The moral case for free commerce
We are here today to launch Richard Morgan’s book, a book that applies C18th wisdom to current circumstances.
One of the great virtues of knowledge of past ideas, is that it forces present thinkers to work harder. Not always an agreeable prospect. Hence the push to define the past as a realm of Stygian moral and intellectual darkness that our present knowing moral splendour has utterly superseded. Thus is current fashionable opinion both elevated and protected.
Yet much that has been paraded in recent decades as allegedly cutting edge thought is little more than ideas from as long ago as the C5th BC re-packaged. Indeterminacy of meaning, for example—which the post-modernists make so much of—was a hot topic for Socrates and the boys. While the politics of Plato’s Republic—with its Platonic Guardians, and their necessary supporting Platonic myths—seems to get endlessly recycled. Judges and international bureaucrats—some of them scientific—are notable current offerings as Platonic Guardians: with supporting Platonic myths from which dissent is, apparently, not to be permitted in polite society.
Against this recycling of the C5th BC, it would be quite an advance if we could get rather more academics and other intellectuals to advance to the standard of some good C18th thinking.
Consider the famous passage by Voltaire in his Letters on the English, first published in 1734.
Take a view of the Royal Exchange in London, a place more venerable than many courts of justice, where the representatives of all nations meet for the benefit of mankind. There the Jew, the Mahometan, and the Christian transact together, as though they all professed the same religion, and give the name of infidel to none but bankrupts. There thee Presbyterian confides in the Anabaptist, and the Churchman depends on the Quaker’s word. At the breaking up of this pacific and free assembly, some withdraw to the synagogue, and others to take a glass. This man goes and is baptized in a great tub, in the name of the Father, Son, and Holy Ghost: that man has his son’s foreskin cut off, whilst a set of Hebrew words (quite unintelligible to him) are mumbled over his child. Others retire to their churches, and there wait for the inspiration of heaven with their hats on, and all are satisfied.Let us consider for a moment how much turgid academic ranting on the allegedly intimate connection between capitalism and bigotry is rendered otiose by this simple observation of what commerce actually means. Commerce does not care for the colour of your skin, your religion, your sex, your sexuality, your ethnicity: what it cares about is the colour of your money. And the worth of your word.
It is politics, with its conjunction of coercion and category – often coercion-by-category – that makes the colour of your skin, your religion, your sex, your sexuality, your ethnicity important, even fatally important. Commerce wants your money and so must, perforce, attend to what you want. Commerce-as-commerce is not interested in any of the vile wars waged by believers—both secular and religious—against human nature-as-it-is in the name of human nature as-it-is-supposed to be. Commerce just wants your money. Preferably again and again. “It is better for me if you are happy with what I do” is practical commerce.
For requiring their consent is a great encourager of good behaviour towards others. As Adam Smith observed:
The real and effectual discipline which is exercised over a workman is that of his customers. It is the fear of losing their employment which restrains his frauds and corrects his negligence.Down the ages, there has been much railing against commerce as undermining the moral order, how amoral the “vulgar merchants” are. Yet—when one bothers to look at the historical record—it is the commercial societies that have, again and again, pioneered social advances. The Serene Republic of Venice with equality before the law and sophisticated capital markets; the Dutch Republic being the first society to abolish the spectre of famine; England pioneering state action to assist the poor. No nations have been so morally tender about just about everything as are modern liberal capitalist societies.
The marginal in society are frequently rather better treated by commerce than by politics. A Fortune 500 company is much more likely to acknowledge same-sex relationships than a US State is. The former cares about getting and keeping good staff, and reaching customers. While political and religious entrepreneurs often seek to sell effortless virtue: to sell a sense of unearned self-satisfaction from simply being different to some other group—whites feeling terribly virtuous for not being black, gentiles feeling terribly virtuous for not being Jewish, straights for not being gay, those born and raised Protestant for not being Catholic, or vice versa. And so on.
If one is selling effortless virtue based on denigration of others, then one is selling bigotry. Something politics, and religion, are sadly rife with. Commerce, not so much. One attends in a different way to those you want to do business with, as Voltaire famously observed.
Long before people talked of the “pink dollar”, there was the Jewish ducat. While women could scale the heights of commerce when they were still formally barred from even the foothills of politics. The first African-American woman to become a millionaire was not Oprah Winfrey, but Madame C. J. Walker, who became a millionaire by 1910: and if you were a millionaire in 1910, you were really a millionaire. She achieved this by selling hair-care products, employing many African-American women in the process, quite deliberately so: no doubt a grave offence against the Equal Opportunity Act—don’t tell Rob Hulls.
When one looks at the denunciations of vulgar merchants and “immoral” commerce, again and again one sees the real complaint is that they attend to what people want, not what the critic thinks people ought to want. That they attend to what people are like, not what people allegedly ought to be like.
To any supporter of a static social order, the restless energy of commerce is a threat. And what social order is more static than one that seeks equality of outcome? The societies that have most raged against commerce have also created some of the most appalling horrors in history, struggling mightily and brutally against what people want.
Indeed, if one wants to establish any bigoted social order, one of the first things one has to do is to restrain commerce. As Thomas Sowell points out, part of the impetus for the Jim Crow laws in the American South was to ensure that a white person buying a first class train ticket did not find themselves sitting next to a black person. For, left to themselves, the railroad companies only cared if you could pay.
The apartheid regime in South Africa restricted commerce in all sorts of ways, as it had to in order to make race matter so much. Hence, when Helen Suzman was the only Opposition member of the South African Parliament, she represented the Cape Town equivalent of Kooyong. The commanding heights of South African commerce was where white opposition to apartheid was electorally strongest.
One of the great disasters of indigenous policy in our country was the law restricting consensual commercial relations between Aboriginal stockmen and pastoralists, by imposing full-time employment as the only acceptable form of contract. This, as was predicted at the time, devastated outback Aboriginal employment. Arrangements that had evolved to suit the people involved in them were abolished by coercive action by central authority because people, not involved in those interactions, had a theory. A theory that did not have pay any attention to what people on the ground actually wanted, and so what would actually work. A theory that classed itself as profoundly moral while it proceeded to stop people attending to what each other wanted.
Adam Smith had something to say about such “Men of System”, who attended to their own theories of government and not to people and circumstances. Such a person
… does not consider that in the great chess-board of human society, every single piece has a principle of its own, altogether different from that which the legislature might choose to impress upon it.In Richard Trudgen’s Why Warriors Lie Down and Die—a necessary book to understand the serial disasters of indigenous policy in this country—there is a particularly appalling passage about “benevolent” government bureaucrats being frustrated when the locals continued to use their canoes to fish rather than the shiny new trawler the taxpayers had bought for them. But the locals knew about canoes and operated them within family and clan groups. The trawler involved new skills and its operation would upset agreed alliances and arrangements among those families and clans. But the bureaucrats knew nought of such matters, so they deliberately burnt the canoes to force the locals to use the trawler.
Needless to say, this wanton vandalism had no such effect. Indigenous Australians have suffered mightily from the coercive benevolence of the state.
For attending to what other people want is not a simple matter of selfishness versus benevolence. As C. S. Lewis noted:
“... those who torment us for our own good will torment us without end, for they do so with the approval of their consciences.”As will those who torment others in the name of the general good. The truly terrible thing about a Nazi gauleiter or Soviet commissar was not that they lacked a conscience, but precisely that they had them: consciences that burned to “purify” society. Attending to others is a great restraint on oppression of all kinds: both those motivated by moral claims, and those not.
For great harms are often created when capitalist acts between consenting adults are banned. The high minimum wages, and grave difficulties in sacking people, of French law do much to explain the social disasters of the banlieu, the French housing estates. The harder it is to sever a working relationship, the riskier it becomes to begin it. The more productive someone has to be to make starting a working relationship worthwhile, the less such relationships will be engaged in. Instead, people retreat to ways of reducing the risk: they insist on more certification; they use networks so people they know can, in effect, vouch for any new person; they minimise risks in communication by hiring people most like themself, and so on. Consequently, if you are a young Muslim male from those French housing estates, your chances of getting a job are greatly reduced. Living lives of idle resentment, burning a few cars provides cathartic excitement.
Thus does state-imposed “morality” divide society by stopping commerce from bringing people together. Social disaster created by a whole set of “moral” theories that stop people attending, one-on-one, to what other people want.
Yet Voltaire, over two and a half centuries ago, could see what encourages people to live together amiably and productively and what divides them. We really could do with a great deal more such eighteenth century wisdom: a sentiment that can turn up in all sorts of places. When he was General Secretary of the Communist Party of the People’s Republic, Hu Yaobang was reported to have observed that it was the ideas of Montesquieu, rather than “outdated” ones of Marx, that China needed.
[There is much to be said for the brute realism of commerce. The ivory towers of academe generate more than their fair share of nonsense. Adam Smith famously described certain universities as having:
… chosen to remain, for a long time, the sanctuaries in which exploded systems and obsolete prejudices found shelter and protection after they had been hunted out of every other corner of the world.But academics can peddle ideas whose consequences they do not have to deal with. Consider the fairly appalling state of modern pedagogical theory. Academics come up with pedagogical theories to be imbued in educators of teachers, who then teach student teachers, who then go and teach students, the ones who actually bear the consequences of those ideas. Few milieus in our society are more isolated from the consequences of their ideas than the peddlers of pedagogical theory and few groups produce so much arrant nonsense—and often grandly big-noting nonsense at that.
Not, I suggest, a coincidence. There are all sorts of good features to commerce’s attention to what other people want: to having to deal, often on a daily basis, with the consequences of what you do.]
It is a grave mistake to think that politics has any inherent tendency to better behaviour than commercial life. In his recent book on the Irish housing boom and bust, Irish journalist Fintan O’Toole refers to:
… certain landowners [who] had accumulated large landbanks at the outskirts of urban areas which they then released in dribs and drabs in order to manipulate the market and artificially to maintain high land prices.In Australia we have a name for such people. We call them ‘State Governments’. If Australians were as free to buy and sell land as Texans—a State that has a bigger population than Australia, faster population growth, higher average income and a bigger proportion of its population in its five largest cities—our houses would cost half to a third (or even less) their current prices. Instead, a country with one of the world’s lowest population densities has the most expensive metropolitan housing in the Anglosphere. A true regulatory achievement.
As Adam Smith observed:
The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would no-where be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.In the light of recent tragic events, we might consider the way regulations controlling removal of trees and bushes retarded people’s ability to manage the fire risk of their properties. We might further consider the failures in management of public lands—notably the failure to reduce fire loads along roads, and in government lands generally.
We might consider the failure to invest in dams to match the increase in Victoria’s population. The last being a particularly egregious failure to live up to Adam Smith’s third duty of government:
… the duty of erecting and maintaining certain public works and certain public institutions which it can never be for the interest of any individual, or small number of individuals, to erect and maintain, because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society.But “global warming” provides useful cover for the failure to match new water infrastructure to the increase in Victoria’s population. A 30% increase in Victoria’s population without a significant new dam is so obviously the fault of the climate—one of those useful Platonic myths I referred to earlier.
The failures of regulation, and of government management, are so numerous, that to presume that they have some strong demand on our support—rather than requiring very careful justification—is a triumph of faith over experience.
By contrast, the economic benefits of free commerce are well attested, something Richard Morgan provides an excellent short survey of in his book. But it is a great mistake to think that those economic benefits are somehow separate, or even opposed, to the moral benefits of free commerce.
Not a mistake that Adam Smith himself was at all inclined to make. As Richard Morgan reminds us, Smith was a moral philosopher who produced The Theory of the Moral Sentiments years before he published The Wealth of Nations. To start with a short discussion of elements of The Theory of the Moral Sentiments, as Richard Morgan does, is entirely appropriate. The right way to frame the practical and moral advantages of free commerce, illuminated by the observations and wisdom of Adam Smith. Wisdom that, as Richard Morgan sets out, is entirely relevant to our own time.
The case for freedom of commerce is very much a moral case. I commend Richard Morgan’s short, and highly readable, book to you as an excellent primer to the continuing relevance of Adam Smith’s C18th wisdom. Perhaps more of our academics—and even a few of our politicians—might catch up to the C18th, so we can better cope with the challenges of the C21st. Especially as Richard Morgan has kindly made it so easy for them to do so.
ADDENDA In his post of 3 December 2009, Adam Smith Scholar Gavin Kennedy has some nice things to say about my speech.