The Equalizing Hand: Why Adam Smith Expected the Market to Produce Wealth without Steep Inequality
Perspectives on Politics, December 2013
Abstract.
That the market economy inevitably leads to inequality is widely accepted today, with disagreement confined to the desirability of redistributive action, its extent, and the role of government in the process. The canonical text of liberal political economy, Adam Smith’s Wealth of Nations, is assumed even in the most progressive interpretations to accept inequality, rationalized as the inevitable trade-off for increasing prosperity compared to less developed but more equal economies.
I argue instead that Smith’s system, if fully implemented, would not allow steep inequalities to arise. In Smith, profits should be low and labor wages high, legislation in favor of the worker is “always just and equitable,” land should be distributed widely and evenly, inheritance laws liberalized, taxation can be high if it is equitable, and the science of the legislator is necessary to put the system in motion and keep it aligned. Market economies are made in Smith’s system. Political theorists and economists have highlighted many of these points, but the counterfactual “what would the distribution of wealth be if all the building blocks were ever in place?” has not been posed. Doing so encourages us to question why steep inequality is accepted as a fact, instead of a pathology that the market economy was not supposed to generate in the first place.
Perspectives on Politics, December 2013
Abstract.
That the market economy inevitably leads to inequality is widely accepted today, with disagreement confined to the desirability of redistributive action, its extent, and the role of government in the process. The canonical text of liberal political economy, Adam Smith’s Wealth of Nations, is assumed even in the most progressive interpretations to accept inequality, rationalized as the inevitable trade-off for increasing prosperity compared to less developed but more equal economies.
I argue instead that Smith’s system, if fully implemented, would not allow steep inequalities to arise. In Smith, profits should be low and labor wages high, legislation in favor of the worker is “always just and equitable,” land should be distributed widely and evenly, inheritance laws liberalized, taxation can be high if it is equitable, and the science of the legislator is necessary to put the system in motion and keep it aligned. Market economies are made in Smith’s system. Political theorists and economists have highlighted many of these points, but the counterfactual “what would the distribution of wealth be if all the building blocks were ever in place?” has not been posed. Doing so encourages us to question why steep inequality is accepted as a fact, instead of a pathology that the market economy was not supposed to generate in the first place.