Understanding Adam Smith - Mutuality
This is the last of an eight-part series designed to explain several important aspects of Adam Smith’s writing, or at least correct widespread misconceptions regarding those writings. You can pick up the start of this series here.
In this series we introduced and presented our position that Smith established the theme of mutuality in his first best-seller Moral Sentiments and carried it through in his second best-seller Wealth of Nations. We believe we carried our burden of proof in support of this position, although we’ll defer to you, the reader, to judge. We’d love to hear your verdict.
We close this series with a sampling of quotes from Wealth of Nations to illustrate how the keystone of mutuality holds together the wide-ranging arc of Smith’s thinking. Remember, consistent with all the Smith references in this series, these aren’t text cherry picked to support a position. Rather, these are simply what Smith wrote and we provide the cites for everyone to read and consider. We’d love to hear your thoughts, particularly about anything in this series that is helping you examine your thinking about America's version of capitalism.
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Mutuality among individuals:
“As it is by treaty, by barter, and by purchase, that we obtain from one another the greater part of those mutual good offices which we stand in need of, so it is this same trucking disposition which originally gives occasion to the division of labour.”(Wealth of Nations, book I, chapter II, paragraph 3.) We note that division of labor does not by itself create gains—it is division of labor and partnership exchanges among the specialized laborers that creates mutual benefit and net gain.
Mutuality between urban and rural areas:
“The gains of both are mutual and reciprocal, and the division of labour is in this, as in all other cases, advantageous to all the different persons employed in the various occupations into which it is subdivided.” (Wealth of Nations, book III, chapter I, para. 1.)
“The inhabitants of the town and those of the country are mutually the servants of one another.” (Wealth of Nations, book III, chapter I, para. 5.)
Mutuality between nations:
“Commerce, which ought naturally to be, among nations, as among individuals, a bond of union and friendship, has become the most fertile source of discord and animosity . . . [due to] the impertinent jealousy of merchants and manufacturers.” (Wealth of Nations, book IV, chapter III, part II, paragraph 9.) This speaks to the intended mutuality of union and friendship, and the failure of mutuality leading to discord and animosity.
Mutuality between producers and consumers:
“Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.” (Wealth of Nations, book IV, chapter VIII, para. 45.)
Mutuality between governments and citizens:
“The third and last duty of the sovereign or commonwealth is that of erecting and maintaining those public institutions and those public works, which, though they may be in the highest degree advantageous to a great society, are, however, of such a nature, that the profit could never repay the expence [expense] to any individual or small number of individuals, and which it therefore cannot be expected that any individual or small number of individuals should erect or maintain.” (Wealth of Nations, book V, chapter I, part III, para. 1.)
“When the institutions or public works which are beneficial to the whole society, either cannot be maintained altogether, or are not maintained altogether by the contribution of such particular members of the society as are most immediately benefited by them, the deficiency must in most cases be made up by the general contribution of the whole society.” (Wealth of Nations, book V, chapter I, conclusion, para. 6.)
Mutuality among religious groups and government:
“The teachers of each little sect, finding themselves almost alone [supposing no state sponsorship], 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 in all ages of the world wished to see established.” (Wealth of Nations, book V, chapter I, part III, article 3d, para. 7.)
Mutuality of self-benefit and social benefit:
“Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society.” (Wealth of Nations, book IV, chapter II, para. 4.)
The core principle of mutuality, of partnering for self-interest and other/neighbor-interest, weaves throughout the wide-ranging thinking of the father of capitalism, from his impartial spectator’s invisible hand to all combinations of exchange among individuals and nations. How do you deal with the plain meaning of Smith’s writing when it counters what you’ve been taught? We recommend a two-step approach.
First, recognize that most people harbor a misunderstanding about Smith’s writings because most of that understanding is secondhand. Namely, that Smith advocates for self-interest and self-interest only because, as we’ve been erroneously taught, his references to invisible hand and laissez-faire turn self-interest in unregulated markets into social good. This error leads people to think that to follow Smith (i.e., to be a capitalist or support capitalism) means to completely focus on one’s self-interest and ignore or even actively avoid seeking social good. That thinking is not commerce functioning as Smith envisioned, but a form of economic Darwinism.
Second, take the corrective action of going directly to the source to see what Smith actually wrote. Namely, that his view of self-interest inherently and inextricably includes concern for others and the common good. His own words declare that individuals, communities, producers and consumers, religious groups, nations, and governments and their citizens can and should seek mutual benefit.
In light of what Smith actually wrote and argued, we identify mutuality as the transformative ethic and move from the economic Darwinism America currently practices toward Partnership Economics and a better capitalism! How does a better understanding of Smith help you in your part of our marketplace, economy, and society? Are you willing to join us and embrace this ethic of mutuality, for your benefit and the benefit of others?
What about you? Share your story, question, comment, idea, disagreement -- yes, we welcome disagreement for the sake of mutual benefit! -- with us at blog@PartnershipEconomics.com. We will give a thoughtful response, with prioritized attention to emails from our subscribers. Subscribe here >>
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