Was Adam Smith a communist?

In addition to historical curiosity, this reading of Smith as a communist is interesting because it was offered by a man who was not only the most eminent Dutch economist at the time, but a banker, Director and President of the Dutch central bank for decades, Minister of Finance, and Prime Minister. Moreover, Pierson’s extensive and thorough exposition of why the Wealth of Nations is in fact not too different from Marx and other socialists’ view of the economy is strangely casual and unintentionally provocative to the modern reader due to all the twentieth century connotations of communism it obviously lacks.

Pierson was a devout protestant, and ‘progressive’ or ‘neo’ liberal – as opposed to the ‘conservative liberals’ within his own political group, various Christian political denominations, and the up and coming socialists of late nineteenth century Dutch politics. Pierson’s political views are perhaps best characterized as resembling those of John Stuart Mill. Pierson emphasized free enterprise, and what in Dutch is always referred to as “zelfredzaamheid” by liberals: the obligation for individuals to take care of their own lives. Pierson appreciated the objectives for a better society advanced by the socialists, but judged their methods of a powerful and all-encompassing and controlling state not feasible or desirable in practice. At the same time, the administration that he presided and that bore his name (1897-1901) became known as Het kabinet van sociale rechtvaardigheid, or The administration of social justice. It introduced among others a national health insurance for workers, introduced a law prohibiting child labor, a law obliging (and paying for) children between the age of 6 and 12 to attend school, and a revolutionary ‘Housing Law’ that gave the Dutch government extensive powers to intervene in the housing market.

Pierson’s main objection to Smith was that Smith disregarded the key element of distribution of welfare in the economy, and the commercial exchange of which this distribution is the result. Only commercial exchange was part of the investigation of economics, and to be distinguished from other forms of exchange, such as giving to the poor, that should be studied by psychology. Because Smith ignored distribution and had no theory of commercial exchange, Pierson argued, it was all too tempting for socialists to conclude that other ways of organizing the economy were possible. If one understood the dynamics of commercial exchange, one understood how welfare is distributed if the economy is allowed to run its course, and one equally understood a socialist organization of the economy to be an illusion. In addition, one would immediately understand that an increase in the population that forces one to take less fertile lands into production, would increase the welfare of the nation, but reduce the average welfare of its citizens. In Pierson’s own words:

Distribution is only acknowledged by [Smith] in such terms that attention is drawn away from [commercial] exchange: the income of each individual is a quotient; the more people, the smaller each share. With this one word [i.e. wealth as only referring to the wealth of a nation, thus only understood as the sum of individual incomes], Adam Smith expresses himself such that all that is characteristic of actual society, all that strongly distinguishes it from a communist society, is pushed to the background. As a result, his [i.e. Smith’] words obtain an evidence they would otherwise lack, and he achieves to make reasonable what no mercantilist, no protectionist, no supporter of the old [i.e. Malthusian] population doctrine, no one who believes in the possibility of over production, can affirm without conflicting his own beliefs.