Presumably no one was aware that a new era in world history was beginning. On March 8, 1776, the small town of Tipton in the English Midlands became “the most important place in the world,” as the local newspaper wrote much later. On that day, the local coal mine put an apparatus into operation that was able to pump comparatively large amounts of water out of the tunnels. This meant that the first efficient steam engine in the modern sense finally came into practical use, designed by the Scottish inventor James Watt.
The next day, a similarly revolutionary product appeared in London, also written by a Scot: The moral philosopher Adam Smith, who was friends with Watt, published his major work “The Wealth of Nations” published by William Strahan and Thomas Cadell. It contained quite novel ideas about how people’s lives and economies could be organized without feudal dependencies – and why everyone could ultimately benefit from free trade. The book about the “Wealth of Nations” had “perhaps more influence on the thinking and actions of civilized peoples,” said the Viennese philosopher Friedrich Jodl at the end of the 19th century, “than any other work of this time, which was so rich in new and fruitful ideas.”
The two publishers had excellent connections and a good nose; in any case, they published two works of the century within just a few weeks. The other was published on February 17th and had the similarly powerful title “Decline and Fall of the Roman Empire”. The book by the English historian Edward Gibbon was also a praise for a tightly networked economic area that had perished due to a lack of pragmatism: Gibbon saw the rise of intolerant Christianity as one of the main causes of the end of ancient globalization and the resulting loss of prosperity.
Connection between Declaration of Independence and Smith?
A few months later, across the Atlantic in Philadelphia, an event followed that is far more present in the collective memory than the great deeds of the three Scots Watt, Smith and Gibbon: On July 4th, the delegates from the British colonies in North America passed a text in the Pennsylvania State House with which they renounced the English crown and propagated universal freedoms. The document, primarily written by future President Thomas Jefferson, marked the beginning of modern Western democracies.
Until now, these key events, which brought together world historical trends 250 years ago, have mostly been viewed independently of one another. In a speech, former US Federal Reserve Chairman Alan Greenspan said it was a mere “coincidence” that the American Declaration of Independence came from the same year as the “Prosperity of Nations”.
With regard to the exact year, this may be true, but this judgment still belies the real-historical and intellectual-historical context of the three events. “When Jefferson invoked the right to ‘life, liberty and the pursuit of happiness’ in the Declaration of Independence, the Scottish Enlightenment thinkers invisibly guided him,” says the Austrian philosopher and Smith biographer Gerhard Streminger. And Benjamin Franklin, who edited the Declaration of Independence, was a personal friend of William Strahan, the publisher of the two Scots.
For Smith, ethics and the market belonged together
The colonists’ text rested largely on similar intellectual foundations as the writings of the two Scottish thinkers, and both developed their epoch-making impact in interaction with the technical possibilities that arose from the new machine power. And finally, political and economic ideas, intellectual and material innovations intertwined in a way that can only be seen when viewed as a whole – and which seems extremely relevant at a time in which authoritarianism and protectionism are on the rise.
During the separation of the American colonies, economic questions played a much greater role than was often perceived later. And Adam Smith wasn’t a professor of economics, which didn’t even exist as a subject yet, but initially a professor of moral philosophy. The much-discussed question of how his ideas about the free market can be reconciled with his early work on “The Theory of Ethical Feelings” probably doesn’t even arise: for Smith, the two belonged together.
At the beginning of American independence there was a question of money. “No taxation without representation”: This was what the pastor of the Old West Church in Boston preached, and this was also the argument of the colonists who, a little later, dressed as Indians, threw a large load of tea from a British ship into the harbor basin. The right-wing populist Tea Party movement, which ultimately brought current President Donald Trump into office, derived its name from this event.
A rebellion for free trade
Strictly speaking, the “taxation” against which the protests in the 18th century were directed was not taxes at all, but rather tariffs: the settlers were supposed to pay a – comparatively moderate – surcharge on the tea that the East India Company brought from India via England. In this respect, the United States is at the beginning of an uprising for the free trade that its president is fighting today.
It was not the Americans but the English who did what Donald Trump is trying to do today: They wanted to impose the costs of their own defense on the colonists. After all, England had just waged war in the New World against the French and Native Americans who were restricting the settlers’ expansion, and it also guaranteed the safety of North American trading ships on the world’s oceans. After refusing their customs contribution, the colonies then had to pay for both themselves.
The close connection between economic questions and personal freedoms also characterized the thinking of the Scotsman Adam Smith. “We do not expect what we need to eat from the benevolence of the butcher, brewer and baker, but from the fact that they look after their own interests,” is one of the most famous sentences from his main work.
The liberation of the individual from feudal dependencies
So it’s not just about the actors’ economic self-interest creating more collective prosperity. But also about the liberation of the individual from feudal dependencies. Conversely, the same applies to the baker and butcher himself: by supplying not the court of a prince, but hundreds or even thousands of customers, he does not have to submit to the will of one individual; the customer is not his king.
The moral philosopher, on the other hand, seems rather ambivalent about the consequences of the division of labor he propagates, both between individuals and between nations. He praises the advantages of specialization, which benefit everyone involved: The worker in a pin factory earns a higher income than the self-employed blacksmith who carries out all the work steps himself with ineffective, detailed work – even though the owner of the factory also earns money from it, assuming fair wage negotiations and state worker protection.
At the same time, the author also warned that the repetitive, “mindless activity” in such a system makes people “dull and simple,” an idea that is not so far removed from Marx’s “alienation.” In order to counteract this, an appropriate range of public education is needed – in a sense, a program against populism, formulated from a modern perspective.
Smith anticipated Ricardo
The situation is similar for the Scot on an international scale. Long before David Ricardo developed his theory of comparative cost advantages, he had already partially anticipated it: Smith judged that it was possible to grow wine in Scottish greenhouses, but at a significantly higher cost than in more southern climes (and of lower quality, one might add). Specialization is therefore called for, which requires free trade that is affected as little as possible by tariffs. At the same time, Smith warned that markets should not be opened suddenly, but only gradually, so that populists do not benefit from the resulting disruption.
Surprisingly, Smith formulated such concerns more clearly in his late work on the “Wealth of Nations,” which is generally seen as a plea for limitless market freedom, than in his early work on the “Theory of Ethical Sentiments,” which is seen as the more idealistic effort. However, the supposed contradiction is quickly resolved: When he was younger, the author was convinced that people’s natural empathy would sort things out. As he got older, he no longer seemed so sure.
However, he clearly set himself apart from the utilitarian considerations of the older Scottish Enlightenment philosophers such as David Hume: Precisely because people do not always act in rational self-interest, they may promote the general good. Smith spoke of the “invisible hand”; today we would talk about the unintended consequences of one’s own actions. The fact that people often value completely useless things creates jobs and contributes to society’s prosperity, and deceptions and illusions can also promote people’s hard work. The result is conditions “that are better than people’s intentions,” as biographer Streminger puts it.
The church critic Smith
The conviction that the diverse interdependencies of a globally networked economic area promote the well-being of humanity was shared by the moral philosopher Adam Smith with the ancient historian Edward Gibbon, whose work he applauded: “By the general agreement of all men of taste and learning whom I know or with whom I correspond, he stands at the head of the entire literary community which now exists in Europe.”
What was meant, however, was an empire like the Roman one, which was essentially based on decentralized structures, and not colonialism, which reduced everyone’s development opportunities through one-sided exploitation. An institution like the Roman Church, for Smith the “most terrible association against the freedom, reason and happiness of men,” could only be a hindrance in both of their minds. Superstition had to be countered with scientific facts, which did not rule out the Scottish Enlightenment thinkers believing in a God in a more abstract sense.
Adam Smith was astonishingly prescient about the emerging United States of America, predicting that it would become “one of the greatest and most powerful countries that ever existed on earth.” He foresaw that the center of gravity of the Anglo-Saxon world would shift to the other side of the Atlantic, and he advised his compatriots in the British Isles not to oppose this development with harmful trade barriers.
All of these Enlightenment ideas found their way into the American Declaration of Independence, which preceded the French Revolution by 13 years, and which Jefferson helped create as ambassador to Paris. The first sentence already showed some chutzpah. “We hold these truths to be obvious, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, among which are life, liberty and the pursuit of happiness”: In the context of the time, this was not obvious, as at first glance the differences between people were immediately apparent.
To date, all of these hopes have only been partially fulfilled. James Watt’s invention did not free humanity from work, and contrary to what Adam Smith expected, international cooperation and interdependence did not lead to eternal peace. It is all the more worthwhile to read these classic texts, which can certainly be read as a warning against emerging populisms.
