Foreign Trade/Current Account Deficit Essay, Research Paper

Liberty: Adam Smith and Alexis de Tocqueville

Both Adam Smith and Alexis de Tocqueville agree that an individual is

the most qualified to make decisions affecting the sphere of the

individual as long as those decisions do not violate the law of justice.

>From this starting point, each theorist proposes a role of government

and comments on human nature and civil society. Smith focuses on

economic liberty and the ways in which government can repress this

liberty, to the detriment of society. De Tocqueville emphasizes

political liberty and the way that government can be organized to

promote political liberty, protect individual liberty, and promote civil

liberty.

Adam Smith’s theory makes a strong argument for the assertion that a

free market will provide overall good for society, but, as de

Tocqueville points out, it provides little or no protection for the

poor. Smith’s picture of human nature given in The Theory of Moral

Sentiments suggests that people would do good and take care of the weak

because of characteristics of their nature. Unfortunately, this image

contrasts with the picture of the individual which emerges from his

economic argument in Wealth of Nations and is a generally unsatisfying

answer.

In attempting to define liberty, Adam Smith is mostly concerned with

negative liberty, or freedom from constraint, especially market

constraints. According to him, in a free market, as long as they are not

fettered by government regulation, actions are guided toward the public

good as if by an invisible hand. Furthermore, the economic sphere is the

determining section of society. Therefore from his economic model, he

derives his argument for the best role of government and asserts that

the resultant society will be the best overall for civilization.

Since he defines the individual as sovereign (within the laws of

justice), and he defines liberty as freedom from constraint, his

argument begins with the individual, defining a man’s labor as the

foundation of all other property. From this it follows that the

disposition of one’s labor, without harm to others, is an inviolable

right which the government should not restrict in any way (Smith 215).

He uses his economic theory to support his belief that this limitation

on government action creates the most overall good for society.

First, he defines all prices as being determined by labor (Smith 175).

Since labor causes raw materials to have value, Smith asserts that labor

confers ownership, but when stock is used there must be something given

for the profits of the investors, so labor resolves itself into wages

and prices (185). The support for the free market lies in the way the

prices are determined and the inner workings of the market. The prices

ultimately come from the value of labor. A capitalist will want to

produce as much as possible, in order to make the greatest profit,

therefore his demand for labor will rise. As the demand for labor rises,

wages will rise. As more people begin working to meet the increased

demand for labor, production will rise, and prices will fall. Following

this argument, in a free market, everybody is working for his or her own

personal gain, but maximum production occurs, which increases overall

wealth and prosperity. If the government interferes by setting minimum

wages, charging prohibitive taxes, or regulating prices, it interrupts

the natural flow of the market. Therefore, Smith argues that the market

prices of wages and of goods should be regulated by the market rather

than by the government.

Smith then identifies three classes of people who develop from

capitalism: laborers, landlords, and capitalists. Each of these groups

act purely out of self-interest, and for this reason Smith does not

think any of them will be able to effectively rule with the good of

society in mind. The laborers are incapable of comprehending “that the

interest of the labourer is strictly connected with that of the

society…” (Smith 226). The landlords are the most impartial of the

classes and therefore the least likely to use government for any plan or

project of their own, but they are “too often, not only ignorant, but

incapable of that application of mind which is necessary in order to

foresee and understand the consequences of any public regulation” (226).

By process of elimination, Smith settles on the capitalists as the most

fit to rule, but stipulates, “the proposal of any new law or regulation

of commerce which comes from this order ought always to be listened to

with great precaution, and out never to be adopted till after having

been long and carefully examined, not only with the most scrupulous, but

with the most suspicious attention” (227).

Due to the lack of a class which would be able to lead with society’s

interests in mind and because the unfettered free market in which

everyone is selfishly motivated produces the most, Smith relegates to

government only the three tasks of the defense of the nation, the

administration of justice, and the maintenance of certain public works

(289). This plan will prevent too many unnecessary restrictions on

“perfect” liberty, or complete freedom from restraints, and will allow a

system of natural liberty to establish itself in which every man, as

long as he does not violate the laws of justice, is left perfectly free

to pursue his own interest his own way.

This role of government also solves the impassable lack of information

problem that, according to Smith, is faced by any government which takes

the responsibility for superintending the industry of private people. No

government official could possibly account for all of the chains of

cause and effect, and no government can truly know what is in the best

interest of every individual.

Furthermore, it is important to recognize that in Smith’s theory, the

government is actually defending the rich against the poor. The poor,

according to Smith, are often driven by envy and need to invade the

possessions of the rich. “It is only under the shelter of the civil

magistrate that the owner of that valuable property, which is acquired

by the labour of many years or perhaps of many successive generations,

can sleep a single night in security” (294). Note the assumption that

the rich are entitled to their wealth because it is acquired by hard

work either of the person or his family. Because of this, Smith

considers civil government a necessary institution.

One objection to this view of government and to the economic reading in

general is that one of the duties of government is to protect the poor

from the tyranny of the rich. In fact, in Smith’s economic perspective,

money demonstrates preferences. Therefore, people with more money are

able to influence the market much more than people with less, and would

therefore be less needing of government protection. It is the people

with less money who can least afford change and bad times. Thus, these

people are in the least position to combat unfair practices or to change

their position.

Alexis de Tocqueville recognizes this fault in Smith’s system. First,

laborer becomes more and more involved in his labors, and therefore more

focused on the small details for which he is responsible, while the

industrialist becomes increasingly interested in the larger workings of

the factory. In this way, the two classes become less alike and mobility

between them becomes more difficult. Finally, “the industrial

aristocracy of our day, when it has impoverished and brutalized the men

it uses, abandons them in time of crisis to public charity to feed them”

(de Tocqueville 558). In Smith’s governmental plan, there are no

provisions for taking care of the poor when they are not taken care of

by the market system.

In his Theory of Moral Sentiments, Smith suggests that human nature

will turn the beneficence of the rich to the poor out of sympathy for

their condition (136), but this response does not offer strong enough

promise that the poor will be cared for when the market fails. One can

only hope that the de Tocqueville analysis is wrong and the laborers

will always make high enough wages. Yet in Wealth of Nations, Smith

says, “A man must always live by his work, and his wages must at least

be sufficient to maintain him,” (197), but is later forced to admit that

when society is in decline, wages fall even below “what is barely enough

to enable [a laborer] to bring up a family, or to continue the race of

laborers” (226).

It is the capitalists who are calculated to be the most qualified to

serve as government officials, it is the capitalists who have the most

control over the market through manipulation of their money, and in the

end it is still the capitalists who Smith thinks need to be protected

from the poor. This lack of provision for the laborer makes Smith’s

system rather unsatisfying.

Alexis de Tocqueville offers a more satisfying system stemming from the

same faith in individual sovereignty. Where Smith states, “Every

individual . . . can, in his local situation judge much better than any

statesman or lawgiver can do for him” (265), de Tocqueville says,

“Providence has given each individual the amount of reason necessary for

him to look after himself in matters of his own exclusive concern. That

is the great maxim on which civil and political society in the United

States rests…” (397) The phraseology of these similar arguments is

demonstrative if the different emphasis of the authors. Smith’s phrase

inherently limits government whereas de Tocqueville’s includes it in

government. By turning his focus to political society, de Tocqueville

highlights the role of positive liberty 5 in government and builds an

argument for the protection of political liberty and individual freedom,

which he considers to be built into aristocratic society, but easily

lost in democratic society.

In defining liberty, de Tocqueville applauds the following definition

of freedom by Winthrop:

“There is a civil, a moral, a federal liberty, which is the proper end

and object of authority: it is a liberty for that only which is just and

good; for this liberty you are to stand with the hazard of your very

lives. . .This liberty is maintained in a way of subjection to

authority; and the authority set over you will in all administrations

for your good be quietly submitted unto, by all but such as have a

disposition to shake off the yoke, and lose their true liberty, by their

murmuring at the honour and power of authority” (46).

This definition emphasizes positive liberty, which is maintained through

subjection to the authorities which have liberty as their goal. Implicit

in this definition then is the assertion that government will has the

power to act in the name of society.

In an aristocratic society, negative liberty in the form of freedom

from arbitrary control is built into the system. Also, for the

aristocrats, positive liberty in the form of ability to act as a group

exists. The question which de Tocqueville faces in describing democracy

is how to expand these liberties to include all people. Positive liberty

is opened to all people by extending the suffrage and electing a

representative government, but there are no structural barriers to

protect the negative liberties.

Alexis de Tocqueville is especially concerned with the tendency towards

tyranny of the majority. He therefore examines the institutions in

American society which will balance the tendency of the majority to

overpower its opposition. One such system is that of strong local

government. De Tocqueville agrees with Smith that people should be

allowed to take care of their own affairs because they are closer to

them. He then extends his analysis beyond this to include the social

benefits of strong local government. “Local liberties . . . bring men

constantly into contact, . . . and force them to help one another”

(511). Such social benefits are the more important consideration for de

Tocqueville. If society can be maintained in a way which counteracts the

overpowering strength of the majority, liberty will continue.

Unlike Smith, however, de Tocqueville does not think that this argument

for strong local government leads to the conclusion that federal

government should be extremely limited. In fact, de Tocqueville expects

the tasks of government to perpetually increase. This conclusion is

based on the assertion that men will be less and less able to produce

the bare necessities (515). Smith agrees with this statement but expects

the market to step in and provide all that is desired. De Tocqueville

does argue that the government must never wholly usurp the place of

private associations.

Implicit in his criticism of Adam Smith’s industrial economy, which

argued that the industrial aristocracy would abandon the poor to

government support, is the assertion that government will take

responsibility for the poor. De Tocqueville observes that in the United

States the framers of government had “a higher and more comprehensive

conception of the duties of society toward its members than had the

lawgivers of Europe at that time, and they imposed obligations upon it

which were still shirked elsewhere. There was a provision for the poor .

. .” (44). The phrases chosen demonstrate de Tocqueville’s support for

the programs. While Adam Smith would argue that these provisions would

hinder the free market by redistributing income and interfering

taxation, de Tocqueville is clearly asserting that the duty of society

to its members does include obligations to protect the weaker members of

society.

One of Smith’s reasons that government should be limited is because

there is no group of people who will rule with the good of society in

mind. By turning the focus away from the individual or class of people

who will be the magistrates and towards the system of selection, de

Tocqueville makes a case for not needing to limit democratic government

as severely as Smith would like. “It is certainly not the elected

magistrate who makes the American democracy prosper, but the fact that

the magistrates are elected” (512). The people collectively will elect a

group of representatives who will have the power to make laws, but the

power of executing them will be left to the lower officials. “Often only

the goal to be aimed at is indicated to [the magistrates], and they are

left to choose their own means” (206). In this way, the power of

government is great, but the power of each individual to turn it to

personal gain is small.

It is not the definitions of liberty offered by the two theorists which

are wholly incompatible, but rather the assertions about the workings of

society and the conclusions about the role of government. Adam Smith’s

account provides a good argument for the power of the market and for a

laissez-faire governmental policy. Unfortunately, his theory fails to

account for the societal problems such as maintenance of the poor.

Alexis de Tocqueville’s theory uses the same considerations of

individual rights and self-interested motives, but examines more closely

the societal institutions which can balance governmental action. He

therefore relegates a larger role to government which includes a duty to

take care of its members through legislation aimed at liberty.