ADAM SMITH’S The Wealth of Nations, published in 1776, revolutionised economics, eloquently arguing the case for free-market capitalism. There is just one problem – as P. J. O’Rourke puts it in this analysis – it’s just too damn long.
The original edition runs to more than 900 pages, and even abridged versions are more than 300 pages, so it is rarely read – except, perhaps, by those who are required to do so for economics courses.
And even if you were prepared to plough through it, O’Rourke argues that Wealth cannot be property understood without first reading Smith’s Theory of Moral Sentiments, his philosophical tome published in 1759 – which is even longer.
Helpfully, O’Rourke, the American satirist, has done the hard work for us in this latest of the series Books That Changed the World. No need to wade through a 67-page “digression concerning the variations in the value of silver” – O’Rourke has read both of Smith’s great works and distilled his considerable wisdom down to a much more manageable book.
O’Rourke’s writing will not be to everyone’s taste. In fact, readers of a liberal democratic or socialist bent might find it less painful to wade through Smith’s 900-page original than to suffer 193 pages of O’Rourke: his disdain for left-wing thinkers is evident throughout a book peppered with US pop cultural references and facetious asides, which sometimes serve to obfuscate, rather than clarify, Smith’s meaning.
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But if you ignore all the predictable gibes at such loathed institutions as the World Bank and the United Nations, this book has plenty to recommend it. O’Rourke clearly outlines Smith’s thesis, explaining the economic basis for equality, the need for clearly defined property rights and the central importance of the division of labour.
Interestingly, the “invisible hand”, the metaphor for which Smith is so famous, is mentioned only twice, originally in The Theory of Moral Sentiments. Moreover, Smith did not intend us to understand it the way we do now, as the agency by which economic liberty produces economic progress. Smith says that the rich “are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made had the earth been divided into equal portions among all its inhabitants”. Or, to put it another way, as O’Rourke does: “The economic benefits of wealth in a free market quickly overflow the humble vessel that is Paris Hilton, and they do not trickle down, they pour.”
But we do not need the introduction of pop icons such as Paris Hilton to see how relevant Smith’s theories remain: in Book 2, for example, Smith cautions against speculating on an overheating property market. However, readers looking for get-rich-quick tips should look elsewhere: Smith’s project was “to materially benefit mankind”, but not by telling us where to invest our money.
The strongest sections deal mostly with books 3 and 4 of Wealth. In the third book, in which Smith gives an economic history of Western Europe, he demonstrates that a good head for business is a middle-class invention. O’Rourke neatly paraphrases: “The Ancient Greeks and Romans, for all their genius, didn’t have it. Otherwise, they would have abandoned slave labour . . . They would have freed the slaves, turned them into customers, and out-sourced the unskilled jobs to Sogdiana and Gaul.” Perhaps the point about Smith that O’Rourke makes most powerfully – and with none of the glibness that mars some of the book – is that Adam Smith did not have some overriding theoretical system that he imagined could be imposed on a nation and thus solve all its problems. In The Theory of Moral Sentiments, Smith demonstrates his dislike of theoretical systems, arguing that theorisers become “intoxicated with the imaginary beauty of this ideal system”, and that intoxication can eventually lead to the “madness of fanaticism”.
Smith’s economic theories were not only perspicacious and groundbreaking, but, as O’Rourke points out, his thinking is “mostly free of those perfect abstractions for which men kill and die”.
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THE WEALTH OF NATIONS by P. J. O’Rourke
Atlantic, £14.99; 256pp
Buy the book here at the offer price of £13.49 (inc p&p)