Read On the Wealth of Nations Online
Authors: P.J. O'Rourke
On the Wealth of Nations (13 page)
Adam Smith may have been first to realize that politics needs a euphemism for 'church'. There's something very contemporary about 'Institutions for the Instruction of People of all
Ages', giving equal weight to pottery classes, yoga, mass, and shul. Smith was unreservedly in favor of separation of all these things and state.
Articles of faith, as well as all other spiritual matters ⦠are not within the proper department of a temporal sovereign, who, though he may be very well qualified for protecting, is seldom supposed to be so for instructing the people.
38
Except, in the case of the future King Charles, in matters of organic farming.
And yet, as with education, Smith felt the need to explore additional policy options. On the one hand, separation of church and state was definitely good. On the other hand, maybe the government
should
fund religion. (It was this kind of thing that would cause Harry Truman to plead for a one-armed economist.) Smith quoted David Hume about how the 'interested diligence of the clergy is what every wise legislator will study to prevent'.
39
If a preacher has to support himself, he'll need, said Hume, 'to excite the languid devotion of his audience. No regard will be paid to truth, morals, or decency in the doctrines inculcated. Every tenet will be adopted that best suits the disorderly affections of the human frame.'
40
Therefore, according to Hume, what the government should do with 'spiritual guides' â in order to avoid an al-Qaeda â 'is to bribe their indolence, by assigning stated salaries to their profession'.
41
,
42
But that would mean underwriting all sorts of oddballs such as hymn-blabbing Methodists, congregation-dunking Baptists, and who knows what. So, on yet a third hand, maybe the Church of England ought to be preserved. 'This system of church government,' Smith wrote, 'was from the beginning favourable to peace and good order.'
43
Probably there wasn't anything to be done about the separation of church and state anyway. Smith claimed that a government with no official religion was something 'such as positive law has perhaps never yet established, and probably never will establish in any country'.
44
Then, in the next paragraph, he explained just how positive law could establish it, 'provided those sects were sufficiently numerous, and each of them consequently too small to disturb the public tranquillity ⦠and if the government was perfectly decided both to let them all alone, and to oblige them all to let alone one another'.
45
That was how we got separation of church and state in America, a country founded by religious lunatics.
Smith was also unreservedly for freedom of belief, though not in a way calculated to please believers:
The teachers of each little sect, finding themselves almost alone, would be obliged to respect those of almost every other sect, and the concessions which they would mutually find it both convenient and agreeable to make to one another, might in time probably reduce the doctrine of the greater part of them to that pure and rational religion, free from every
mixture of absurdity, imposture, or fanaticism, such as wise men have in all ages of the world wished to see established.
46
This sounds like the joke about what you get when you cross a Jehovah's Witness with a Unitarian â somebody who goes door-to-door for no reason.
And Smith had a kind of praise for fundamentalist Christians that would infuriate all of them, from Ralph Reed to Al Sharpton:
A man of low condition ⦠is far from being a distinguished member of any great society ⦠His conduct never excites so much the attention of any respectable society, as by his becoming the member of a small religious sect. He from that moment acquires a degree of consideration which he never had before.
47
And don't get Smith started on Roman Catholicism: 'The most formidable combination that ever was formed against the authority and security of civil government, as well as against the liberty, reason, and happiness of mankind.'
48
It wouldn't be a good idea to send Adam Smith out on the campaign trail, drumming up the religious vote.
Adam Smith did a lot of thinking about taxes, eighty-odd pages worth. He began with four sensible maxims of taxation: taxes
ought to be inexpensive to collect, be levied when taxpayers are best able to pay them, be proportionate to the revenue that taxpayers 'enjoy under the protection of the state',
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and be 'certain, and not arbitrary'.
50
The last maxim is the most sensible and therefore the least observed. The boggling complexity of tax law and the ceaseless fiddling with taxes, even by legislators who would lower them, violate Smith's principle that 'a very considerable degree of inequality ⦠is not near so great an evil as a very small degree of uncertainty.'
51
It's a principle that applies to practically everything, as anyone who is in love or waiting for a check in the mail knows.
Smith was opposed to inheritance taxes, which are almost as arbitrary, if not as uncertain, as death. And they can hardly be said to be levied at a time when the taxpayer is best able to pay them, because he's dead.
Smith did not see a consumption tax as a panacea: 'All taxes upon consumable commodities ⦠tend to reduce the quantity of productive labour.'
52
He wouldn't have favored introducing a VAT in the United States. Just the fact that it is in use elsewhere is an argument against it. 'There is no art which one government sooner learns of another, than that of draining money from the pockets of the people,' wrote Smith.
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Smith was against corporate taxes because 'The proprietor of stock is properly a citizen of the world,'
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and 'a tax which tended to drive away stock from any particular country, would so far tend to dry up every source of revenue, both to the sovereign and to the society.'
55
Also, Liechtenstein might
end up as a world power. And it could hardly help but have territorial ambitions.
Smith made a sensible argument in favor of property taxes â but only on Republicans with inflated house values in nice neighborhoods: 'Nothing can be more reasonable than that a fund which owes its existence to the good government of the state, should be taxed peculiarly.'
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And, since government was instituted for the defense of the rich against the poor, he called for progressive taxation: 'It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion.'
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But only if the government makes the poor knock it off with the graffiti and turn down the rap music.
Smith objected to certain taxes on libertarian grounds:
It would have been impossible to proportion with tolerable exactness the tax upon a shop to the extent of the trade carried on in it, without such an inquisition as would have been altogether insupportable in a free country.
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We're very proud of our modern liberty, but that sentence indicates we may have dropped a few freedoms while we were stooping to pick up all the new ones.
And Smith had one really brilliant tax idea, a surcharge on 'the persons who have the administration of government'.
59
He felt that they were 'generally disposed to reward both themselves and their immediate dependents rather more
than enough'.
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St Andrews was founded in 1754, so golf junkets with lobbyists were already available. 'The emoluments of officers, therefore, can in most cases very well bear to be taxed,' wrote Smith.
61
He predicted this would be 'always a very popular tax'.
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Nonetheless, thinking about taxes leads to bad thinking. Think what you would do to the IRS auditor if not for the laws of God and man. And those who would recommend taxes are led as far astray as those who would avoid paying them. Smith's preferred method of raising revenue was a luxury tax. This would be imposed not only on the frivolities of the rich but on 'the luxurious [but] not the necessary expence of the inferior ranks of people'.
63
Let us consider, on evidence that Smith himself provided, what the eighteenth century considered a poor person's 'necessary expence' to be:
It may indeed be doubted whether butchers meat is any where a necessary of life. Grain and other vegetables, with the help of milk, cheese, and butter, or oil, where butter is not to be had, it is known from experience, can, without any butchers meat, afford the most plentiful, the most wholesome, the most nourishing, and the most invigorating diet.
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And let us further consider what, in Smith's words, that plentiful, wholesome, nourishing, invigorating diet actually consisted of:
The circumstances of the poor through a great part of England cannot surely be so much distressed by any rise in the price of poultry, fish, wild-fowl, or venison, as they must be relieved by the fall in that of potatoes.
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And potatoes don't hurt poor people a bit:
The chairmen, porters, and coal-heavers in London, and those unfortunate women who live by prostitution, the strongest men and the most beautiful women perhaps in the British dominions, are said to be, the greater part of them, from the lowest rank of people in Ireland, who are generally fed with this root.
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In the eighteenth century the poor had not yet been elevated to their present status as a valuable source of fads, fashions, and illegal drugs. The inferior ranks were openly considered inferior, rather than secretly and guiltily considered inferior. Even as decent a man as Adam Smith accepted this inferiority without giving it a decent thought. Smith, in his role as policy advisor, wrote the following without any apparent sense that he was contradicting the most important parts of
The Wealth of Nations:
Upon the sober and industrious poor, taxes upon [luxuries] act as sumptuary laws, and dispose them either to moderate, or to refrain altogether from the use of superfluities which they can no longer easily afford. Their ability to bring up families, in
consequence of this forced frugality, instead of being diminished, is frequently, perhaps, increased by the tax'.
67
Perhaps. But the subject of taxes can push a person beyond being merely wrong. Smith was starting to sound slightly demented when he proclaimed, 'Every tax, however, is to the person who pays it a badge, not of slavery, but of liberty. It denotes that he is subject to government, indeed, but that, as he has some property, he cannot himself be the property of a master.'
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And Smith must have been completely out of his head when he wrote about income received by a landowner for renting land: 'Though a part of this revenue should be taken from him in order to defray the expences of the state, no discouragement will thereby be given to any sort of industry.'
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Taxes drive people crazy. Smith as much as admitted it when he declared, rather crazily, 'After all the proper subjects of taxation have been exhausted ⦠they must be imposed upon improper ones.'
70
'Advice, n. The smallest current coin.'
â Ambrose Bierce,
The Devil's Dictionary
Not all of Adam Smith's policy recommendations were worthless or self-canceling or cracked. He dismissed government ownership of businesses in one sentence: 'The state cannot be very great of which the sovereign has leisure to carry on the trade a wine merchant or apothecary.'
71
He cleared the fog about national debt, which isn't a Keynesian stimulus to the economy or a Milton Friedmanish drag upon same, but a moral outrage. It allows government to indulge in sneaking:
Every new tax is immediately felt more or less by the people. It occasions always some murmur, and meets with some opposition ⦠Debt is not immediately felt by the people, and occasions neither murmur nor complaint.
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And larceny:
When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid.
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And counterfeiting. Because the devaluation of currency that results from such defaults should properly be called â¦
⦠an injustice of treacherous fraud.
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This inevitably leads to inflation, which â¦
⦠occasions a general and most pernicious subversion of the fortunes of private people; enriching in most cases the idle and profuse debtor at the expence of the industrious and frugal creditor.
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So every time you cash your social security check you're buying a golf course for Donald Trump.
In 'Of the Expence of Defence' Smith advised us to be glad that defense is expensive: 'In modern war the great expence of fire-arms gives an evident advantage to the nation which can best afford that expence.'
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This is why the Berlin Wall came down. The Star Wars missile defense didn't work, but only the United States could afford to build one to find that out. The USSR was not in an economic position to threaten America with Mutual Assured Bankruptcy.
Adam Smith would have been a first-rate National Security Advisor in the Reagan administration. But even the best advice can't always be given twice. 'The invention of fire-arms,' wrote Smith, 'an invention which at first sight appears to be so pernicious, is certainly favourable both to the permanency and to the extension of civilization.'
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The TigrisâEuphrates river valley is the cradle of civilization. The Iraqis can afford guns.
A policy advisor, even more than the politicians he advises, should know his place. And that place should be nowhere near the economy. At the end of book 4 of
Wealth,
Smith observes, 'The sovereign is completely discharged from a duty ⦠for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people.'
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And Smith goes on to say all that ever needs to be said about the duties that government does have:
First, the duty of protecting the society from the violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it ⦠; thirdly, 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.
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And yet, on that third point, if the works and institutions aren't for the interest of any individual, why are we individuals paying to erect and maintain them? This brings us â and Adam Smith â back to politics.