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Speech at the Launch of Richard Morgan’s book Lessons From
The Global Financial Crisis
On Wednesday 6 December 2009, Michael Warby was one of the two
launchers of Richard Morgan’s book Lessons From The Global
Financial Crisis: The Relevance Of Adam Smith On Morality And Free
Markets. The following is his speech, except that the section
in [] was not delivered at the event to save time.
The speech was published in the April 2010 issue of
Quadrant.
The moral case for free commerce
We are here today to launch Richard Morgan’s book, a book that
applies C18th wisdom to current circumstances.
One of the great virtues of knowledge of past ideas, is that it
forces present thinkers to work harder. Not always an agreeable
prospect. Hence the push to define the past as a realm of Stygian
moral and intellectual darkness that our present knowing moral
splendour has utterly superseded. Thus is current fashionable
opinion both elevated and protected.
Yet much that has been paraded in recent decades as allegedly
cutting edge thought is little more than ideas from as long ago as
the C5th BC re-packaged. Indeterminacy of meaning, for
example—which the post-modernists make so much of - was a hot topic
for Socrates and the boys. While the politics of Plato’s
Republic - with its Platonic Guardians, and their necessary
supporting Platonic myths - seems to get endlessly recycled. Judges
and international bureaucrats - some of them scientific - are
notable current offerings as Platonic Guardians: with supporting
Platonic myths from which dissent is, apparently, not to be
permitted in polite society.
Against this recycling of the C5th BC, it would be quite an
advance if we could get rather more academics and other
intellectuals to advance to the standard of some good C18th
thinking.
Consider the famous passage by Voltaire in his Letters on the
English, first published in 1734.
Take a view of the Royal Exchange in London, a place more
venerable than many courts of justice, where the representatives of
all nations meet for the benefit of mankind. There the Jew, the
Mahometan, and the Christian transact together, as though they all
professed the same religion, and give the name of infidel to none
but bankrupts. There thee Presbyterian confides in the Anabaptist,
and the Churchman depends on the Quaker’s word. At the breaking up
of this pacific and free assembly, some withdraw to the synagogue,
and others to take a glass. This man goes and is baptized in a
great tub, in the name of the Father, Son, and Holy Ghost: that man
has his son’s foreskin cut off, whilst a set of Hebrew words (quite
unintelligible to him) are mumbled over his child. Others retire to
their churches, and there wait for the inspiration of heaven with
their hats on, and all are satisfied.
Let us consider for a moment how much turgid academic ranting on
the allegedly intimate connection between capitalism and bigotry is
rendered otiose by this simple observation of what commerce
actually means. Commerce does not care for the colour of your skin,
your religion, your sex, your sexuality, your ethnicity: what it
cares about is the colour of your money. And the worth of your
word.
It is politics, with its conjunction of coercion and category –
often coercion-by-category – that makes the colour of your skin,
your religion, your sex, your sexuality, your ethnicity important,
even fatally important. Commerce wants your money and so must,
perforce, attend to what you want. Commerce-as-commerce is not
interested in any of the vile wars waged by believers—both secular
and religious—against human nature as it is in the name of human
nature as it is supposed to be. Commerce just wants your money.
Preferably again and again. “It is better for me if you are happy
with what I do” is practical commerce.
For requiring their consent is a great encourager of good
behaviour towards others. As Adam Smith observed:
The real and effectual discipline which is exercised over a
workman is that of his customers. It is the fear of losing their
employment which restrains his frauds and corrects his
negligence.
Down the ages, there has been much railing against commerce as
undermining the moral order, how amoral the “vulgar merchants” are.
Yet—when one bothers to look at the historical record—it is the
commercial societies that have, again and again, pioneered social
advances. The Serene Republic of Venice with equality before the
law and sophisticated capital markets; the Dutch Republic being the
first society to abolish the spectre of famine; England pioneering
state action to assist the poor. No nations have been so morally
tender about just about everything as are modern liberal capitalist
societies.
The marginal in society are frequently rather better treated by
commerce than by politics. A Fortune 500 company is much more
likely to acknowledge same-sex relationships than a US State is.
The former cares about getting and keeping good staff, and reaching
customers. While political and religious entrepreneurs often seek
to sell effortless virtue: to sell a sense of unearned
self-satisfaction from simply being different to some other
group—whites feeling terribly virtuous for not being black,
gentiles feeling terribly virtuous for not being Jewish, straights
for not being gay, those born and raised Protestant for not being
Catholic, or vice versa. And so on.
If one is selling effortless virtue based on denigration of
others, then one is selling bigotry. Something politics, and
religion, are sadly rife with. Commerce, not so much. One attends
in a different way to those you want to do business with, as
Voltaire famously observed.
Long before people talked of the “pink dollar”, there was the
Jewish ducat. While women could scale the heights of commerce when
they were still formally barred from even the foothills of
politics. The first African-American woman to become a millionaire
was not Oprah Winfrey, but Madame C. J. Walker, who became a
millionaire by 1910: and if you were a millionaire in 1910, you
were really a millionaire. She achieved this by selling
hair-care products, employing many African-American women in the
process, quite deliberately so: no doubt a grave offence against
the Equal Opportunity Act - don’t tell Rob Hulls.
When one looks at the denunciations of vulgar merchants and
“immoral” commerce, again and again one sees the real complaint is
that they attend to what people want, not what the critic thinks
people ought to want. That they attend to what people are like, not
what people allegedly ought to be like.
To any supporter of a static social order, the restless energy
of commerce is a threat. And what social order is more static than
one that seeks equality of outcome? The societies that have most
raged against commerce have also created some of the most appalling
horrors in history, struggling mightily and brutally against what
people want.
Indeed, if one wants to establish any bigoted social order, one
of the first things one has to do is to restrain commerce. As
Thomas Sowell points out, part of the impetus for the Jim Crow laws
in the American South was to ensure that a white person buying a
first class train ticket did not find themselves sitting next to a
black person. For, left to themselves, the railroad companies only
cared if you could pay.
The apartheid regime in South Africa restricted commerce in all
sorts of ways, as it had to in order to make race matter so much.
Hence, when Helen Suzman was the only Opposition member of the
South African Parliament, she represented the Cape Town equivalent
of Kooyong. The commanding heights of South African commerce was
where white opposition to apartheid was electorally strongest.
One of the great disasters of indigenous policy in our country
was the law restricting consensual commercial relations between
Aboriginal stockmen and pastoralists, by imposing full-time
employment as the only acceptable form of contract. This, as was
predicted at the time, devastated outback Aboriginal employment.
Arrangements that had evolved to suit the people involved in them
were abolished by coercive action by central authority because
people, not involved in those interactions, had a theory. A theory
that did not have pay any attention to what people on the ground
actually wanted, and so what would actually work. A theory that
classed itself as profoundly moral while it proceeded to stop
people attending to what each other wanted.
Adam Smith had something to say about such “Men of System”, who
attended to their own theories of government and not to people and
circumstances. Such a person
… does not consider that in the great chess-board of human
society, every single piece has a principle of its own, altogether
different from that which the legislature might choose to impress
upon it.
In Richard Trudgen’s Why Warriors Lie Down and Die - a
necessary book to understand the serial disasters of indigenous
policy in this country - there is a particularly appalling passage
about “benevolent” government bureaucrats being frustrated
when the locals continued to use their canoes to fish rather than
the shiny new trawler the taxpayers had bought for them. But the
locals knew about canoes and operated them within family and clan
groups. The trawler involved new skills and its operation
would upset agreed alliances and arrangements among those families
and clans. But the bureaucrats knew nought of such matters, so they
deliberately burnt the canoes to force the locals to use the
trawler.
Needless to say, this wanton vandalism had no such effect.
Indigenous Australians have suffered mightily from the coercive
benevolence of the state.
For attending to what other people want is not a simple matter
of selfishness versus benevolence. As C. S. Lewis noted:
“... those who torment us for our own good will torment us
without end, for they do so with the approval of their
consciences.”
As will those who torment others in the name of the general
good. The truly terrible thing about a Nazi gauleiter or Soviet
commissar was not that they lacked a conscience, but precisely that
they had them: consciences that burned to “purify” society.
Attending to others is a great restraint on oppression of all
kinds: both those motivated by moral claims, and those not.
For great harms are often created when capitalist acts between
consenting adults are banned. The high minimum wages, and grave
difficulties in sacking people, of French law do much to explain
the social disasters of the banlieu, the French housing
estates. The harder it is to sever a working relationship, the
riskier it becomes to begin it. The more productive someone has to
be to make starting a working relationship worthwhile, the less
such relationships will be engaged in. Instead, people retreat to
ways of reducing the risk: they insist on more certification; they
use networks so people they know can, in effect, vouch for any new
person; they minimise risks in communication by hiring people most
like themself, and so on. Consequently, if you are a young Muslim
male from those French housing estates, your chances of getting a
job are greatly reduced. Living lives of idle resentment, burning a
few cars provides cathartic excitement.
Thus does state-imposed “morality” divide society by stopping
commerce from bringing people together. Social disaster created by
a whole set of “moral” theories that stop people attending,
one-on-one, to what other people want.
Yet Voltaire, over two and a half centuries ago, could see what
encourages people to live together amiably and productively and
what divides them. We really could do with a great deal more such
eighteenth century wisdom: a sentiment that can turn up in all
sorts of places. When he was General Secretary of the Communist
Party of the People’s Republic, Hu Yaobang was reported to have
observed that it was the ideas of Montesquieu, rather than
“outdated” ones of Marx, that China needed.
[There is much to be said for the brute realism of commerce. The
ivory towers of academe generate more than their fair share of
nonsense. Adam Smith famously described certain universities as
having:
… chosen to remain, for a long time, the sanctuaries in which
exploded systems and obsolete prejudices found shelter and
protection after they had been hunted out of every other corner of
the world.
But academics can peddle ideas whose consequences they do not
have to deal with. Consider the fairly appalling state of modern
pedagogical theory. Academics come up with pedagogical theories to
be imbued in educators of teachers, who then teach student
teachers, who then go and teach students, the ones who actually
bear the consequences of those ideas. Few milieus in our society
are more isolated from the consequences of their ideas than the
peddlers of pedagogical theory and few groups produce so much
arrant nonsense - and often grandly big-noting nonsense at
that.
Not, I suggest, a coincidence. There are all sorts of good
features to commerce’s attention to what other people want: to
having to deal, often on a daily basis, with the consequences of
what you do.]
It is a grave mistake to think that politics has any inherent
tendency to better behaviour than commercial life. In his recent
book on the Irish housing boom and bust, Irish journalist Fintan
O’Toole refers to:
… certain landowners [who] had accumulated large landbanks at
the outskirts of urban areas which they then released in dribs and
drabs in order to manipulate the market and artificially to
maintain high land prices.
In Australia we have a name for such people. We call them ‘State
Governments’. If Australians were as free to buy and sell land as
Texans—a State that has a bigger population than Australia, faster
population growth, higher average income and a bigger proportion of
its population in its five largest cities—our houses would cost
half to a third (or even less) their current prices. Instead, a
country with one of the world’s lowest population densities has the
most expensive metropolitan housing in the Anglosphere. A true
regulatory achievement.
As Adam Smith observed:
The statesman, who should attempt to direct private people in
what manner they ought to employ their capitals, would not only
load himself with a most unnecessary attention, but assume an
authority which could safely be trusted, not only to no single
person, but to no council or senate whatever, and which would
no-where be so dangerous as in the hands of a man who had folly and
presumption enough to fancy himself fit to exercise it.
In the light of recent tragic events, we might consider the way
regulations controlling removal of trees and bushes retarded
people’s ability to manage the fire risk of their properties. We
might further consider the failures in management of public
lands—notably the failure to reduce fire loads along roads, and in
government lands generally.
We might consider the failure to invest in dams to match the
increase in Victoria’s population. The last being a particularly
egregious failure to live up to Adam Smith’s third duty of
government:
… the duty of erecting and maintaining certain public works and
certain public institutions which it can never be for the interest
of any individual, or small number of individuals, to erect and
maintain, because the profit could never repay the expense to any
individual or small number of individuals, though it may frequently
do much more than repay it to a great society.
But “global warming” provides useful cover for the failure to
match new water infrastructure to the increase in Victoria’s
population. A 30% increase in Victoria’s population without a
significant new dam is so obviously the fault of the climate—one of
those useful Platonic myths I referred to earlier.
The failures of regulation, and of government management, are so
numerous, that to presume that they have some strong demand on our
support—rather than requiring very careful justification—is a
triumph of faith over experience.
By contrast, the economic benefits of free commerce are well
attested, something Richard Morgan provides an excellent short
survey of in his book. But it is a great mistake to think that
those economic benefits are somehow separate, or even opposed, to
the moral benefits of free commerce.
Not a mistake that Adam Smith himself was at all inclined to
make. As Richard Morgan reminds us, Smith was a moral philosopher
who produced The Theory of the Moral Sentiments years before
he published The Wealth of Nations. To start with a short
discussion of elements of The Theory of the Moral
Sentiments, as Richard Morgan does, is entirely appropriate.
The right way to frame the practical and moral advantages of free
commerce, illuminated by the observations and wisdom of Adam Smith.
Wisdom that, as Richard Morgan sets out, is entirely relevant to
our own time.
The case for freedom of commerce is very much a moral case. I
commend Richard Morgan’s short, and highly readable, book to you as
an excellent primer to the continuing relevance of Adam Smith’s
C18th wisdom. Perhaps more of our academics—and even a few of our
politicians—might catch up to the C18th, so we can better cope with
the challenges of the C21st. Especially as Richard Morgan has
kindly made it so easy for them to do so.
Thank you
Michael Warby
ADDENDA In his post of 3 December 2009, Adam Smith Scholar Gavin
Kennedy http://adamsmithslostlegacy.com/ASLLBlog.htm
has some nice things to say about this speech.
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