WHY ARE WE STILL WAITING ?

I have been listening to a Radio Four book of the week “Adam Smith: What he thought and why it matters” by Jesse Norman MP. He values Adam Smith a great deal, and is a firm believer in Smith’s philosophy, particularly as it pertains to economics. 

 

Mr. Norman has served as a Minister of State, Parliamentary Under-Secretary, Paymaster General, Financial Secretary and Committee Chairman under Teresa May, Boris Johnson, Liz Truss and Rishi Sunak. He is currently Minister of State for Decarbonization and Technology. Mr Norman was educated at Eton College and Merton College, Oxford, graduating with a Second in Classics. Norman pursued further studies at University College London, where he was appointed an Honorary Research Fellow in philosophy, taking an MPhil (Master of Philosophy) in 1999 and a PhD in 2003. His doctoral thesis was titled "Visual reasoning in Euclid’s geometry: an epistemology of diagrams". His book Adam Smith: What He Thought, and Why It Matters (2018), won the Parliamentary non-fiction book award in 2018., and was described as "superb" in the Financial Times.

He is married to Dame Catherine Elizabeth Bingham DBE HonFRS HonFREng. She is a managing partner at a venture capital firm, SV Health Investors. She has a first-class degree in Biochemistry (MA) from Christ Church, Oxford, and an MBA from the Harvard Business School. In May 2020 Bingham was appointed Chair of the UK Vaccine Taskforce, without a recruitment process. Dame Kate's work on the UK's vaccination rollout programme has been praised by scientists and international media, particularly for securing 350 million doses of six vaccines and setting up infrastructure for clinical trials, manufacturing and distribution. Bingham has expressed views on how the UK covid vaccination programme could have been better run and on how UK potential in life sciences could be improved. In January 2017 Bingham received the Lifetime Achievement Award of the BioIndustry Association UK. She was appointed Dame Commander of the Order of the British Empire (DBE) in the 2021 Birthday Honours for "services to the procurement, manufacture and distribution of Covid-19 vaccines", Bingham was also admitted to the Freedom of the City of London in that year. She was elected an Honorary Fellow of the Royal Society (FRS) in 2023 and was elected an Honorary Fellow of the Royal Academy of Engineering later the same year.

 

There is no doubt a great deal of academic and personal accomplishment by Mr & Mrs Norman; however, the distinction between a first-class degree and a second is clearly noted. There can also be no doubt as to who the big earner is in the family and that venture capital and capitalism in general has provided a great deal to the Norman family; hence Jesse Norman’s attraction to Adam Smith’s “An Inquiry into the Nature and Causes of the Wealth of Nations” published in March of 1776, during the Scottish Enlightenment and the Scottish Agricultural Revolution.

 

There was also a colonial revolution going on in America which had begun in 1765, erupted into conflict in 1775, continuing till 1783. Four months after the publication of the Wealth of Nations, the Declaration of Independence (principally written by Thomas Jefferson) was adopted and published in July of 1776. Seven years earlier in 1759 Smith had published The Theory of Moral Sentiments which I have no doubt would have been read by and had some influence on Thomas Jefferson and some others involved in the American revolt.

 

It was a time of conflict throughout the world, much as it is now.  The last battle on Scottish or British soil was the Battle of Culloden in 1746. Smith would have been 23 years old. He published his Theory of Moral Sentiments at the age of 36, thirteen years after this bloodiest of conflicts and it must have still been very much a factor in his experience and thought as it must have taken some time to write. One has to admire his optimism and assumption that his imagined ‘concerned person’ was a reality that could be achieved. 

 

There is no doubt that were all individuals to behave in the manner of Smith’s concerned person, with full faculties of imagination and sympathy, the world would be a better place. Indeed if every capitalist, merchant or politician behaved in this exemplary manner, then the process of levelling up and spreading of the wealth throughout the world would have been achieved long ago.

 

I do not pretend to have read Smith’s works in any great depth, but essentially his view is that we all operate out of self-interest, but a self-interest tempered by sympathy.  Smith was highly concerned about the problems of poverty. He writes:

...poverty, though it does not prevent the generation, is extremely unfavourable to the rearing of children [...] It is not uncommon [...] in the Highlands of Scotland for a mother who has borne twenty children not to have two alive [...] In some places one half the children born die before they are four years of age; in many places before they are seven; and in almost all places before they are nine or ten. This great mortality, however, will everywhere be found chiefly among the children of the common people, who cannot afford to tend them with the same care as those of better station.

 

He should have said poverty is extremely unfavourable to everyone in all circumstances.  Between the exercise of self-interest and the exigencies of sympathy for others, there is a Grand Canyon for most people and in particular the very wealthy. The concept that mutual self-interest will result in some sort of wealth distribution is clearly unwarranted. Smith was clearly aware of this as he was extremely critical of what is now called ‘special interest’ (bankers, corporations, oligopolies, guilds etc.). He writes:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

 

I do not understand how, a conservative party, with as firm a belief in laissez-faire capitalism as an eventual cure for all ills, can possibly believe that higher taxation of the rich stifles enterprise. They claim that by allowing them to thrive and increase their profits, they will in effect pay more taxes in the long run. They also claim that by allowing generous tax exemptions for spending profits on expansion to increase profits, they will again be paying more into the treasury. Yet somehow, that does not happen, and governments are reduced to imposing so-called windfall taxes. It doesn’t happen because corporations and ‘special interests’ do everything they can to disguise their profits and avoid paying taxes altogether, until they are found out and exposed for having “unexpected” or even “unearned’ profits.  

 

The conservative party sees this extreme example of self-interest in operation daily, and they still cling to the notion that lower taxation helps big enterprise, which in turn will help the general public. If that is the case why is the National Health Service struggling for funds to replace outdated equipment, outdated buildings, pay all its staff better wages, and recruit more people to reduce the waiting time for treatment?

 

Smith’s publications occurred during times of crisis. His theories have been lauded but clearly impossible to put into practice. Some 160 years later during another time of crisis a certain William Beveridge was part of an inter-departmental committee created by a conservative leaning coalition government to produce a survey of Britain’s social insurance and allied services. The report was published in November of 1942, officially entitled Social Insurance and Allied Services (Cmd. 6404),

The Report offered three guiding principles to its recommendations:

1. Proposals for the future should not be limited by "sectional interests". A "revolutionary moment in the world's history is a time for revolutions, not for patching".
2. Social insurance is only one part of a "comprehensive policy of social progress". The five giants on the road to reconstruction were Want, Disease, Ignorance, Squalor and Idleness.
3. Policies of social security "must be achieved by co-operation between the State and the individual", with the state securing the service and contributions. The state "should not stifle incentive, opportunity, responsibility; in establishing a national minimum, it should leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and his family".

Beveridge was opposed to "means-tested" benefits. His proposal was for a flat rate universal contribution in exchange for a flat rate universal benefit. Means-testing was intended to play a tiny part because it created high marginal tax rates for the poor (the "poverty trap"). 

There were later attempt to implement some of the recommendations by the Labour Party who came to power in the 1945 general election, most notably the Family Allowances Act 1945, National Insurance (Industrial Injuries Acts 1946 and 1948, National Insurance Acts 1946 and 1949, National Health Services Act 1946, Pensions (Increase) Act 1947, Landlord and Tenant (Rent Control) Act 1949.

The notion of creating a democratic welfare state whilst keeping up with a market-led, capitalist economy is very much part of what most countries in the western hemisphere are about. Various governments along the line have leaned more towards welfare whilst others have bent the other way in letting the “market decide” and for individuals to fend for themselves. Today’s world unfortunately makes it extremely difficult for populations to fend entirely for themselves. The state has to intervene. Smith’s concerned person is no longer an individual, it is the state. Beveridge’s report should be more carefully examined and perhaps a new investigation should bring it up to date. What is necessary is not so much minimum wage legislation, but minimum income legislation. I see entrepreneurs and corporations lauded for their supposed creation of wealth and employment but I see no entrepreneurs or venture capitalists lauded for their elimination of poverty, which, for some reason, is seen as a by-product rather than the main goal.

It is not just about economic growth, it is about ensuring that every human being has the possibility of benefiting from very basic human rights and partaking in the world around them, free to learn, free to work, free from want and disease. That has been the goal for the last 10,000 years. Numerous individuals have come up with strategies and plans to that end, and, still, it would appear, not one of them has succeeded. Why is that?