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We Can Build That

Obama rejects the Scottish Enlightenment ideas that inspired the Constitution.
Adam Smith statue

The president’s statement two years ago that “You didn’t build that. Somebody else made that happen” is a very concise summary of the danger posed by modern progressive liberalism to the heart of the American idea and experience, as represented by its Constitution, founding principles, and the reasons for its modern success.

What is stunning is how effectively this short utterance combines both the devaluing of ambition and entrepreneurship and the promotion of envy and class resentment—the very opposite of the unique combination that sets America apart. If ambition is to be devalued and envy to be admired, there is no room for the operation of private morality, commercial success, social conscience, and community, because the only entity that can survive is government.

To explain why this is so, one could go back to the origins of the Judeo-Christian ethic and trace its rules-based culture, including the Ten Commandments, through the Roman emphasis on the rule of law and through the reformation in Europe. But the most logical starting point is the Scottish Enlightenment, which produced in the beginnings of modern commerce the foundation of free markets, the importance of trading relationships to moral behavior, and the concept of the limits to government. Three thinkers at its very core—Adam Smith, Edmund Burke, and Samuel Johnson, all friends (and sometime competitors)—made profound contributions to the U.S. Constitution.

Mandeville, Adam Smith, and Self-Interest

Before jumping into the Enlightenment, a little context might be helpful. One of the basic issues at the beginning of the 18th century, raised in part by the new freedom from feudalism provided by the Renaissance and the industrial revolution, was whether human frailty with all of its vices should remain subject to the ancient stoic effort at containment or whether there was some way to capture the energy of greed and vanity for public benefit. One of the earliest and most influential efforts to reconsider vice was made in 1705 not by a Scot but by a Dutchman named Bernard de Mandeville.

Mandeville’s challenge came as a remarkable, and at the time scandalous, poem at the start of his book The Fable of the Bees: or, Private Vices, Public Benefits. A forerunner of Adam Smith, Mandeville posited that greed was a private vice but a public benefit because it incentivized industry and prosperity that benefited everyone, including, and especially, the poor. Moreover, a society’s engagement in industry made possible the division of labor that Smith later captured in his concept of the “invisible hand.” Smith never gave Mandeville (or anyone else, for that matter) any credit, but Friedrich Hayek did, as did Dr. Johnson, and, perhaps surprisingly, John Maynard Keynes.

An illustrative excerpt from the Fable goes like this:

The Root of Evil, Avarice,
That damn’d ill-natured baneful Vice,
Was Slave to Prodigality,
That noble Sin; whilst Luxury
Employed a Million of the Poor,
And odious Pride a Million more:
Envy itself, and Vanity,
Were Ministers of Industry;
Their darling Folly, Fickleness,
In Dyet, Furniture, and Dress,
That strange, ridic’lous Vice, was made
The very Wheel that turn’d the Trade […]

Thus Vice nurs’d Ingenuity,
Which joyn’d with Time and Industry,
Had carry’d Life’s Conveniencies,
Its real Pleasures, Comforts, Ease,
To such a Height, the very Poor
Liv’d better than the Rich before,
And nothing could be added more.

It’s not a big leap from these sentiments to one of Adam Smith’s most famous quotes: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

This acknowledgement of the role of greed and avarice—seemingly sealed by Adam Smith’s look back at Mandeville’s highly controversial views—has been a target of the critics of free markets since the 18th century, up to the present day, as illustrated by the renewed focus by both political parties on inequality. It has, indeed, become almost a caricature. But Smith’s acceptance of the incentivizing role of self-interest is only the beginning of the story. The development and conclusion of that story is more interesting, more relevant today, and more deserving of attention.

The Moralizing Role of the Golden Rule

To start with, greed is not an especially attractive personality trait. It does not evoke the better angels of our nature. It appears to be a total rejection of religious teachings, a big issue in the 18th century and not an insignificant one today. And it is a denial of the basic moral precepts that most people aspire to even if they are not regular churchgoers, namely the central teachings of the Judeo-Christian ethic about loving thy neighbor as thyself, resisting envy, and doing unto others as you would have them do unto you. Put another way, the Mandeville thesis rejects one of the most universally accepted rules of conduct—“what goes around, comes around.”

This fatal flaw most certainly did not go unnoticed by Adam Smith. But he never addressed it as directly as his slightly older contemporary, Samuel Johnson, whose thinking permeates Smith’s work. Johnson made a deep impression on his contemporaries, and remains the greatest moral essayist in the English language, quoted more for approval than any writer except possibly Shakespeare. He became later in life an astute commentator on economics—and essentially free-markets—a development even many Johnson admirers don’t know. Equally unknown is the fact that Smith started out, like Johnson, basically as an English teacher writing about ethics and morals. So there are important parallels between the two men.

Johnson is identified by his biographer James Boswell as noticing Mandeville’s Achilles’ heel some 40 or 50 years after Mandeville wrote. Johnson freely admitted that Mandeville “opened my views into real life very much.” He nevertheless rejected Mandeville’s central thesis that “private vices lead to public benefits.” Mandeville’s great fallacy, Johnson said, was his failure to formulate a definition of the vice or benefit—taking too broad a view of vice and too narrow a view of benefit. To Mandeville, any pleasure was a vice, something Johnson dismissed as ridiculous since something like a garden was a great pleasure and certainly not a vice, just as private wealth was not necessarily a public benefit. Mandeville’s drunk may create additional wealth for the pub and the brewer, but the evil he produces will greatly outweigh those benefits. The happiness of heaven, Johnson said, would be that “pleasure and virtue will be perfectly consistent.” Johnson’s conclusion was succinct: “It is clear that the happiness of society depends on virtue.”

Johnson’s greatest achievement, apart from the English dictionary, was his advice for reconciling human nature—with all of its weaknesses of greed, envy, and vanity—with the vast new opportunities and temptations unleashed by the breakdown of feudal immobility and emergence of the industrial revolution. How did he reconcile Mandeville’s focus on greed with reliance on virtue?

Simply put, Johnson’s insight—amplified by Adam Smith in his Theory of Moral Sentiments, which was the foundation of The Wealth of Nations—was that humans need reciprocating relationships as captured by the 18th century concept of “sympathy.” That in turn involved the notion of “mirroring,” where people thought about how others might react to their own behavior, especially in commercial dealings. In the pursuit of sympathy, both envy and vanity are highly destructive impulses.

Commerce—especially the making of money—was an interesting subject for Johnson. Born poor, he had to write to make a living, and he once said, “no one but a blockhead ever wrote except for money.” But he was a cheerleader for luxury, like Mandeville, because it provided so much incentive for general employment. Furthermore, he noted that there “are few ways in which a man can be more innocently employed than getting money.” Yet he rejected the notion that money was the essential element of life. “Getting money,” he said, “is not all a man’s business: to cultivate kindness is a valuable part of the business of life.” Indeed, Johnson implied that the chase was the thing: “The natural flights of the human mind are not from pleasure to pleasure but from hope to hope.” Thus, it was not hard for him to say, at the same time, that a “decent provision for the poor, is the true test of civilization,” and that “How small, of all, that human hearts endure, / That part which laws of kings can cause or cure.” (One might add here his observation that “most schemes of political improvement are very laughable things.”)

Smith built on Johnson’s insights about human nature to create the “impartial spectator,” a way of describing what we might call a person’s conscience—a kind of “mirroring”—as he develops commercial and other social relationships. Smith believed that man was not born with high moral values but rather adopted them as a way of satisfying his endless need for social contacts, which in turn required the development of trust to survive in a commercially-oriented community.  For Smith (and for Johnson), commerce and free markets fostered moral behavior by encouraging sociability and by emphasizing the essentials of the Golden Rule.

Crony Capitalism

Burke had much of the same view. As Yuval Levin points out in his new book on Burke and Paine, Burke thought that the “dark side of our sentiments is mitigated not by pure reason, but by more beneficent sentiments. We cannot be simply argued out of our vices, but we can be deterred from indulging them by the trust and love that develops among neighbors, by deeply established habits of order and peace, and by pride in our community or country.”

The more commerce, the better the behavior­—so long as clear rules were in place to counter abuse by powerful economic actors (today we call them “too big to fail”) trying to capture the machinery of government for their own private interests. Smith’s worst nightmare was commercial monopolization supported by government. He felt that big government—“crony capitalism” today—was a source of corruption and interference with the benefits of fair trade, which depended on man’s desire for reciprocating relationships and level economic playing fields. Studies confirm that communities with extensive trading relationships with outside partners exhibit better moral behavior than inward-looking communities with limited trading. Moreover, the favoritism of crony capitalism—the picking of winners and losers—does no service to the poor and those out of favor.

For example, few mortgage bankers would knowingly put a family into a house the family could not afford, for two reasons. First, the banker might not get his profit out; second, the banker might have to face that family or its neighbors and friends in the community at church or the Safeway. But if the government—say Fannie Mae working with Countrywide—eagerly takes the banker out of the relationship at a handsome profit, who is to say no to that family? Well, the taxpayers should, because studies show that individualized “character” loans—also known as “relationship” loans—are more reliable than cookie-cutter big bank loans sought by Fannie Mae, the government’s major lender, and now by the Consumer Finance Protection Bureau.

Alan Greenspan, in his most recent book, sees Smith’s reliance on self-interest as flawed because that view, combined with the division of labor, posited a self-regulating system that needed no oversight by government. But this was not Smith’s complete view. He was constantly wary of big business capturing government for some special favor, and he thought government had a crucial role to play in precluding monopolies and unnatural interferences with free commerce. He once said that “The government of an exclusive company of merchants is, perhaps, the worst of all governments for any country whatever,” so government has a regulatory role, to preserve level playing fields, freedom from monopolies, and the sanctity of private property.

Envy’s Destruction

President Obama would apparently throw all of this out, on the grounds that today “preserving our individual freedoms ultimately requires collective action.” In his view, individuals pursuing their own unique talents and dreams with other individuals seeking to satisfy their own needs—the division of labor in a huge marketplace—cannot train teachers and build roads, networks, or laboratories. They must instead submit to common action “together” as “one people” under the direction of the government. Forget the division of labor and the moralizing force of individuals building trust through reciprocal relationships in a free market protected from corrupting special interests. One of the unique characteristics of the limited government ideal of the United States is its high level of volunteerism—as first described by Tocqueville nearly 200 years ago. That spirit is still alive, and it was reenergized by President George H.W. Bush as “1,000 points of light,” which he described as essential to liberty. Despite Obama’s agreement with this sentiment about liberty at the 20th anniversary of Points of Light event in College Station, Texas, volunteerism cannot begin to compete with the expansive government role envisioned by the new progressives. The best illustration is Europe, which has almost no tradition of private philanthropy, little encouragement for entrepreneurship, and huge dependency on government for community services.

So Obama’s goal is nothing short of a complete reversal of the entire backdrop our Constitution inherited from the Scottish Enlightenment’s architects: their view of human nature as well as an economic model that has revolutionized living standards and opportunities around the world. In his second inaugural address, Obama said that big government programs “do not sap our initiative” but “free us to take the risks that make this country great.” But without limits they inevitably will sap initiative because there will be no money to pay for them and no risks for individuals to take—leaving just a world of crony collectivist capitalists with charity towards none.

Under Obama, the government is doing all it can to intervene in and disrupt private transactions by promulgating thousands of pages of regulations on everything from healthcare to financial services. In his recent State of the Union address, he asserted, “That’s what most Americans want—for all of us in this chamber to focus on their lives.” Creating huge, new unaccountable bureaucracies to issue massive regulations to correct the mistakes of other huge, unaccountable bureaucracies is not what the Framers had in mind when they imposed the separation of powers to limit government and guarantee free-market liberty for individuals.

Adam Smith celebrated the role ambition and even greed play in creating wealth through the invisible hand, but he also understood well the critical role government performs in providing non-market benefits, like infrastructure (done locally), civil society’s rule of law, protection against monopolies and crony capitalism, and, yes, even progressive taxation to pay for these governmental obligations which individuals cannot provide their own.

What Johnson contributed was the disciplined need for individuals to temper their unquenchable ambition, vanity, and envy. Both Smith and Johnson saw the government’s role as reinforcing the community’s safeguards for the Golden Rule on the one hand, while barring citizens from using government for private ends on the other. Hence the idea of pitting “ambition against ambition,” the separation of powers, federalism, and other constitutional barriers to concentration of power, as well as the protections of free markets, competition, and intellectual and real property to foster as much opportunity as possible.

Johnson warned us about envy, which Obama seems determined to exploit as the most destructive of all human weaknesses. It is said that Chief Justice Roberts rereads every new year Samuel Johnson’s poem “The Vanity of Human Wishes,” wherein Johnson teaches how to tame envy and the temptations of the markets without losing their powerful incentives for good. In his sweeping study of envy, Helmut Schoeck asserts:

The only activity that liberates from envy is that which fills us with new, different impulses, feelings and thoughts which, to be of help, have to be value-asserting, dynamic and forward-thinking. To many, the desire to overcome their envy may have been a genuine incentive for positive achievement, and hence have led to satisfaction in a sense of achievement.

The president’s drive to stoke envy and resentment is disgraceful—and if history proves correct, will ultimately not succeed.

Human Nature and the Constitution

What does all this mean in practical, political terms? Republicans should consider reining in “too big to fail” and other crony capitalist relationships like the military-industrial-congressional complex (which was Eisenhower’s original term); the insurance and PhRMA-dominated healthcare system (which all but eliminates competition); the union monopolization of primary and secondary education to the detriment of individual choice and competition; and, finally, the revolving door between big government and big business which makes all of this possible. Conservatives should support greater use of free-trade agreements, immigration reform to maximize the possibilities for talented people to migrate to the best opportunities, deregulation, and the creation of level playing fields, all of which would open up individual opportunity. The solution to inequality is to equalize educational opportunity by giving parents true choice to maximize both competition and the ability of free markets to create economic growth.

Envy, on the other hand, is destructive of everything that underpins the American dream. It requires big government interference for its satisfaction, destroys the sociable and reciprocating relationships that are essential to free markets, undermines the rule of law, and ultimately makes pointless all private volunteer efforts to make a “decent provision for the poor.” Self-interest as the starting point is not to the contrary. Self-interest as a matter of human nature depends on acceptance of the Golden Rule for sustained community trust in promoting commercial development. Envy and class warfare, conversely, mean every man and every group for himself, hoping to grab the ever-growing pieces of the government to bolster each special interest claim for advantage. marapr-issuethumb

Modern conservatives like Russell Kirk have extolled the contributions of Burke, Johnson, and Smith—described by Kirk as the “Three pillars of order”—to recognizing the importance of self-restraint: “Burke and Johnson and Smith, in their separate ways, described those beliefs and institutions that maintain the beneficent tension of order and freedom. They were pillars of what Burke called “‘this world of reason, and order, and peace, and virtue, and fruitful penitence.’”

The Constitution encapsulates these sometimes quarreling aspects of human nature with its basic structure of federalism and the separation of powers; it capitalizes on the notion of pitting “ambition against ambition” in government to keep them contained.

Early in his career, Oliver Wendell Holmes saw no connection between the Constitution and the lessons of the Enlightenment and Adam Smith. Notwithstanding the many references to the building blocks of free markets in the Constitution—such as the patent system, protection for contract, equal protection of the law—Holmes famously said in his 1905 dissent in Lochner that the Constitution embodied no particular theory of economics, “whether of paternalism and the organic relation of the citizen to the State or of laissez faire.”

More than a decade later, it appears that Holmes had a major change of heart. After much lobbying by outside friends in connection with free speech cases occasioned in part by World War I, Holmes dissented in the Abrams case—which his own precedent would have affirmed—by stating that “The ultimate good desired is better reached by free trade in ideas.” He explained that “The best test of truth is the power of the thought to get itself accepted in the competition of the market, and that truth is the only ground upon which [man’s] wishes safely can be carried out.” Some see no inconsistency between Holmes’ dissents in Lochner and Abrams with respect to his views about any relationship between free markets and the Constitution. But it is difficult not to see the older Holmes viewing the Constitution as preferring competition to paternalism.

So, free markets and competition may have won after all as one of the central tenants of the Constitution. If so, the progressive left is not just undermining our founding document, but it is also busting up our intellectual and cultural heritage.

C. Boyden Gray has served as White House counsel and U.S. ambassador to the European Union.



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