Wednesday, December 30, 2009



The rapid-fire proposal of new economic policies by the current administration in Washington has left many of us breathless. Cap and Trade, bailouts, health-care reform, climate change legislation are all programs that have the potential of severely altering what America has stood for in matters related to the economy. Though never officially Laissez-faire in policy, America has generally followed a more free-trade, lower federal taxes, and less redistribution of wealth approach than has been the case in many European countries and, of course, in the communist bloc when it existed. That has been where we have stood, though not unanimously so. But, as the proverb states, we need to see where we have been in order to see where we ought to be going. This is the first of a multi-part essay on America and economics. Obviously this is not intended to be thorough, though it is a sample of a larger project that I have been working on that is now nearing completion. This first installment will show where free trade, lower government philosophy about economics comes from, and how antebellum nineteenth century Christian thinkers reacted to it and to America’s rapid rise to being and industrial powerhouse. The second part will look at what brought us from there to the Great Depression, and the third part will track our history from that signal event to where we are today.

The story begins, in a sense, not in Philadelphia, but in Glasgow. Adam Smith was a Scotsman, a moral philosopher and educator, and in 1776 he published what would be his most famous book, The Wealth of Nations. It would take a separate essay even to introduce Smith adequately, but in a few sentences we can at least trace the key elements of his book, and what he was trying to accomplish with it. Smith was convinced that the mercantile system of economics that prevailed in his day was outmoded and destructive of wealth. It was based on the belief that real wealth was to be found in hard coin or bullion, gold and silver, and that the more of this that a nation owned, the wealthier it was. In order to maintain that level of wealth, therefore, governments micro-managed their economies, putting heavy restrictions on imports and on buying anything from other nations that would decrease their stockpile of “wealth.” Governments also managed the economy in many other ways in terms of productivity, prices, and distribution.

Smith opposed all of this. He began with a new definition of “wealth.” For him, wealth is the productivity of a nation, and that has little if anything to do with how much gold bullion a king might have in his cellar. Since wealth was productivity, he encouraged that governments ought to remove all restrictions to productivity, and that entrepreneurs ought to restructure their business models around three ideas: free trade, the division of labor, and the development of new technologies.

It was in America, the nation founded the same year as Smith’s volume on the wealth of nations, where his ideas would first be tested and tried, though England was close behind, and Germany not far behind England. In order for Smith’s project to be undertaken in full measure, several freedoms were needed. First, political freedom was a necessity. Some kind of republicanism or democratic republicanism was a basic requirement. Through the Middle Ages the authorities, whether kings, barons, or other types of unelected political powers, often saw fit to confiscate the property of those under their jurisdiction. Then again, in various sorts of ways the governments at various levels controlled prices, production, and distribution. It was against this “mercantilist” system of political economy that Smith had dedicated his efforts. It would be only in a political economy that eschewed mercantilism that could witness whether or not Smith’s theories might be workable. The American form of government as it crystallized in the Constitution offered that very kind of political freedom since most government officials in the federal system would be elected in some form by qualified holders of political franchise, and since, for a variety of reasons, the early American economy was virtually free from government intrusion.

Second, freedom of press is crucial to a capitalistic political economy. This is the case since the press needs to be free to disseminate information about the nature of the exchange of goods and services and about the ethical status of various industries. It must also be free to report on any alleged government intrusion into the economy. There must be no coercion from the state over the press, and there must be freedom for one form of the press to monitor whether other forms of the press are being manipulated by business interests for their own purposes.

Third, freedom of markets is fundamental to this system. That is almost by definition basic to Smith’s approach to economics. What we need to note here is that the American government early on played little role in manipulating markets, in interfering with production, and, for the most part, in overly taxing products for consumption by the populace. The free market means small government regulation of trade, low tariffs on goods imported, low taxes on sale of goods, and not preferring one industry or one company over against others. Though there was considerable disagreement on such matters as the national bank and on whether the federal government had any right at all to tax goods and services, the early American experiment was closely aligned with Smith’s ideology on this particular issue of markets.

Because America was a place where there was little regulation of the economy, Smith’s ideas seemed to bear themselves out, in some cases even long before his book appeared. New England was financed early on by joint stock corporations, especially the Massachusetts Bay Company and the Plymouth Bay Company. The men who founded these companies back in England were known as “adventurers.” That seems an odd name for men who never left home, but it was a term etymologically related to our modern term “venture capitalist.” These men went out on a limb and invested their own money in a “venture” which might not have met with success with the expectation that they would realize a profit. The venture was relatively free from government regulation, and the profit would, hopefully, be relatively free from government monitoring since it was obtained outside the normal network of government oversight. The New World of British colonization in the Western Hemisphere would seem to offer a pragmatic testing ground for ideas like those represented in Smith’s philosophy.

Specific intellectual responses to Smith in America were mixed. This was to be true in the general intellectual world and in the world of Christian intellectuals. In America the two “worlds” were not widely separated until later in the nineteenth century. In this way, America was different from Europe and even England, where the Enlightenment had created two intellectual communities, one of them broadly Christian, and the other decidedly non-Christian, and even anti-Christian. In America, the intellectual world of the early nineteenth century was still, generally, a Christian intellectual world. Stewart Davenport (Friends of the Unrighteous Mammon, University of Chicago Press, 2008) has identified three responses to the new “political economy” ideology developed by Smith and carried on by the French Physiocrats and Smith’s other disciples: the clerical economists, who were supporters of Smith’s approach; the contrarians, who opposed it; and the pastoral moralists, who adapted it to their own moral ideology. All three groups were represented by avowedly Christian thinkers, each of whom claimed that his theory was completely consistent with biblical ethics and the teachings of Jesus. Just how did each group make its case?

The “clerical economists” were supportive of America’s rapid rise to commercial success and were further sanguine about Smith’s overall approach to political economy. They supported free trade, the division of labor, and the rapid evolution of industrialized technology. They held these views in spite of the so-called, “Adam Smith problem,” which was that Smith’s theory was not in any sense compatible with biblical or otherwise altruistic ethics. These individuals were well-known Christian leaders, mostly educators, who did not believe that Smith’s approach to political economy was anti-Christian or necessarily injurious to the spiritual life of those who were being affected by it in the marketplace.

One of the most outspoken supporters of Smith was Baptist minister and professor of moral philosophy, Francis Wayland. At the heart of Wayland’s own moral theory lay a commitment to Scottish Common-Sense Realism. This was a worldview articulated by, among others, Thomas Reid and Dugald Stewart. Reid and Stewart were convinced that God had established the world according to certain natural moral laws and that humans were endowed by God with the ability to discover what those laws were. Wayland and the other political economists contended that Smith’s approach was intuitive, that it was pragmatically advantageous, and that its utility was being proven in the material success of the American experiment. So, for Wayland, the proof lay in a mix of natural theological intuitions, utilitarianism, and American millenarianism. As a college president and professor, he also wished to extend the scope of these ideas to the point of changing the college curriculum to include more practical discipline.

On the other side of the debate lay a group known to historians as the “contrarians.” Chief among them were Presbyterian layman and industrialist Stephen Colwell and sometimes-minister and educator Orestes Brownson. Colwell married into wealth and spent most of his adult life managing his father-in-law’s iron foundries. But he traveled widely in Europe and there witnessed what he thought to be the natural result of political economy—a starving working class made of the many and an opulent ownership class made up of the very few. He believed the same thing was happening in the United States of America in the 1830s and 40s. He laid the blame for all of this on the explicit self-centeredness of Smith’s approach. Tell people that satisfying their own interests and their own needs is entirely appropriate, and they will do just that, and the devil take the rest. “It may be worth inquiring whether the principles upon which free trade is urged will not go far in their ultimate conclusions to dissolve the whole fabric of human society,” he wrote. He opposed free trade, the division of labor, and the development of industrial technology. All of it, he was convinced, was evil and could not be reformed.

Orestes Brownson concurred with Colwell, at least in the early years of his writing. Brownson loathed economic inequality during the period before 1840. He especially was angry at anyone who argued that God approved of such inequality in the name of progress and civilization. He contended that the gospel itself was against any sense of inequality. The clerical economists had argued that class distinction is not important, and that it may lie even in the providence of God. Brownson replied that social and economic inequality was created by men, and that such inequalities must now be reversed in the name of progress, even if that meant an assault on private property. He was not opposed to private property per se, but he was against any kind of hereditary property. He was not, then, a communist, but did call for the state to reform all laws related to wealth inheritance. The basis for his views was primarily religious in nature—he believed the Bible was against the call to financial success.

The clerical economists, then, supported America’s rapid rise to industrial leadership and wealth and the philosophy that supported and informed that rise. The contrarians were opposed to such industrialization and wanted the US government to intervene. There was also a third group, identified by Davenport as the “pastoral moralists,” a group less-well identified ideologically, but people who recognized the danger inherent in industrialization, free trade, and the division of labor, but who were not philosophically opposed to it. Among them was William Arnot, who warned, “Among the elements of the nation’s greatness lie the seeds of sure decay. The very abundance of our material resources, and the very excess of our mercantile enterprise, seem to be forcing into earlier maturity the vices that will lay our glory in the dust.” These pastoral moralists were ministers first, and so found themselves from time to time having to warn their people, pastorally, of the danger that lay in the accumulation of wealth. These men, including Presbyterian pastor Henry Boardman, Unitarian Andrew Peabody, and Congregationalist Joseph Emerson, were not ideologically opposed to capitalism, but were concerned about what capitalism might become in the hands of entrepreneurs.

Three responses to the rise of industrialization and to the philosophy that underlay it—the philosophy of Adam Smith. All three responses from antebellum American Christian leaders, some educators, some captains of industry, some pastors. What none of them suspected was that there was lurking in the shadows a much more strident voice, one that was not buttressed by quotes from the Bible, but one that would sound a clarion call against Smith’s project. We will take that up in the next installment.

Chad Owen Brand

1 comment:

  1. great post Dr. Brand. Your description of the three categories was very helpful. I look forward to the other posts!