If, as is proposed, Winston Churchill replaces social reformer Elizabeth Fry on the new £5 note in 2016 it will mean that there is not one woman represented on the back of British banknotes. In fact, since 1970 only two of the 15 ‘eminent British personalities’ to have received the honour have been women.
Fry was an important inclusion not only as a woman (and, indeed, a mother, much attacked at the time for pursuing a public career whilst bringing up a family) but also as a reformer who strove to make prisons more humane, to help the homeless – she was responsible for London’s first ‘nightly shelter’ for homeless people – and to make education available to the poorest, including prisoners and their children.
Her presence on the £5 note is a reminder that progressive change in our society has been hard won, usually in the face of resistance from those in power, and that reformers like Elizabeth Fry and the thousands of ‘ordinary’ people who have dedicated themselves to securing social change have been responsible for much of what is most to be liked about our national life. Change worth having rarely comes about because of the benevolent interventions of our leaders.
Among the ‘personalities’ who will continue to be depicted is Adam Smith. Smith appears on the back of the £20, along with an illustration of his famous example of how the division of labour raises output, the pin factory. Smith is, of course, included because of his founding contribution to modern economic theory and his espousal of free trade. His choice, however, was also a political one, because of his close association (deserved or not) with the economic ideology expounded under Margaret Thatcher and continued by her successors (of all mainstream parties).
Smith, however, is a much more complex figure than his reputation suggests. The vision he expounds, both in his major economic work, The Wealth of Nations, and in his seminal contribution to moral philosophy, The Theory of Moral Sentiments, sets him some distance from those on the right who would enlist him in their cause. It is worth taking pains to get a more rounded understanding of his work and to look more closely at the sections of his work upon which his ‘Thatcherite’ reputation rests.
The first sentence of Smith’s great work of economics, An Inquiry into the Nature and Causes of the Wealth of Nations, famously extols the virtues of the division of labour, as having wrought ‘[t]he greatest improvement in the productive powers of labour’. His most famous example, drawn for his own observations of economic life in Scotland, derives from a Glasgow pin factory, in which ten men, each performing a set task, produced 48,000 pins in a day, compared to little more than one each, when working alone.
Less well known, however, is Smith’s diagnosis of the social problems which stem from the division of labour, found several hundred pages later. In Book V, Chapter I, Smith observes that the division of labour can leave human beings mentally ‘mutilated’, ‘deformed’ and ‘wretched’. Through the division of labour, he writes, the employment of the ‘greater part of those who live by labour … comes to be confined to a few very simple operations; frequently to one or two’.
Since ‘the understandings of the greater part of men are necessarily formed by their ordinary employments’, the worker, who ‘has no occasion to exert his understanding, or to exercise his invention … naturally loses … the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for human creatures to become.’
The damage caused to the private lives of the ‘labouring poor’ by the division of labour has important social implications. The ‘torpor of mind’ into which the worker descends will be accompanied by a decline in self-command, a tendency to fall prey to superstitious beliefs, an inability to judge of ‘the great and extensive interests of his country’, and a weakening of the martial spirit requisite to the defence of the state.
Smith’s suggested solution to these social problems is a publicly supported system of education. The parlous condition of the labouring part of the population is inevitable, Smith thinks, ‘unless government takes some pains to prevent it’. While people of ‘rank and fortune’ have the leisure and the incentive to fend for themselves in this respect, the ‘common people’ have neither the funds nor the ‘time to spare for education’.
Provision ought, therefore, to be made to establish, ‘in every parish or district’, schools, which, through public subsidy, ‘even a common labourer may afford’, teaching children ‘the most essential parts of education’, to ‘read, write and account’. A grounding in ‘the elementary parts of geometry and mechanicks’ would also provide learners with the ‘necessary introduction to the most sublime as well as the most useful sciences’.
It might be argued that Smith is interested in education only in so far as it acts either as a spur to economic growth or as a mechanism of social control. Smith, however, is careful to add that ‘though the state was to derive no advantage from the instruction of the inferior ranks of the people, it would still deserve its attention’. Without such intervention, the ordinary man, with no opportunity to exercise his understanding, is left ‘mutilated and deformed’, barely a member of the moral community about which Smith wrote in his Theory of Moral Sentiments.
Smith, also, famously, writes in The Wealth of Nations of ‘an invisible hand’ by which the pursuit of our own interests – specifically, in this case, self-interested ‘support of domestic to that of foreign industry’ – results in outcomes beneficial to the whole of society. He says:
“by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other eases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.”
For many, this argument, actually directed against the threat of British mercantile interests investing in goods abroad rather than at home, is Smith’s core message: that is it by pursuing our own individual interests as best we can, achieving the greatest value for ourselves, that we best serve the wider interests of society, building a stronger, wealthier nation, to the benefit of all. The above quote certainly demonstrates that Smith did believe that self-interested economic activity can indirectly benefit society. He also believed that the pursuit of private self-interest and the competition that resulted from it was beneficial in keeping prices down.
However, Smith also warns of the tendency of powerful mercantile interests to conspire ‘against the public or in some contrivance to raise prices’. Smith was concerned about the tendency of business interests to collude against those of the public. He wrote: ‘We rarely hear, it has been said, of the combinations of masters, though frequently of those of the workman. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject.’ He saw that business had the capacity to act against the wider interests of society.
Smith also warned, presciently enough, against business gaining too much power over the political system and having too much influence over policy and law-making. The interest of manufacturers, he wrote, ‘in any particular branch of trade or manufactures, is always in some respect different from, and even opposite to, that of the public …The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention.’
Smith’s Wealth of Nations had its origins in economics lectures, given at the University of Glasgow, as part of his course in moral philosophy, and Smith’s moral concerns are evident, though they rarely command the attention of his commentators. The moral focus of Smith’s thought sharply separates him from most modern economic thinking. This is unsurprising, since Smith was a figure of the Enlightenment, viewing human beings as essentially social and sociable creatures, guided as much by sympathy and benevolence as by ‘self-love’. In the Wealth of Nations, he complains that: ‘All for ourselves and nothing for other people seems in every age of the world to have been the vile maxim of the masters of mankind.’
Smith continues to be read as an apostle of non-interventionist economics. A cursory survey of The Wealth of Nations shows that this is a partial and unsatisfactory view. It is certainly not one that Smith would have recognised or welcomed. He saw that the emergent commercial society of the eighteenth century had its dark underbelly and that it was the responsibility of government to deal with it. Economic activity, like every other area of human activity, Smith believed, needed to be morally, and not merely materially, grounded.
All in all, not too bad a candidate for the back of a £20 note.