The Enlightener Adam Smith – Why the father of capitalism is still misunderstood today – Culture

300 years ago Adam Smith was born in Scotland. He was one of the most important economists – but his theory of the power of the markets remains misunderstood to this day.

Man, the selfish animal: this is how Adam Smith is said to have seen Homo sapiens. At least according to his neoliberal admirers today.

It is always the same passage from Smith’s main work “The Wealth of Nations” to which the market-radical fans of the Scottish enlightener refer: “We do not expect what we need to eat from the goodwill of the butcher, brewer and baker,” it says there, “but that they look after their own interests.”

The big mistake of the Smith interpreters

The Graz philosopher Gerhard Streminger is one of the most prominent experts on the thinking of the Scottish Enlightenment. He gets mildly enraged when he sees Adam Smith elevated to a sort of chief theorist of contemporary neoliberalism.

Adam Smith did not believe that the market as such promoted the common good.

“The great mistake of all market-radical Smith interpreters is that they equate ‘self-interest’ with crude self-interest. But that is a gross misinterpretation of Smith’s theory. Because Smith was first and foremost a moral philosopher,” says Streminger.

In his view of things, it is in people’s self-interest to lead a good – and for Smith that always means: a morally good – life, according to Streminger. “People are happy in their eyes when they feel responsible not only for their own happiness, but also for the happiness of others.”

Market and state go hand in hand

So Adam Smith never advocated ruthless laissez-faire capitalism. According to Smith, the “invisible hand” of the market must interact with the visible hand of the state.

In his entertaining biography of Adam Smith, Gerhard Streminger describes the Scottish philosopher as an early advocate of a “social market economy”: “Adam Smith did not believe that the market as such promoted the common good. On the contrary, only a regulated market is able to do this.”

A pragmatic enlightener

There can be no question of a regulated market in today’s globalized financial markets. However, the Wall Street capitalism of the 2020s cannot be tackled with Smithian analytical instruments alone. The market theorist Adam Smith simply could not have imagined the speculative excesses of today’s financial capitalism.

“You have to understand the philosopher from his time,” emphasizes Gerhard Streminger. “As a pragmatic enlightener, Smith was concerned with improving people’s lives.”

The central question that plagues the philosopher in his main work “The Wealth of Nations” is: How can general prosperity be increased in bitterly poor societies like Scotland’s? Smith’s answer: through the division of labour, through free trade and through the power of markets.

A New Testament?

The “wealth of nations” has sometimes been called the “Old Testament of political economy.” A “New Testament” has yet to be written. Of course, this “New Testament of National Economy” would have to take the limited resources of our planet into account.

It would be interesting to know what Adam Smith would have thought about this.