism to reproduce itself and to expand, by requiring an ever greater amount of saving, investment and output.

It is irrelevant whether I like or dislike this situation (as Jason seems to believe). It is just that I observe how the world functions while Jason appears to me to live in an unreal world. If he looked at the real world he would have seen that up to 50 immigrants from Sudan are often found squeezed in the tiny electric compartments of French trains while crossing the border in order to live better lives and buy more “stuff”; he would have noticed that people, as they will doubtlessly do on this Thanksgiving too, get up at 4 in the morning to line up in front of Walmart’s and engage in fistfights so that they can buy the new model of “stuff”; he would have noticed that professors at many, and probably his own, universities fight endless battles over 1 or 2 percent salary increases; he would have noticed that families go into debt just to show off with a new model of a car etc. etc.

So his program may in words be accepted by those who would have travelled 10,000 miles to attend the conference where the program is presented; who would use AC while sitting in the conference hall and eat meat during the conferences meals, but they too would not vote for it.  

For if the proponents of such a program really believed in it, they should start (or should have already started) a political movement that would promise to implement it and save the planet. They should explicitly promise continuous annual income declines of several percentage points, lower wages, pensions and social transfers, a work week of 20 hours or fewer, closure of most gas stations and many airports, home production of key food items, picketing of factories that work longer hours or supermarkets that sell meat. They should put this program on their flag and see how many people will vote for it.