Adam Smith on the Rich and the Poor

rich and great just sentiments rich and poor


February 22, 2023


Martin looks closely at when and how Adam Smith advocates for the interests and welfare of the least well off.

Did Adam Smith always side with the poor and weak against the rich and powerful? Christopher Martin gives the resounding answer: Yes, mostly. It’s a little complicated.
Adam Smith has often been seen as a defender of one’s own and therefore of the rich. Because of this emphasis on one’s own, he has sometimes been represented as cool towards working people or the poor. However, scholars have offered other views of Smith. Some go so far as to view him as a kind of proto-progressive (Fleischacker 2004, Rothschild 1992).
Was Smith’s attitude toward the poor a chilly one? In 1891, the great Austrian economist (and admirer of Smith) Carl Menger said otherwise:
In every conflict of interest between the rich and the poor, the strong and the weak, Smith sides without exception with the latter. I use the term “without exception” with proper consideration, as one cannot find one single instance in the works of Smith in which he represents the interests of the rich and powerful against the poor and weak. (Menger 2016, 475)
I too am an admirer of Adam Smith. When I first encountered Menger’s claim, I thrilled to it. At the same time, however, I felt skeptical. The Wealth of Nations (WN) alone is a huge work, to say nothing of Smith’s writings discovered after Menger published these words in 1891. Could Menger’s strong claim survive careful scrutiny?
I wondered about the “without exception.” As the survivor of a ponderous but (I think) conscientious scholarly effort (Martin 2021), I actually can offer a “fact-checking” report on it of sorts. To the question “did Adam Smith indeed always side with the poor and weak against the rich and powerful” I give the resounding answer: Yes, mostly. It’s a little complicated. Fact-checking isn’t always as easy as we hope!
In many cases Smith does clearly advocate for the interests and welfare of the poor, of workers, of the politically powerless, and so forth. But at times Smith’s discussion is harder to characterize. It turns out that, to echo Menger’s words, what “siding with” or “representing the interests of” some group in society means depends on what policies one thinks are in the best interest of the group. To use a perennial contemporary policy dispute as an example, whether opposition to minimum wage laws is “anti-worker” depends on what the disemployment and other adverse effects of such policies actually are, which is a complex matter (Reich et.al. 2017; Jardim et.al. 2022). Smith tackled similarly knotty issues—what are the effects of free markets on the welfare of the poor? Of the division of labor? Of various sorts of taxes? Of different means of financing education and religious instruction?

Adam Smith, hot and cold
By quoting selectively from the WN and the Lectures on Jurisprudence (LJ), it is possible to paint two diametrically opposed pictures of Adam Smith. The “warm” Smith makes statements that could come from a beret-wearing radical. The “cool” Smith can sound like a Dickensian villain.
The “warm” Adam Smith dwells on the prima facie unfairness of life in an advanced economy with specialization and wage labor. He notes that “[t]he division of opulence [wealth] is not according to the work”: a rich merchant works less but earns more than his clerk; the clerk, in turn, earns more and enjoys better working conditions than the manual laborer who “trudges up and down without intermission.” Indeed, “[He] who…bears the burthen of society has the fewest advantages” (LJ, 489-490). In an earlier version of this same point Smith used even more emotional language, describing the “dependent poor man” who
...furnishes the means of the convenience and ease of all the rest [of society]…[but] is himself possessed of a very small share and is buried in obscurity. He bears on his shoulders the whole of mankind, and unable to sustain the load is buried by the weight of it and thrust down into the lowest parts of the earth, from whence he supports all the rest (LJ, 341)
Elsewhere, Smith claims that the rich gain proportionately more from trade (with the poor) than the poor do (LJ, 512); that “[l]aws and government may be considered in this and indeed in every case as a combination of the rich to oppress the poor, and preserve to themselves…inequality” (LJ, 208). He describes the contemporary “poor day labourer or indigent farmer” as being subject to “oppression and tyranny” (LJ, 338-339). Seeming to foreshadow contemporary debates, Smith further says that “[w]herever there is great property, there is great inequality” and explicitly claims that “[f]or one very rich man, there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many” (WN, 709-710).
Yet, a “cool” version of Adam Smith can also be selectively constructed. This Smith describes the poor as making “inroads” and “attack’" on the rich which can only be repelled by the outstretched “arm of authority” (LJ, 208). Civil government is needed to protect owners against the “violence and rapacity” of the poor and to thereby preserve the “usefull inequality in the fortunes of mankind” (LJ, 338; Martin 2021, 842). In the Theory of Moral Sentiments (TMS) Smith argues that the “poor man must neither defraud nor steal from the rich” even if the gain from such a transaction were “much more beneficial [to the poor man] than the loss could be hurtful to the [rich]” (TMS, 138). In LJ, he even criticizes the intelligence of the poor, saying that “the low people are exceedingly stupid” due in part to parents neglecting to educate their children. Such children when grown have no recreation except riot and debauchery, so they work half the week and carouse the second half (LJ, 540). In the WN (795), Smith says that many of the urban poor abandon themselves “to every sort of low profligacy and vice.” The fact that "the people who cloath the whole world are in rags themselves" is seemingly partly their own fault (LJ, 539-540). Now we seem very far from Smith the radical partisan of the workers!

An underlying unity
Of course, each of these portrayals misses the underlying unity of Smith’s thought. He had both a strong and even impassioned sympathy for the poor and a strong commitment to property, with the second commitment justified partly by the first. In many of the passages quoted above, Smith dwells so long on the disadvantages of being a worker in an advanced economy in order to highlight just how compelling the advantages are. The famous culmination of this strategy is Smith’s claim, appearing in similar phrasing in both the LJ and in the Wealth of Nations, that even a common day laborer in Britain is more equipped with the “conveniencies and luxuries of life” than an “Indian prince” with 1,000 subjects (LJ, 338-339; WN version at 22-24). The resolution of the apparent paradox is the enormous increase in productivity conferred by the division of labor. Even the “meanest laborer in a polished society” can focus on a specific task and become good at it; he is also assisted in his work by “machines and instruments” that primitive man lacks (LJ, 521). The things he buys only appear simple; even the common woolen coat he wears is itself a masterpiece of coordination (WN, 22-23). But the division of labor requires that property be secure. If not, if
people find themselves every moment in danger of being robbed of all they possess, they have no motive to be industrious. There could be little accumulation of stock, because the indolent...would live upon the industrious, and spend whatever they produced (LJ, 521).
The mention of “stock” (capital) is significant. Capital is essential both for purchasing machinery and tools and to finance the complex organizations and trading patterns supporting the division of labor itself. Its creation requires strong property rights, for otherwise it is under threat from the “passion to invade property” which comes from “avarice and ambition in the rich, in the poor the hatred of labour and the love of present ease and enjoyment” (WN, 709). Notice that property can come under threat from both the poor and the rich.
That Smith is an “equal opportunity defender” of property is further suggested by his discussion of poverty in China (WN, 112). Smith contends that there “the rich or the owners of large capitals enjoy a great deal of security.” Were Smith an advocate only for the interests of the rich he would have stopped there. But he continues that “the poor or the owners of small capitals enjoy scarce any [security], but are liable, under the pretence of justice, to be pillaged and plundered at any time by the inferior mandarins.” As a result, he concludes, less capital is accumulated than China could in fact sustain (see discussion at Martin 2021, 845). This passage supports two interpretations. First, that it is unjust to pillage the poor. Second, that it is bad for economic growth to do so. Put another way, economic development isn’t a “trickle-down” process from the rich but a broad-based process in which all can participate—the proverbial rising tide that raises all boats, a theme set out in the fourth paragraph of WN (10).
Everyone’s wellbeing counts when evaluating the growth process. Against the early modern tradition that the prosperity of the working class somehow didn’t sum towards national well-being, Smith contended that “[n]o society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.” Moreover, it was only “equity, besides, that they who feed, cloath, and lodge the whole body of the people, should....be themselves tolerably well fed, cloathed, and lodged” (WN, 95-96).
While the second part of this statement has been taken by some to suggest endorsement of some kind of government-organized redistribution, it can be argued that what Smith intended was rather the removal of restrictions on workers’ ability to gain wealth through market transactions. Of these there were still many in the eighteenth century; the apprenticeship system for one, and for another a crumbling, imperfectly enforced, but still threatening legal apparatus to confine the poor within their home parishes—and its limited labor market (discussed in Martin 2015). Smith treated these policies as property issues, liberty issues. His anger is palpable when he asserts
The property which every man has in his own labour...is the most sacred and inviolable. The patrimony of a poor man lies in the strength and dexterity of his hands; and to hinder him from employing this strength and dexterity…without injury to his neighbour, is a plain violation of this most sacred property…a manifest encroachment upon the just liberty both of the workman, and of those who might be disposed to employ him (WN, 138).
Likewise, the labor mobility restriction (the Law of Settlement) wasn’t just an “inefficiency” or policy error, but an “evident violation of natural liberty and justice” (WN, 157). Smith never, to my knowledge, talks about injustice to the rich with the same warmth as he does injustice to the poor. And therein may glimmer another facet of his thought.
Smith has a reputation for caginess and hedging his statements (Henderson 2004). It might therefore be justifiable (if, admittedly, a bit speculative) to scrutinize his statements about rich-poor conflicts based on the type of rich person in question. It is plausible that the rich who Smith criticizes obtained their wealth through zero-sum or even negative-sum processes. The rich often wield centralized political power abusively, such as the employers who ask Parliament to limit the wage of journeymen tailors (WN, 157–158) or the wealthy master manufacturers who orchestrate and benefit from the mercantile system (WN, 644). In a society rife with special legal privileges, Smith may well have suspected that someone rich would also be powerful. Being powerful in turn often spelled involvement in predatory avarice—even though wealth gained fairly was not in itself objectionable (TMS, 83; Martin 2021, 843).
What I’m trying to suggest is that we cannot summarize Smith’s attitudes with some bland statement that “there is no ultimate conflict of interest between rich and poor.” Whether there is a conflict depends on what sort of rich people we are talking about. It also depends on the type of society in which both rich and poor are embedded. Smith makes clear his belief that the poor are better off in an advanced market order enjoying an approximation to the “liberal plan of equality, liberty, and justice” (WN, 664) rather than living under feudalism or in the slaveholding economy of the ancient world.
And Smith argued that with liberty comes dignity. Smith says that dependency (i.e., being a retainer or servant) “corrupt[s] and enervate[s] and debase[s] the mind” but that commerce and manufacturing prevents this degradation by giving the poor alternative and better job opportunities than working for the rich. Commercial society even gives the independent common people of England “noble and generous notions of probity” (LJ, 1762–63, vi.4-7, 332; LJ, 1766, 204-205, p. 486-7). Unlike the shepherds of the remote past who had to serve their local aristocrat (LJ, 202), a tradesman in a commercial society with many customers isn’t beholden to any one individual, even a wealthy one. It is perhaps notable that the laborer who was thrust into the “depths of the earth” is described by Smith as a “dependent poor man” (LJ, 341, emphasis added). That market society reduces “servile dependency,” promoting instead “independency” (412, 399), is a main theme of Book III of WN.

Compared to what?
Of course, manufacturing and commerce can also fall prey to exploitive behavior. Government mercantilist restrictions encourage "industry which is carried on for the benefit of the rich and the powerful,” while “[t]hat which is carried on for the benefit of the poor and the indigent [for example, spinning woolen yarn] is too often either neglected or oppressed" (WN, 644). Even in the Britain of his day, Smith says, some of the wealthy act to the detriment of the good of the common people.
Adam Smith’s “relevance” for modern debates around wealth and poverty has obvious limitations. Smith’s belief that the standard of living was rising in Britain in the 18th century isn’t particularly useful for contemporary arguments about the recent trajectory of real wages. Paradoxically, then, his “bigger picture” frameworks—those less dependent on specific details of his own time—tend to be most provocative for his remote intellectual descendants. His observation that a poor person might simultaneously have a “very small share” of the total wealth of society, but a “great share” of the “conveniencies of life,” obviously anticipates the distinction between absolute and relative poverty (LJ, 341 as well as similar comments at 338-339 and in WN, 22-24). A modern reader is naturally led to wonder whether well-being scales in exactly this way, or if there are certain goods whose accessibility depends on relative and not just absolute earnings. Weighing these issues alongside Smith’s claim that “[i]n what constitutes the real happiness of human life…all the different ranks of life are nearly upon a level” (TMS, 185) opens rich directions for thought.
Smith was suspicious of sweeping changes imposed by arrogant reformers. He still had an “idea of the perfection of policy” and wished to see the status quo improved even if he knew that his ideas would, realistically, never triumph completely (TMS, 234; WN, 471, 616–617). But even the best policy regime would not deliver paradise. There is no reason to suppose that each and every element of liberal commercial society contributes to human wellbeing. Far from it. But decisions in life always come to the question, Compared to what? And Smith thought that the liberal plan was better than the alternatives.
If we too struggle to bridge the gap between the status quo and “perfect justice…perfect liberty…[and] perfect equality” (WN, 669) we can at least feel that Smith would sympathize with our efforts.


Christopher Martin is an associate professor of economics at Hillsdale College in Michigan. He is a 2012 graduate of George Mason University’s doctoral economics program. A transplanted Southerner, he endures winters in the Upper Midwest with his wife and two children.

This essay is part of the AdamSmithWorks series Just Sentiments curated by Daniel B. Klein and Erik Matson. New essays will be published on the fourth Wednesday of the month. You can read more about the series in this Speaking of Smith post, "Just Sentiments- Welcome!". Klein and Matson lead the Adam Smith Program in the Department of Economics at George Mason University, in association with the Mercatus Center. In the program, they study big ideas in jurisprudence, politics, ethics, and economics as they were pursued during the original arc of liberalism, especially in the 18th century in Britain.



References

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Henderson, Willie. 2004. “A Very Cautious, or a Very Polite, Dr Smith? Hedging in the Wealth of Nations.” Edited by Vivienne Brown. The Adam Smith Review I: 72–96.
Jardim, Ekaterina, Mark C. Long, Robert Plotnick, Emma Van Inwegen, Jacob Vigdor, and Hilary Wething. 2022. "Minimum-wage increases and low-wage employment: Evidence from Seattle." American Economic Journal: Economic Policy 14, no. 2: 263-314.
Martin, Christopher S. 2015. “Equity, Besides: Adam Smith and the Utility of Poverty.” Journal of the History of Economic Thought 37 (4): 559–81.
Martin, Christopher. 2021. “Adam Smith and the Poor: A Textual Analysis.” Journal of Economic Behavior & Organization 184 (April): 837–49.
Menger, Carl. 2016. “The Social Theories of Classical Political Economy and Modern Economic Policy.” Translated by Stefan Kolev and Erwin Dekker. Econ Journal Watch 13 (3): 467–89.
Reich, Michael, Allegretto, Sylvia, and Godøy, Anna. 2017. “Seattle’s Minimum Wage Experience 2015-16.” CWED Policy Brief. Berkeley, CA: Center on Wage and Employment Dynamics.
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Smith, A., 1981. An Inquiry into the Nature and Causes of the Wealth of Nations. R.H. Campbell, A.S. Skinner and W.B Todd (Eds) Indianapolis, IN: Liberty Fund.
Smith, A., 1982. The Theory of Moral Sentiments. D.D. Raphael and A.L. Macfie (Eds.) Indianapolis, IN: Liberty Fund.
Smith, A., 2009. Lectures on Jurisprudence. R. L. Meek, D. D. Raphael, and P. G. Stein (Eds.). Indianapolis, IN: Liberty Fund.