What can Adam Smith teach us about the moral economy of sanctioning oligarchs? Part 2

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Brianne Wolf for AdamSmithWorks

The West’s decision to sanction Russia’s superrich makes sense given Smith’s account, on the one hand, because of the general tendency to admire and worship the rich. If the wealthiest are punished, so with them goes public opinion, perhaps swaying Putin.... On the other hand, Smith tells us our tendency to admire the rich and great also causes us to look the other way when they behave badly. 
Part 2: Intended and Unintended Consequences of Sanctions on the Super Rich
In Part 1, I discussed the economic and moral economy of sanctions. In this second and final part, I focus on Smithian insights about crony capitalism, the superrich, and the potential efficacy of sanctions
Adam Smith spends an inordinate amount of time discussing the moral influence of the richest in society in his Theory of Moral Sentiments. This analysis can give us some insight into why the sanctioning of Russian oligarchs is an attractive option for Western governments, but also why these sanctions are unlikely to work as intended. 
Smith suggests that the rich have immense influence on the moral system of a society. He writes, 
“This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments” (TMS I.iii.2.12). 
The problem is that people think the richest are the most virtuous rather than judging them based on their behavior and character. Because we tend to conflate wisdom and virtue with wealth and greatness, we are much more likely to excuse the behavior of the wealthiest in society, while at the same time condemning the slightest misstep by the poorest. Smith writes, 
“Those exalted stations may, no doubt, be completely degraded by vice and folly.  But the vice and folly must be very great, before they can operate this complete degradation. The profligacy of a man of fashion is looked upon with much less contempt and version, than that of a man of meaner condition. In the latter, a single transgression of the rules of temperance and propriety, is commonly more resented, than the constant and avowed contempt of them ever is in the former” (TMS I.iii.3.4). 
This tendency to admire the rich and great and excuse their bad behavior is why most people desire to be rich. We want the respect and approval of others in society around us and displays of wealth are the quickest way to earn this approbation. For Smith, every human being desires others to sympathize with us, by which he means something like empathize, or to put themselves in our shoes. We need sympathy to feel relief from our sorrows and joy in our happiness. This is what explains why we look upon the wealthy and ignore the impoverished. 
“To be observed, to be attended to, to be taken notice of with sympathy, complacency, and approbation, are all the advantages which we can propose to derive from it” (TMS I.iii.2.1).  
One discussion argues that the sanctioning of oligarchs is working based on this insight shared by twentieth-century economist and sociologist Thorstein Veblen who argued that people want to display their wealth, through conspicuous consumption to gain notoriety from it and to highlight their leisure time. Smith even takes this insight so far as to consider war. He writes, 
“In quiet and peaceable times…a prince, or great mean, wishes only to be amused…The external graces, the frivolous accomplishments of that impertinent and foolish thing called a man of fashion, are commonly more admired than the solid and masculine virtues of a warrior, a statesman, a philosopher, or a legislator.” (TMS I.iii.3.6). 
Though the wealthiest do not possess virtues that would prove useful in a time of conflict, they are still the objects of aspiration. In short, for Smith, the wealthiest in society are insulated from the moral system he has outlined. They do not get the feedback from the sympathy of others. The behavior of the wealthiest is admired even when it should not be. Smith notes that therefore, 
“in the middling and inferior stations of life, the road to virtue and that to fortune, to such fortune, at least, as men in such stations can reasonably expect to acquire, are, happily in most cases, very nearly the same…In the superior stations of life the case is unhappily not always the same” (TMS I.iii.3.5-6).
What does all of this have to do with attempts to curb Russia’s attack on Ukraine? The West’s decision to sanction Russia’s superrich makes sense given Smith’s account, on the one hand, because of the general tendency to admire and worship the rich. If the wealthiest are punished, so with them goes public opinion, perhaps swaying Putin. In fact, some have claimed success for the sanctions on this basis because Russian oligarchs like Oleg Tinkov, Oleg Deripaska, and Mikhail Fridman among others have spoken out against Putin’s war on Ukraine. Smith could perhaps even explain this behavior, noting that the rich are in a constant competition with one another to set the fashion. On the other hand, Smith tells us our tendency to admire the rich and great also causes us to look the other way when they behave badly. Smith describes this tendency:
 “We are eager to assist them in completing a system of happiness that approaches so near to perfection” (TMS I.iii.2.3). 
The wealthiest contribute to the order of society. We imagine them to be happier than we are and think that we could one day be like them. Their existence gives us something to aspire to: 
“When we consider the condition of the great, in those delusive colors in which the imagination is apt to paint it, it seems to be almost the abstract idea of a perfect and happy state…We feel, therefore, a peculiar sympathy with the satisfaction of those who are in it” (TMS I.iii.2.2). 
The rich are able to thwart the feedback system of sympathy that generates moral sentiments because we do not want to condemn a state we imagine as the happiest and in which we hope to participate. Therefore, as some have noted, the oligarchs are able to slip past the sanctions with money they obtained in questionable circumstances in the first place. In other words, they continue to participate in crony capitalism. After all, as Veblen well knew, the wealth of the superrich is not worth it to them if they cannot spend it ostentatiously so that everyone knows the status they hold. Smith was similarly aware of this reality: 
“The rich man glories in his riches, because he feels that they naturally draw upon him the attention of the world, and that mankind are disposed to go along with him in all those agreeable emotions with which the advantage of his situation so readily inspire him” (TMS I.iii.2.1). 
Applying Smith’s teachings about the superrich shows that the sanctions against the oligarchs are both popular and unlikely to succeed because of the several ways the rich are insulated from the moral teachings of the market. The rich are the taste makers. As Smith states
Their dress is the fashionable dress; the language of their conversation, the fashionable style; their air and deportment, the fashionable behavior. Even their vices and follies are fashionable; and the greater part of men are proud to imitate and resemble them in the very qualities which dishonor and degrade them” (TMS I.iii.3.7). 
And we are willing to excuse the behavior of the wealthiest even when we are appalled at the actions of those with whom they associate.

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