Adam Smith's Critique of International Trading ... - Political Theory

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210 Political Theory 21. To the extent that the topic of commercial pessimism in Smith is addressed, it is usually discussed exclusively by way of his ambivalence toward commercial society itself, rather than in light of his views about global political economy. About the former, see James E. Alvey, Adam Smith: Optimist or Pessimist? 177-213. 22. On the possible “kinship” between commercial society itself and mercantilism, see Peter Minowitz, Profits, Priests, and Princes: Adam Smith’s Emancipation of Economics from Politics and Religion (Stanford, CA: Stanford University Press, 1993), 103-09. 23. Cf. “That a joint stock company should be able to carry on successfully any branch of foreign trade, when private adventurers can come into any sort of open and fair competition with them, seems contrary to all experience” (V.i.e.25; 746). 24. In contrast, for the view that Smith’s criticism of the English East India Company was diagnosing not a form of corporate or market failure, but an example of “government failure,” see Gary M. Anderson and Robert D. Tollison, “Adam Smith’s Analysis of Joint Stock Companies,” Journal of Political Economy 90, no. 6 (1982): 1237-56, esp. 1249-54. It should be noted that Anderson and Tollison defend the core of Smith’s criticism of joint stock companies as part of what they take to be a sensible theory of the firm, although they are at pains to argue that it is purely an empirical and not a “moralistic” critique—such a distinction likely tells us more about the contemporary discipline of economics that it does about the philosophical nuances of the Wealth of Nations. 25. On the importance of the scale of a company’s operations and the size of the company itself in Smith’s critique, and whether this makes his arguments more or less applicable to contemporary corporations, see Samuel Fleischacker, On Adam Smith’s Wealth of Nations, 239. 26. Along these lines, Iain McLean has argued that “for Smith, the enemy of freedom and prosperity was not government per se, but what we now label rent-seeking government ... a government that is captured by rent-seeking interests.” I. McLean, Adam Smith, Radical and Egalitarian (New York: Palgrave Macmillan, 2007), 80. 27. Cf. “It is the industry which is carried on for the benefit of the rich and the powerful that is principally encouraged by our mercantile system. That which is carried on for the benefit of the poor and the indigent, is too often, either neglected, or oppressed” (IV.viii.4; 644). About Smith’s concerns that mercantilist policies especially harmed weaker social groups at the expense of the wealthy and powerful, see David Lieberman, “Adam Smith on Justice, Rights, and Law,” in The Cambridge Companion to Adam Smith, 239-43. 28. Adam Ferguson had also been considered for a position on the commission. See William J. Barber, British Economic Thought and India, 1600-1858: A Study in the History of Development Economics (Oxford, UK: Clarendon, 1975), 88-89; and Ian Simpson Ross, The Life of Adam Smith (Oxford, UK: Clarendon, 1995), 358. 29. As Smith noted in a letter to his publisher William Strahan in 1783, his intent in doing so was to provide “a full exposition of the Absurdity and hurtfulness of almost all our chartered trading companies” (Letter 227; WN 731). 30. He notes, for example, that the VOC “burn[s] all the spiceries which a fertile season produces beyond what they expect to dispose of in Europe with such a profit as they think sufficient” (IV.vii.c.101; 636). Such policies, in conjunction with various “arts of oppression” that limit local resources (and thus the food supply), function as a kind of hideous population control scheme so that the number of inhabitants on the Spice Islands approximates as closely as possible “the number which is sufficient to supply with fresh provisions and other necessaries of life their own [the VOC’s] insignificant garrisons, and such of their ships as occasionally come there for a cargo of spices” (IV.ii.c.101; 636; see also IV.vii.c.105; 639).
Muthu / Smith’s Critique of International Trading Companies 211 31. Along these lines, Smith argued that the English East India Company most likely turned what would have been a dearth into the full-fledged famine in Bengal in the 1770s (IV.v.b.6; 527). On Smith’s analysis of famines, as compared with Turgot’s and Condorcet’s views, see Emma Rothschild, Economic Sentiments, 72-76. 32. For a detailed account of the connections between the English East India Company and the British government, and the ways in which these connections were debated in the late eighteenth century, see H. V. Bowen, The Business of Empire: The East India Company and Imperial Britain, 1756-1833 (Cambridge: Cambridge University Press, 2006), 53-83. 33. As Joseph Cropsey has noted, Smith’s position is that any form of political rule by a mercantile class is contrary to the public interest. Joseph Cropsey, Polity and Economy: With Further Thoughts on the Principles of Adam Smith (South Bend, IN: St. Augustine’s Press, 1957/2001), 78. Cf. Charles Griswold, Adam Smith and the Virtues of Enlightenment (Cambridge: Cambridge University Press, 1999), 264. 34. The Company administration in India, Smith argues, “is necessarily composed of a council of merchants, a profession no doubt extremely respectable, but which in no country in the world carries along with it that sort of authority which naturally over-awes the people, and without force commands their willing obedience. Such a council can command obedience only by the military force with which they are accompanied, and their government is therefore necessarily military and despotical” (IV.vii.c.104; 638). 35. For a treatment of the various connections between proximity and sympathy in Smith, see Fonna Forman-Barzilai, “Sympathy in Space(s): Adam Smith on Proximity,” Political Theory 33, no. 2 (2005): 189-217. 36. Economic inequality as such, of course, did not constitute a social problem, in Smith’s opinion. Yet Smith was genuinely disturbed by Rousseau’s writings on inequality, and while he ultimately argued in WN that economic inequality could be compatible with real and meaningful improvements in the lives of the poorest members of modern commercial societies, such inequality was nevertheless morally corrupting. See, for instance, the chapter that Smith added to the 1790 edition of The Theory of Moral Sentiments (I, iii, 3). See also John Robertson, The Case for the Enlightenment: Scotland and Naples 1680-1760 (Cambridge: Cambridge University Press, 2005), 392-96; and Donald Winch, “Scottish Political Economy,” in The Cambridge History of Eighteenth-Century Political Thought, 464. 37. Indeed, Smith argues that even simply to increase the tax on such companies would be “extremely impolitick” (IV.vii.c.67; 618). 38. As Emma Rothschild and Amartya Sen have noted, “this is the conflict implicit in the image of the invisible hand. On the one hand, they [merchants] should be left to pursue their own interests as they themselves perceive them. On the other hand, they are likely to pursue these interests by political importunity. The ‘commercial system’ is the characteristic objective of commercial societies, and it is at the same time subversive of commerce itself.” E. Rothschild and A. Sen, “Adam Smith’s Economics,” in The Cambridge Companion to Adam Smith, 346-7. As I note below, Smith hoped that future geopolitical changes that result from a highly imperfect system of global commerce might serve as external (though only partial) correctives to such subversions. 39. The theme of the future decline of European power and the rise of non-European societies, which Smith hoped for, appears in another noteworthy moment of WN. Even Smith’s proposed solution to the grievances of British colonists in America—a union of Britain and America that would eliminate any colonial relationship—included the prediction that the capital and Parliament of this new entity would “in the course of little more than a century” move to America, on the assumption that Britain’s power, relative to America’s, would surely decline over time (IV.vii.c.79; 625).
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