Re: [OPE-L] Smith's socio-economic thought (a reply to Nicky)

From: Nicola Taylor (nmtayl@YAHOO.COM.AU)
Date: Thu Nov 30 2006 - 21:41:27 EST

> ---------------------
> Nicky, lets put what you say about Marx and
> Neoclassic for the time being
> aside and (bearing our question in mind)
> concentrate on Smith, because there is
> lots of clarification necessary as to how  interpret
> Smith's work. But let me
> remind you that Marx is as much concerned  about the
> freedom of individuals
> as anybody else in western social and political
> thought.

Dogan, in asking whether unemployment is 'rational' in
a CAPITALIST system - (that was the question, right?)
- I don't actually need to consider Marx's thoughts on
the freedom of individuals.  I do need to consider
WHAT IS RATIONAL FOR CAPITAL? i.e. does the existence
of unemployment contribute in some way to
profit-making goals of the corporation (an individual
entity) and/or reproduction/accumulation of capital (a

> You seem to accept the mainstream interpretation of
> Smith's work as  offered
> by people like Milton Friedman and F. A. Hayek. But
> I think that this
> approach fails to grasp the complexcity of Smith's
> teaching.

No, I don't accept the mainstream interpretations of
Smith.  Rather I am talking about *what has been made
of Smith's ideas* in the construction and development
of the so-called *value-neutral* neoclassical system.
I also wanted to bring to your attention the fact that
contemporary real-world capitalism is 'irrational'
from a neoclassical point of view.  Most economists
spend their lives attempting to make the irrational
real better conform to the rational ideal.

That's all.  With your views on Smith (below) I
largely agree.

> Just some methodological remainders: Smith was and
> is one of the greatest
> historians of society and the state and as such he
> approached social formations
> historically. The main question he poses in this
> connection is this: what is
> more advanced and, if you like, better - feudalism
> or "commercial society"
> (what we call capitalism today)? He definitely sees
> capitalism more advanced
> than feudalism. He wrote the 'Wealth of Nations'
> long before the French
> Revolution of 1789.  Therefore, everything he wrote
> he wrote also with  the aim to
> highlight the advantages of capitalism compared to
> feudalism. He uses  his
> famous "invisible hand" in this context. (He uses
> this metaphor only three  times
> in his whole work: once in the Theory of Moral
> Sentiments to criticise  land
> lords, once in his philosophical essay on Astronomy
> and once in Wealth of
> Nations.) In Wealth of Nations when he uses this
> metaphor the main question he
> has in mind is this: who do administer social wealth
> in feudalism and in
> capitalism? In Feudalism it is adminstered by land
> lords, in capitalism, by
> contrast, it is administered by manufacturers. Now
> according to Smith Landlords  make
> up an idle class because they waste social wealth.
> They do not invest it.
> Rather they consume and waste it for luxary.
> Manufacturers, by contrast, have to
>  invest it because they are permanently under the
> pressure of competition. In
>  this connection he uses the metaphor of invisible
> hand and says that
> manufacturers are lead to contribute to the benefit
> of society. They do this not
> consciously, this is not their aim at all, they
> pursue their own benefit, namely
>  to make profit, but because they have to invest
> they necessarily contribute
> to  the benefit of society.
> Please note that he does not speak of individuals
> here. He speaks of
> manufacturers.
> Now, the other aspect you refer to in this
> connection is the notion of free
> trade. He explicitly says that free trade is
> impossible not because the state
> interfers with the invisible hand of the market but
> because manufacturers
> want  to defend and expand their monopolies and
> therefore put the state under
> pressure  to do so. So, Smith says that the greatest
> enemies of free trade are
> manufacturers whose interests are always against the
> general interets of
> society. This leads him to the famous concept of the
> night-watch state. If the
> state is strong that would put manufacturers in a
> much stronger position in
> relation to society than they are anyway because of
> their economic  position.
> In your email you refer to the concept of
> self-ineterst. Again, here I  think
> some clarification is in order. In his work Smith
> uses the concept of
> self-interest in various ways. One meaning may be
> called what we refer to as  'life
> project'. The other meaning has indeed to do with
> economic interest. This
> distinction is very important to understand what
> Smith teaches us.
> As to the first meaning. Indeed, in this connection,
> that is, in the
> connection that individuals pursue their life
> projects, social institutions  should
> interfer as less as possible, because individuals
> know it better than  anybody
> else what is in their own interests. Smith employs
> here a different  social
> theory than commercial society. The foundation of
> social relations when  he
> refers to the concept of life project is mutual
> sympathy, support, respect  and
> recognition. In short, it is a social theory which
> envisages a society in  which
> everybody is everyboy's neighbour, in which
> everybody sees everybody else  as
> his/her second self.
> As to the second meaning: However, as soon as
> economic interests come into
> play there occurs what he calls corruption of moral
> sentiments, power relations
>  and mutual negation. Market society according to
> Smith is, then, a morally
> corupt and is therefore a irrational society.
=== message truncated ===

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