American public anger at its financial system has perhaps not run higher in almost a century. Banks are booking record profits while the American consumer on the other end of what was a shared crisis just a year go continues to struggle. Curiously, at about the same time 1st quarter results came out, two volumes at once very different and very much to the point were reissued to little notice on the same day by General Books, a club that republishes classics: Adam Smith’s “The Wealth of Nations” and William Dean Howells’ “The Rise of Silas Lapham” (both from General Books LLC, 618 pages and 222 pages respectively).
Smith’s book, appropriately published in 1776, remains the foundational economic text of American limited-government conservatives – a crucial touchstone in the coming dust-up over financial regulation. Howells’ most famous novel, written in 1885, offers an equally important commentary on recent events.
Smith determined a number of principles fundamental to a thriving economy, expressing the most famous of them in the metaphor of an invisible hand organizing individual self-interest into a fair, working polity. It is this idea that will come under pressure in the coming Congressional food-fight over financial regulation. Have we not, Congressmen will ask, seen the chaos that follows reliance upon the invisible hand?
This is a good moment, then, to remind ourselves that Smith understood “self-interest” very differently from the way in which we construe it today. An earlier classic, “The Theory of Moral Sentiments” (1759) provided the ethical, philosophical, psychological, and methodological underpinnings of the later work. Its opening is worth quoting in full:
“How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it. Of this kind is pity or compassion, the emotion we feel for the misery of others, when we either see it, or are made to conceive it in a very lively manner. That we often derive sorrow from the sorrows of others, is a matter of fact too obvious to require any instances to prove it; for this sentiment, like all the other original passions of human nature, is by no means confined to the virtuous or the humane, though they perhaps may feel it with the most exquisite sensibility. The greatest ruffian, the most hardened violator of the laws of society, is not altogether without it.”
Smith’s conviction that this is all “too obvious” to require proof seems charmingly quaint today. That is because we have lost sight of the fact that the limited government Smith supported, and which our Founders envisaged, rested on an assumption best exemplified by George Washington’s observation that “reason and the lessons of experience … taught that patriotic republicans ought to recognize and endorse religion because only a religious citizenry could sustain republican self-government.” Smith’s religious beliefs were not Washington’s. Certainly, however, he saw and approved of the function of religious institutions in an emerging industrial economy.
Now, it may not, in the current environment, be immediately helpful to preach a sermon about the necessity of re-infusing our society with the spirit of religion. But it is crucial that we cleave to notions of moral probity rooted in the Judeo-Christian tradition, without which the American experiment is at risk – as Washington saw quite clearly. This country’s economic pre-eminence was built on Max Weber’s Protestant ethic, neatly captured in the idea of “doing well by doing good.” If we wish to prosper, we must keep our wagon firmly hitched to that star.
This is where the twinning of “The Wealth of Nations” with “The Rise of Silas Lapham” is so apt. For if “The Theory of the Moral Sentiments” is not likely to be reissued by General Books, LLC, anytime soon, “Silas Lapham” can certainly stand in for it. “Silas Lapham” tells the story of a rags-to-riches businessman who ultimately compromises his fortune by declining to sell high a property whose value he knows is bound to plummet in the near future. He is ruined financially, but rises morally – hence the book’s title.
Howells wrote shortly before the “Panic of 1893” brought the first “gilded age” of American finance to an end. We still await the great chronicler of the current episode. In the meantime, even a long-time admirer of our financial system might find it hard not to feel that the championing of “The Wealth of Nations” to the detriment of “The Theory of Moral Sentiments” has opened the door to ideologically-driven regulatory reform that a bit more of the spirit of Silas Lapham could have saved us from – and perhaps, at this late date, still could.
Mr. Rosenberg, a writer and editor in New York, writes on books and culture for The New York Sun.