Craig Emerson gave a wide-ranging speechÂ to the Sydney Institute on Thursday night, discussing early childhood intervention, trade liberalisation, and innovation. A little unusually for a Labor MP, the speech also contained a robust defence of Adam Smith.
Smith, the professed father of capitalism, warned that admiration for the rich and powerful was ‘the great and most universal cause of the corruption of our moral sentiments’ (Theory of Moral Sentiments, p. 61). And he fingered contemporary government as a conspirator with the wealthy against the poor: ‘Civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all’ (Wealth of Nations, p. 715).
Smith accused businesspeople – merchants – of constantly conspiring against consumers: ‘People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the publick, or in some contrivance to raise prices’ (Wealth of Nations, p. 145).
In their conspiracies, merchants enlisted the support of governments to protect them from competition at the expense of consumers, causing Smith to warn that ‘the proposal of any new law or regulation of commerce’ that arises from the merchant class ‘ought always to be listened to with great precaution’ (Wealth of Nations, p.267).
But if these systems of preferment were removed, Smith saw virtue in the freedoms so created: ‘…the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring forth his industry and capital into competition with those of any other man, or order of men’ (Wealth of Nations, p. 687).
Smith considered openness and freedom would yield social good through the power of self-interest: ‘It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest’ (Wealth of Nations, pp. 26-27). Prosperity is gained through this ‘invisible hand’ (Wealth of Nations, p. 456) of buyers and sellers pursuing their self-interest in an open, competitive economy.
Yet Smith did not see this as utopia. He foresaw the debilitating effects of the division of labour in an industrial revolution that had not yet begun, predicting that menial, repetitive behaviour would create men ‘mutilated and deformed’ (Wealth of Nations, p. 788).