Adam Smith and Pope Francis

Southern Illinoisan, February 18, 2014

 When Pope Francis decried "the tyranny of capitalism" late last year, many American conservatives reproached the pontiff.  In his “apostolic exhortation,” Francis charged, "The worship of the ancient golden calf has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose."

In reply, Bill O’Reilly commented, “Pope Francis said that income inequality is immoral. . . . I don’t know if Jesus is going to be down with that,” while Rush Limbaugh termed Francis’ remarks “pure Marxism.” 

In fact, though, Francis' entreaties echo similar warnings in the seminal work of capitalism, Adam Smith's Wealth of Nations.  Limbaugh might more accurately accuse the pope of “pure Smithism.”

Published in the momentous year of 1776, The Wealth of Nations challenged the dominant theory of the day, mercantilism, which argued that economic activity must be subservient to the state. In contrast, Smith reversed the emphasis, arguing that individual liberty provided the basis of economic activity, and that the driving social force was self-interest. In his famous formulation, “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 self-interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our necessities, but of their advantages.”

In the half-century after Smith died in 1790, his theories were mainly championed by the rising class of industrialists who embraced his theories of free trade without government interference.

But Smith's philosophy cannot be understood as simply an eighteenth-century variation of Gordon Gekko's "greed is good." In fact, Smith strongly distrusted this new class of industrialists, which he condemned for its “mean rapacity.”

As economist Robert Heilbroner has written, “It is not [Smith’s] aim to espouse the interests of any class. He is concerned with promoting the wealth of the entire nation. And wealth, to Adam Smith, consists of the goods that all the people of society consume; note all—this is a democratic, and hence radical, philosophy of wealth.”

And thus Smith might say, about proposals to raise the minimum wage, “What improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, 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 well fed, clothed, and lodged.”

He likely would add, “That a little more plenty than ordinary may render some workmen idle, cannot well be doubted; but that it should have that effect upon the greater part, or that men in general should work better when they are ill fed than when they are well fed, when they are disheartened than when they are in good spirits, when they are frequently sick than when they are in good health, seems not very probable.”

As to the excess profits of the 1%, Smith would comment: “Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”

In fact, Smith despised the opulence and conspicuous consumption of the wealthy. “With the greater part of rich people, the chief enjoyment of riches consists in the parade of riches, which in their eye is never so complete as when they appear to possess those decisive marks of opulence which nobody can possess but themselves.”

As for taxation policies, Smith advocated from each according to ability. “The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

One of the major themes of Wealth of Nations is for people to understand self-interest not in a particular and short-term sense, but in the concept that the wealth of one lies in increasing the wealth of all. The pope couldn’t have said it better.