Most of us know two things about Adam Smith. He invented the invisible hand, and he thought that greed, left alone, makes everyone rich. He is the founder of free-market capitalism, and his face used to be on the British twenty-pound note.
The Wealth of Nations runs to about three hundred and eighty thousand words, and it can be searched. The phrase invisible hand occurs once. Laissez-faire never. Capitalism never; the word did not yet exist. Monopoly and its cognates occur two hundred and eight times. The man who wrote it was a professor, a tutor and, for his last twelve years, a collector of customs duties, and the book he left is stranger and sharper than the one he is famous for.
A book to pass away the time
On 5 July 1764 a forty-one-year-old Scotsman in Toulouse wrote to his best friend, David Hume, that he was bored. He was in France as tutor to the young Duke of Buccleuch, the introductions he had been promised had never come, and they knew nobody. I have begun to write a book in order to pass away the time. You may believe I have very little to do.
The book appeared twelve years later, on 9 March 1776, in two large volumes at thirty-six shillings, about a month's wages for a London labourer. It was called An Inquiry into the Nature and Causes of the Wealth of Nations.
That is the story as it is usually told, and it is the wrong one. The argument was not begun in Toulouse. He had been giving it out loud for fifteen years, first in public lectures in Edinburgh from the winter of 1748, then to students in Glasgow at half past seven in the morning. The butcher, the brewer and the baker are in a student's notebook of those lectures more than a decade before he published a word of them.
Three places
He was born in Kirkcaldy, a customs town on the Firth of Forth that lived on coal, salt, nails and smuggling. His father, the comptroller of customs, died in January 1723, before his son was born. The parish register records a baptism on 5 June; the birthday itself was never written down.
At seventeen he won a scholarship to Balliol College, Oxford, and found that nobody was teaching. The professors were paid out of endowments whether they taught or not, and most had stopped. Thirty-six years later he explained why: in every profession, the effort people make is in proportion to the necessity they are under to make it.
In Glasgow he watched a city grow rich on tobacco, a trade the law had closed to everyone but British merchants, grown by enslaved people in Virginia and Maryland. Those three places, the customs town, the idle college and the tobacco port, are the argument of the book.
What the book actually says
A nation's wealth is what it makes and uses each year, not the gold in its treasury. It grows by dividing the work, which can go only as far as there are people to sell to.
Its enemy is monopoly, which Smith means literally: a trade closed by law, usually at the request of the people who profit from it. Any proposal for a new regulation of commerce that comes from merchants, he wrote, ought to be examined not only with the most scrupulous, but with the most suspicious attention.
The state has three duties: defence, justice, and the roads, harbours, schools and other works a country needs that nobody could make pay. Banks must be restrained for the same reason a terrace needs a party wall against fire. Taxes should follow ability to pay, and he thought it not very unreasonable if one fell a little harder on the rich.
The customs man
On 30 January 1778 Smith was made a Commissioner of Customs for Scotland, the board his father had worked for. About a week later he read the list of prohibited goods that hung in every custom house, went home, looked in his own drawers, and found that almost every cravat, ruffle and handkerchief he owned was contraband. I wished to set an example and burnt them all.
For twelve years he administered, conscientiously, the machinery of prohibitions his book had spent eleven hundred pages taking apart. In private memoranda to ministers he argued for replacing prohibitions with moderate duties. In the boardroom he was, by his own account, its most regular attendant.
The second fire
In the second week of July 1790, dying, he sent for two friends, the chemist Joseph Black and the geologist James Hutton, and had them burn his unpublished manuscripts. What went was almost certainly the third book he had been promising since 1759, on the principles of law and government. He died at Panmure House in Edinburgh on 17 July 1790, aged sixty-seven.
His first biographer concluded that he had wished to leave no materials for his biographers. He very nearly succeeded, and the gaps were filled by other people.
How the other Adam Smith was made
In 1793, in the shadow of the sedition trials, his first biographer gave the world a safe Smith, detached from politics. In the 1840s the campaigners against the Corn Laws quoted his chapters on trade and left out his case for public education. In 1948 the most widely used economics textbook in the world turned the invisible hand into the name of a doctrine. In 1982 his portrait was on a necktie worn by members of the Reagan administration.
What survives, with the necktie off, is a method. Smith looked at any arrangement, a college, a bank, a customs house, a company that had acquired a country, and asked not whether the people in it were good, but what the arrangement would make them do.
Everything on this page comes from Adam Smith: What Makes a Nation Rich, which is built from the letters and the printed texts, and says in its notes where each fact comes from.
