Sir James Steuart as the Apotheosis of Mercantilism and His Relation to Adam Smith

Author(s): Gary M. Anderson and Robert D. Tollison

Source: Southern Economic Journal, Vol. 51, No. 2 (Oct., 1984), pp. 456-468
Published by: Southern Economic Association
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Sir JamesSteuartas theApotheosisof
Mercantilismand His Relationto Adam Smith*
GARY M. ANDERSON
ROBERT D. TOLLISON
George Mason University
Fairfax, Virginia

I. Introduction

The conventionalwisdomholdstwo relatedpropositionsregardingSmith'spresentation of

his case forlaissez-fairein The Wealthof Nations. One is thathe employs,forthesake of
expositoryconvenience,a strawman-the mercantilist view-against whichhe presents
thealternativeoffreetrade[2; 15]. It has become acceptedby some scholarsthatmercan-
tilistwritersheld muchmoreintelligent viewsand thatSmith"invented"an oppositionby
distortion,making his alternativewin by default[7; 23; 9; 11]. The otherproposition,
whichhas also gained currencysincethe 1940s,is thatSmithfalselyportrayedhimselfas
an iconoclast in oppositionto the mercantilistorthodoxy.It is nowadays alleged that
Smith was instead merelyofferingan able articulationof an orthodoxview which had
alreadyemerged[23; 11]. Laissez-faireprejudiceswerethedominantfashion,and Smith
provideda rationalizationof themex post.
We feelthatthisconventionalwisdomabout Smithis wrong,and we believethatthis
can be demonstratedby meansof a close examinationof the mostprominentmercantilist
writerin Smith'stime(who was, in fact,an acquaintance of Smith): Sir James Steuart.
Our case regardingSteuart can be easily summarized-he was virtuallythe complete
antithesisof Smith. Althoughsome older writers[1] sensed this,the morerecentfashion
has been to characterizeSteuartas basicallya classical liberalwithKeynesianleanings,
committedto thefurtherance of economicsas a science.The sophisticationand trenchancy
of his analysisis stressed,along withthe manifestsuperiority of some of it to Smith's.We
believethatwe can demonstrate,quite apart fromany Keynes-likedemand management
ideas, that Steuart presenteda politicaleconomyand an approach to economic science
thatdiffered fundamentally fromSmith.In short,Smithdid nothave to builda strawman;
he had JamesSteuart.Furthermore, thereis considerableevidenceto suggestthatSteuart's
alternativegave a real runforthe moneyand thatSmithoffereda trulyradical program
which gained considerable influence, overturning rather than rationalizing
popular prejudices.
In Section II, we outlinetheextentof Steuartrevivalismin the literature.In Section
III, we examine Steuart'semphasison classes ratherthan individualsas unitsof analysis.

*We are grateful

to a referee
forhelpfulcomments.
The usualcaveatapplies.

456

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 SIR JAMES STEUART 457

This discussioncarriesover to Section IV wherewe discuss Steuart'sconceptof competi-

tion. The contrastto Smith on this point is sharp as Steuartadvocates the abolition of
competitionin favorofa state-controlled systemofcartelsand monopolies.We proceedin
Section V to outlineSteuart'sviewofthegood society.Integratedwiththisdiscussionis an
accountof variousmodernmisinterpretations, whichhave tendedto excuseaway Steuart's
anti-liberalism.In Section VI, we attemptto establishthe relevantpersonal and pro-
fessionallinks betweenSteuartand Smith and that Smith altered Wealthsignificantly
in responseto Steuart'sviews. We conclude in Section VII, emphasizingthat Smithwas
engagedin a real debate withat least one major liveopponent,not withphantoms.

II. The New Orthodoxyon Steuart

Untilfairlyrecently,the reason thatSteuartand his Principlesfellinto relativeobscurity

afterthepublicationof Smith's Wealthof Nationswas generallythoughtto be obvious-
Steuart'sPrincipleswas contradictory, incoherent,and unreadable.Bycomparison,Smith
was logical,insightful, and wroteextremelywell. Ingram[12, 86] calls Steuart'swork"the
mostunfortunate of books." Roll [19, 127]insiststhatSteuarthad littleto offerthebodyof
economic doctrinebeyond obscurityand contradictions.And Bagehot [1, 73] thought
Steuart'sbook so patentlyabsurd that it should be read in conjunctionwith Wealthin
orderto appreciatethe kindof spuriousnotionsSmithwas up against.
New interestwas generatedin Steuartby the KeynesianRevolution.Althoughthere
remaineda universalconsensusto theeffectthat Steuart'swritingstylewas unfortunate,
quite a numberof writersnotedsimilaritiesbetweenSteuartand Keynesin the theoryof
macro policy.The effortbegan to rehabilitateSteuart'sgeneraleconomicanalysis.
Supposedly, earlier writershad misunderstoodSteuart and failed to pay deserved
attentionto a body of analysisthat had not been refuted,but merelysweptaway in the
Smithiandeluge after1776. To Stettner[28, 472], ".... Steuarthad a remarkableinsight,
farmorepenetrating thanthatofhiscontemporaries, enablinghimto graspthesignificance
of currenttrendsto which they were blind." Sen [21, 35] enthusedthat Steuart,like
Keynes,was "[c]osmopolitanin outlook but realistin spirit.. .", and furthermore found
that the ". . . similaritybetweenthe two withregardto theirtechniqueof writing,their
attemptto definepreciselyeveryeconomictermtheyuse,explaincarefully at everystepthe
logical basis of theirexposition and illustrate
everyimportantpointby facts and statistics,
is, indeed, remarkable." Earlier in the same article,Sen [21, 19] describes Steuartas a
"pioneer,"and his Principlesas "a classic ofdeductiveanalysis."Vickers[30, 1190]thinks
thatthe strongsuitof the Principlesis ". . . theinternalcoherenceand theoreticalacumen
of the work itself."Hutchison[11, 142-43] argues that Steuart understoodbetterthan
Smiththe natureof a marketeconomyas a disequilibriumsystem,but thatthissophisti-
cated insightwas lost on his contemporariesmore inclinedto believe in a naturalorder
providingself-equilibrium.'
In short,Steuart did not fade into obscuritybecause Smith's superior,competing
economicanalysisblew the Principlesout of the waterin a fairfight(as impliedby older
writers),but ratherfor other reasons. Smith's doctrinejust appealed to the popular
prejudicesof the timesbetter.The new consensusis summarizedthusly:"The Zeitgeistof

1. For a defense of Smith against the charge of simplisticanalysis, see Hayek [8].

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458 GaryM. Andersonand Robert D. Tollison

thetimesbeingwhatit was, thelatterphilosophy[Smith'spoliticaleconomy]achievedan

immediateand astoundingsuccess whiletheother[Steuart's]fellintocompleteoblivion"
[22, 188-89]. Sen [22, 184] even goes so far as to suggestthat Smithplagiarizedfrom
Steuartextensively.
We thinkthat it is well worthexaminingSteuart'stheoryof politicaleconomyin
orderto evaluate theseclaims. We accept that Steuartand Keynesharboredsimilarideas
regardingdemand managementand fiscal policy, and will instead focus on Steuart's
overall theoryof economic policy and the microeconomicfoundationsupon which it
rested,aspects of Steuart'sthoughtthat have receivedconsiderablyless attention.What
indeedwas Smithup against?

III. The Economics of Class

An interesting aspect of Steuart'swork,not only by contrastwith Smith but also with

earlierwriters[6,489-90],was therejectionoftheprincipleofmethodological individualism.
In fact,Steuart seems to have strivento express all of his economic ideas in termsof
classes. Economizingindividualsheld littleinterestforhim.
Steuarttook thenotionof economicclasses veryseriously.For example,he speaks of
"theconsumers"and "theproducers"and makesclearthattheseweretwoentirelydistinct
groupsof people and not economicfunctions[29, 230]. Membersof different classes had
different "wants and spirit[consumptionfunctions]based on theirclass" [29, 73], which
Steuartthoughtof as fixedand stable.
Classes sharedcommoninterests, but conflictwithotherclasseswas inevitable.At the
highestlevel of classes were nations,and what he says about internationalconflictalso
applies to interclassconflict.He writes:"While thereare different states,theremustbe
separateinterests,and when no one statesman is foundat thehead of thoseinterests,there
can be no such thingas a commongood, everyinterestmustbe consideredseparately"[29,
365].
Althoughmostof Steuart'smodernstudentshave chosen to ignorethisaspect of his
approach,notall have. Sen [22, 185] writes:
Thegroupversus thesociety
is as mucha distinct
problemas theindividualversus
thegrouportheindividual thesociety.
versus IfAdamSmith wasbreaking awayfrom
thegroupto theindividual,Steuartwas shiftingfromthegroupto society. Two
pathswerepointing
divergent outwards from themilieu
ofMunandPetty andLocke.
Steuart
followedtheonewhichwaslatertoleadtoeconomic socialism.AdamSmith
followed
theother,leadingtoeconomic individualism.
RecognizingSteuart'stendencyto thinkin class termshelps to make sense of his
because it is boththe virtualmirrorimage of
account of competition,whichis interesting
Smith's account and because has been ignored in modern discussionsof Steuart's
it
Principles.

IV. Steuarton Competition

Steuartbasicallyviewedcompetitionas a formofclass conflict.Althoughpreviouswriters

[31] have notedthat Steuartviewedinternationalcompetitionas a zero-sumgame, it has
escaped noticethathe arguedthatall competitionwas of thisnature.
In a domesticsettingcompetitionwithinclasses- variouslydefined- was merelya

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 SIR JAMESSTEUART 459

formof wastefulconflict.The class conflictof competitionwas to Steuart a situation

analogous to warfare.For example,he claimsthatthecompetition". .. among industrious
people of thesame profession"would bringthe"... declineofthemodernstate"[29, 273].
Elsewhere,he maintainsthatfreecompetitionamong laborersis likelyto lead to distress
and misery[29, 191-92].
In some cases, as in some wars,a clear victorwill emergefromthe struggleof free
competition.Instead of the mutual destructionof competitors,one may emerge as a
victoriousmonopolist.In a passage wherehe discussespredatoryspeculation,Steuart[29,
175] writes:
Theforestaller
buysallup,withanintentiontosellwithmoreprofit,
as hehasbythat
meanstakeother out
competitors ofthe and
way, appears witha single onone
interest
sideofthecontract,in thefaceof manycompetitors on theother.Thispersonis
punishedbythestate,becausehe hasprevented thepriceofthemerchandisefrom
becoming totherealvalue;hehasrobbed
justlyproportioned thepublicandenriched
andinthepunishment,
himself; hemakesrestitution.
So competition withina class- meaningall competition ina domesticsetting--isdestructive
of theeconomicorder,at best resultingin monopoly.
It is the task of "the statesman"to ". . . avoid in his administration,
everymeasure
to
whichmaytend promote[competition], byconstitutingparticularadvantagein favour
a
of some individualsof the same class above others"[29, 273]. The state mustrescuethe
economyfromthechaos offreecompetitionbyorganizingcartelsin professions, industries,
and trades;onlythe statecan providea rationaleconomicorder.As the authorputs it at
one point,"If the weaversoppressthe spinners,forinstance[i.e., encroachon the market
for weaving],methodsmay be called upon, if not by incorporatingthe last, at least by
unitingtheirinterests, so as to preventa hurtfulcompetitionamong them"[29, 395].
But notethatSteuartalso arguedthatone oftheperniciouseffectsoffreecompetiton
was that it tended to give rise to monopoly.In fact,he argues [29, 395] that although
foreigntradingcompaniesmustbe grantedexclusivechartersto preventcompetitionfrom
hamperingthe developmentof the trade,theymust not be allowed ". . . to engrossthe
whole" or ". . . reduce the gains of those who are not incorporated,below the proper
standard." Steuarttendsto speak of the rational"plan of politicaleconomy"in termsof
(what amounts to) cartelsreplacing"hurtfulcompetition."At no pointin the Principles
does he offerany economic argumentagainst monopoly. At best he offersvague pro-
nouncements,as in theforestalling diatribeto theeffectthatmonopoly"robs the public"
[29, 175].
It seemsthatSteuartshouldhave likedmonopolywithoutthishedging--itprevented
the wastefulnessof competition.The true explanation for this uneasinesswith private
monopolymaylie in thefactthatSteuartwas nota meremercantilist, but byfarthe"most
mercantilistof the mercantilists,"whose purpose in writingPrincipleswas to offera
detailedvisionof a rationallyplanneddictatorship.Unregulatedmonopolywas as incom-
patiblewiththisvisionas unregulatedcompetition.
The state mustorganize cartelsand monopoliesto quash competition,but it must
controlthesecreationsin a detailedmanner.As he explains,". .. whenexclusiveprivileges
are given,a statesmanshould neverfail to stipulateforhimself,a particularprivilegeof
inspectionintoall the affairsof the company,in orderto be able to take measureswhich
mayeffectively preventbad consequencesto thegeneralinterestof thenation,or to thatof
particular classes" [29, 394].

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460 GaryM. Andersonand Robert D. Tollison

Among modernhistoriansof classical economics,only Sowell and West have noted

thefundamentaldichotomybetweenSteuartand Smithin termsof the natureof market
competition [26; 31]. However,bothofthesewritersemphasizeSteuart'sviewson competi-
tionin foreigntrade.As we have seen,thisis onlythetipoftheiceberg.In fact,theviewsof
Steuartand Smith on competitionwere virtualmirrorimages. Smith makes it clear in
Wealththat competition-a voluntary,rivalrousprocess betweenindividualswhich is
game-likeand notwar-like- was notwastefulbut productive.Competitionwas a positive-
sum game. Monopolywas nottheresultof predatorypricingor unrestrained competition,
but was createdbygovernmental restriction
on freecompetitiveentry.2In addition,Smith's
hostilityregardingforeigntradingcompaniesgranted exclusive privilegesby the state is
well known.3

V. Steuart'sLiberalism

AlthoughSteuart thoughtthat freecompetitionwas inherentlywasteful,this does not

implythat he rejectedthe marketeconomy in general. Many modernadvocates of a
"mixedeconomy"acceptthepropositionthatmarketsallocate resourcesefficiently, butgo
on to argue that marketfailuresrequire occasional governmentintervention.In fact,
Steuart'smoderncommentatorsportrayhim not as an implacableenemyof the market
economy,butratheras someonewho insightfully recognizedtheproblemofmarketfailures
and advocated correctivegovernment action.
For example, White[32, 718] claims thatthe Principleshas "... greaterrelevanceto
moderneconomicconditions"thanthe Wealthof Nations,because ofour modern"mixed
economy."Accordingto Vickers[30, 1191],". .. Steuartdid notin factadvocate anything
likea totallyplannedeconomy.His economicinterventionism, hisanalysisoftheneed for
governmentalparticipationin the economy,is to be seen against the backgroundof the
liberalstateand theviableexchangeand marketsystemforwhichhe consistently 4rgued."
Skinner[23, lxvii] refersto Steuart's classical liberal sentiments". .. which are more
reminiscentof Locke or Harringtonthan Sir Robert Filmer [the seventeenthcentury
defenderof thedivinerightof kings]."
Steuart revivalistshave portrayedhim more or less as Adam Smith-in-Keynesian-
clothing,withsome sophisticated insightintothepathologyof marketfailuresthrownin for
good measure. In this section we hope to demonstratethat this tack is somewhatmis-
leading. Steuartwas in facta championof economicplanningof an extremevariety.His
vision was of societyas a closely regimentedmilitarycamp. Steuart offereda body of
analysisand policyprescription whichwas anti-liberalbothin spiritand in tone- in short,
thecompleteoppositeof Smith.
2. To Smithcompetitionwas a creativediscoveryprocedurewhichsystematically eliminatedinefficiencyin
resourceallocation.His viewis neatlysummarizedin reference to thepredictableeffects
of theremovalof political
constraintson thefreecompetitive process:
Theyencourage thecultivation
oftheremotewhichmustalwaysbe themostextensive circleofthe
country ... theyintroducesomerivalcommodities intotheold market, [and]theyopenmanynew
markets to[thecountry's]
produce.Monopoly, besidesis thegreatenemyofgoodmanagement, which
can neverbe universally
establishedbutinconsequence ofthatfreeand universal
competition which
forceseverybodyto haverecourseto itforthesakeofself-defense[24,163].
3. An entirechapterin Wealth[24,724- 755] is largelydevotedtoan attackon theexclusiveprivilegesgrantedto
tradingcompanies,whichSmitharguedfostered
foreign and perpetuated economicinefficiencies.
significant

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 SIR JAMESSTEUART 461

It is relativelyeasy to portraySteuartas a champion of individualliberty,at least

superficially.For instance,Skinner[23, lxvii] quotes him as saying,"I deduce modern
libertyfromthe independenceof the same classes, by the introductionof industryand
circulationofan adequate equivalentforeveryservice";and later". .. an opulentbold and
spiritedpeople, havingthe fundof the prince'swealthin theirown hands, have it also in
theirown powerto shake offhis authority"[23, lxvii].Or, considerthefollowingpassage:
"By a people's beingfree,I understandno morethantheirbeinggovernedby generallaws,
well known,notdependingupon theambulatorywillofany man... So faras a powerof
dispensingwith,restraining or extendinggenerallaws is leftin thehands ofany governor,
so farI considerlibertyprecarious"[29, 206].
However,whenread in context,it is clear thatSteuarthad somethingelse entirelyin
mind. In the same paragraphas the above quotation,he continues:"Accordingto this
definition ofliberty,a people maybe foundto enjoyfreedomunderthemostdespoticforms
of government;and perpetualserviceitself,wherethe master'spoweris limitedaccording
to naturalequity,is notaltogetherincompatiblewithlibertyin the servant"[29, 207].
It should especially be noted that Steuart's versionof the rule of law (". .. not
dependingupon the ambulatorywill of any man . .. .") applies not universallybut to
classes--an importantqualificaton,consideringthatclass boundariesare not objectively
discernible.For example, in concludinga discussionin whichhe advocates coercivecon-
trols on familysize in the lower classes, which include the forcedremoval of "excess"
childrenfromtheirparents,he writes:"I propose no new limitationsupon marriage,
because I am a friendto liberty,and because such limitationswould shockthespiritof the
times"[29, 80].
To Smithand otherclassicalliberals,thesystemofnaturalliberty(individualfreedom
with the rule of law) created order and prosperity.The proper role of the state was
analogous to thatofa refereein an athleticcontest,notcommandingtheplayin detailbut
ensuringthatparticipatingplayersobey the necessaryrules.Steuart,in contrast,seemsto
imply that the "rule of law" held sway as long as whateverthe state decreed applied
withoutexception.By thistokenthemostoppressivemeasurespromoted"liberty"so long
as theydid not nominallyspecifyparticularindividuals.This is clearlynot the classical
liberalconceptionof the ruleof law, whichreferred to the protectionof the naturalrights
of individualsfromstatecoercion.Steuart,ratherthan beinga neglectedclassical liberal,
"turnedliberalismon itshead" (to paraphraseMarx).
Steuart denied that withoutgovernmentalinterventionmarketswere likelyto be
stableand orderly.In practice,thisviewcarriedextremeimplications.His viewof market
failurewas muchcloser to Marx's "capitalismis the anarchyof production"than thatof
most modernadvocates of regulation.As Skinneracknowledges,"The problems which
mayarise whenconsideringthemannerin whichtheseprinciplesor forcesoperateinfact,
were,in Steuart'seyes,absolutelyendless"[23, lxxxi,emphasisin original].To Steuart,the
marketitselfwas a massive failurein need of correction.His visions of lifewithoutan
interventionist stateborderedon theapocalyptic.For example,thestatesman,who has the
reinsin his hand mustdirectproductionand consumptionsystematically, lest
willbebrought
..theindustrious tostarve,
consumptionandtaxeswilldiminish; that
is,luxurywillinsensibly and hoarding
disappear, willsucceedit.Theseand similar
consequenceswillundoubtedlytakeplaceandmechanically
follow oneanother,
when
a skillful
handis notappliedtopreventthem[29,281].(Emphasis inoriginal.)

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462 GaryM. Andersonand Robert D. Tollison

The claim of Vickersto theeffectthat".. . he neveradvocated anythinglikea totally

plannedeconomy"[30, 1191] willnotstandcarefulscrutiny.Of course,Steuartofferedno
detailed programof comprehensivecentralplanning.But the basic elementsof such a
programare offeredin the Principles.He saw the properrelationshipof the stateto the
economyas like that betweenthe driverof a wagon and the horses[29, 306]. And in a
passage whereSteuarttalks more specificallyregardingthe natureand functionof state
economicmanagement,he makesclearthatprivateproperty oughtto existonlynominally,
as thepowerofeffective disposal shouldultimatelyrestwiththe statesman.An interesting
featureof thisdescriptionis Steuart's[29, 382 -83] proposal fora kind of slaveryof the
forthegood of thestate:
self-sufficient
A statesmanis broughtto a dilemma;eitherto allow industry to runintoa channel
littlebeneficialto thestate,littlepermanent in itsnature,or to deprivethepoorofthe
advantageresulting fromit. May I notfarther suggest,thata statesman, whois at the
head of a people,whosetasteis directedtowardsa trifling species expense,does
of
verywellto diminishthefundoftheirprodigality, bycallingin,bythemeansoftaxes,
a partofthecirculating equivalentwhichtheygiveforit?Whenoncehe is enrichedby
thesecontributions, he comesto be insamesituationwithancientstatesmen, withthis
that
difference, they had theirslavesat theircommand, whom theyfed and provided
for; and thathe has thefree,for thesake of an equivalentwithwhichtheyfeed and
providefor themselves.He thencan setpublic worksonfoot, and by his example,
inspirea tastefor industry of a morerationalkind,whichmayadvance thepublic
good and procure lastingbenefitto thenation.(Emphasisadded.)
a
Steuartargued that his "plan of politicaloeconomy"was "the mosteffectivebridle
ever . . . inventedagainst the folloyof despotism"[29, 279]. This conclusionis based on
Steuart'sdefinitionof despotismas vestedpowerof an arbitrarynature.Power exercised
non-capriciouslyis non-despotic,and theeliminationof arbitrariness equals freedom.As
he elaborates:
... whilethelegislative
poweris exertedinacquiringan influence
onlyovertheactions
in orderto promote
of individuals, a schemeof poiticaloeconomy,
uniform
and
consistentin all its parts,the consequencewill be so farfromintroducing
slavery
amongthe people,thattheexecutionof the plan willproveabsolutelyinconsistent
witheveryarbitrary or irregular
measure[29, 278].
He is not merelyadvocating the application of occasional regulatoryband-aides;
"legislativepower" means planningthe organizationand output of the economy in a
detailedmanner.The authorofthe Principlescan be accused ofoffering statistplanningas
onlya vague panacea, but his overall prescription-in effect,the rejectionof the liberal
orderof freetrade,bothdomesticand foreign -is competelyunambiguous.4
It is not our purpose hereto enterinto a critiqueof statistplanning.But we should
point out that Steuart seemed to take the ideal constructionof the statesmanperfectly
seriously.Althoughhe maintainedthat ". . . men are slaves to theirown wants," the
statesmanwas exemptfromthisdictum.Accordingto Steuart,"public spirit..,. oughtto
be all-powerfulin the statesman"[29, 143]. Moreover,the statesmanwas not merelya

4. To Steuart,
theunlimitedpowerof thestateto control
theeconomy to securefreedom.
was necessary
According ofplanning
tohim,onlytherequirements couldlimit
thepowerofthe"modern whose
price," "authority...
wouldatlengthcometoresemble ofthewatch...which
thedelicacy isimmediately ifputtoanyother
destroyed, use,
ortouchedwithanybutthegentlest
hand"[29,278].

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 SIR JAMES STEUART 463

convenientexpositorydevice,but reflectedSteuart'sestimationofactual nationalleaders.5

The factis generally ignoredby Steuart'sdefenders thathe lefta concisebutilluminating
account of thedesirablecharacteristics ofa plannedsocietywhereinall decisionsofconse-
quence were leftto the state.This is his extensivediscussionof ancientSpartan commu-
nism,to whichwe now turn.
Steuart firstproceeded to make a most emphaticand ringingendorsementof the
systemhe was about to describe:"The republicof Lycurgusrepresentsthe most perfect
plan of political economy,in my humble opinion, anywhereto be met with,eitherin
ancientor moderntimes. . . ifat last it come to fail,it was morefromthe abuses which
graduallywereintroducedintoit,thanfromany vice in theform"[29, 218]. In spiteofthe
unambiguousnatureofthisstatement, some ofSteuart'sstudentshave tendedto ignorethe
chapter(XIV) devoted to the system Sparta,or elseattemptedto dismissitby trivializing
of
it,e.g., Skinner [23, 218; 22, 133].
It firstmustbe pointedout thatSteuart'sdescriptionof Sparta is basicallya fable.His
source was Plutarch,and accordingto Skinnerhe "... followsthe originalclosely"[23,
218]. In otherwords,Steuartwas not confrontedwitha problemposed by the historical
developmentof a peculiarsocial system.
The Spartan "perfectplan of politicaloeconomy"was imposed by forceof arms on
the populace. All property(includingslaves) was firstexpropriatedand redistributed to
citizensin equal shares. Centralcontrolof behavior was nearlytotal. Eating alone was
expresslyforbidden;clothingwas "perfectly alike"; the people were requiredto be con-
tinuallytogether.The entiresocietywas a militarycamp: "Everyfreemanin the statewas
bred up fromhis infancyto arms ... The wholeyouthof Sparta was educated notas the
childrenof theirparents,but of the state" [29, 222]. In order to preventthis "state of
simplicity"frombeingcorruptedby foreigninfluence,Spartanswereforbiddento travel,
and no foreigners wereallowed in.6
All of thiscould be dismissedas an eccentricdisgressionon Steuart'sparthad he not
explicitlyrelateditto "modern"(eighteenth century)conditions.To "... moreclearlypoint
out theforceof theprinciplesupon whichtheLacedemonianrepublicwas established"[29,
226], he considersthehypothetical exampleoftheSpartan plan imposedon hiscountryby
a European Prince. The state would firstexpropriate all propertyand confiscate
all income,but thiswould onlybe theinitialstage. Warmingto the subject,he writes:
Leteverysuperfluitybecutoff;letthepeasants beenslaved,
andobliged tolabourthe
groundwithnoviewofprofit tothemselves, butforsimplesubsistence;
lettheuseof
goldandsilver be proscribed;
andletall thesemetalsbe shutupina publictreasure.
Letnoforeign trade,andvery little
domesticbeencouraged; butleteveryman,willing
toserveas a soldier,
be receivedandtakencareof;andthosewhoeither tobe
incline

5. A briefcomparisonwithSmith'sviewson thismatterwill proveinstructive. In Wealth,bureaucratsand

politiciansare frequentlydismissedwithcontemptas parasitesunconcerned withthewell-being ofthesocietyat large.
At one pointSmithargues,". . . thepersonswho havetheadministration ofgovernment disposedto
[are] generally
rewardthemselves and theirimmediatedependentsrathermorethanenough"[24, 861]. Elsewhere, ina remarkwhich
mayhave beenaimedat Steuart,he referred to "... thatinsidiousand crafty animal,vulgarlycalleda statesmanor
politician,whosecouncilsare directedto themomentary fluctationsofaffairs" [24, 861].
6. Interestingly,
theegalitariansocialiststatewas foundedon slavery.Accordingto Steuart,the". .. whole
nation[was] fedand providedforgratuitously ... "[29, 221]; thatis,all productionredistributed bythestatewas the
outputoftheHelotes(the Spartanslaves).Theseslavesweredistributed inequal lotswiththerestofproperty. Excess
slaveswerehunteddownand killedforsport,a practiceSteuartdefinedas necessary to eliminateslaveswhichwere"..
. idle,licentious,
and consequentlydangerousto thestate"[29, 222]. Steuartportrays Spartaas an elitistutopia.

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464 GaryM. Andersonand RobertD. Tollison

idle, or who are found superfluous,be sent out of the country.I ask what confederacy
among the modern European Princes, would carryon a successful war against such a
people? ... And what countrycould defend itselfagainst the attack of such an enemy?
[29, 226-27]
Steuart'smodernstudentsassertthathis discussionof Sparta was not intendedto be
taken seriouslyand had no normativeimplications.Nonetheless,contemporary reviewers
took himseriously.For example,a reviewerin 1767 wrote:
We cannot blame Sir James for not altering his way of thinkingwhen he came to
England, with respect to the excellence of Lycurgus Plan: but when he or any other
writer,recommendssuch institutionsin this kingdom,as perfectplans or economy, we
thinkourselves equally at libertyto express our disapprobation of them. .. " [23, 218].

In short,Steuart was taken as offeringa serious proposal involvingthe forcible

impositionof a totalitariansocietybased on slavery.Steuart'senthusiasmfortotalitarian
economicplanningwas apparentlyunique among Englishas well as continentalthinkers
contemporary withSmith.7

VI. The Impact of Steuarton Smith

It is generallyrecognizedthatAdam Smithwas aware oftheviewsexpressedby Steuartin

the Principlespriorto writingThe Wealthof Nations.A lack ofawarenesson Smith'spart
would have been remarkable,consideringthat Steuart'sbook was publishedby the pub-
lisherof Wealthjust nine yearsearlier.In fact,just priorto the publicationof Wealth,
Smith wroteto his friendPulteney,explaining:"I have the same opinion of Sir James
Stewart'sbook thatyou have,"and proceededto say thatalthoughhe would not mention
Steuart'sbook in the forthcomingWealth,"any fallaciousprinciplein it will be metby
a clear and distinctconfutationin mine" [17, 253]. Smith appears to have been well
acquainted withbothSteuartand his viewsforseveralyearspriorto thepublicationofthe
Principles[17, 253], and he observedon at leastone occasion thathe understoodSteuart's
system"betterfromhis talkthanfromhis books" [17, 61; 16, 164]. Apparently,Smithwas
acquainted withSteuart,both personallyand intellectually.
Curiously,almost no one seems to take Smith at his word, that is, to accept his
assertionregardingWealthas a "confutation"of "Stewart'sfallaciousprinciples."Upon
close examinationof both works,thereis a substantialamountof corroborating evidence
forsuch an interpretation.
7. In a passagein Theoryof Moral Sentiments, introducedin 1789, Smithoffersa critiqueofcentralplanning:
"The manof system... seemsto imaginethathe can arrangethedifferent membersof a greatsocietywithas much
ease as the hand arrangesthedifferent piecesupon a chessboard,"failingto recognizethat"everysinglepiece has a
motionof its own, altogetherdifferent fromthatwhichthe legislaturemightchoose to impressupon it . . ." [25,
233- 34]. Macfieand Raphael[25,293]assertthatSmith"likely... had theFrenchRevolutionin mind"whenwriting
thispassage,or possiblytherationalist philosopher thereis nodirectevidenceconcerning
RichardPrice.Unfortunately,
Smith'sintentions in thispassage. However,giventhedoctrinalcontextat thetimeof Smith'swriting, in whichthe
ideasofSteuartmayactuallyhaveexceededSmith'sin popularity, itseemsplausiblethatSteuartand notPrice(much
lessthestillmurkyissueoftheFrenchRevolution)wouldhavebeenthefocalpointofSmith'sconcern.Further, ifnot
forSteuart'splan of politicaleconomy,thispassagewouldseemto represent an anomaly:no one else contemporary
withSmithadvocated clear-cutstatistplanning.Finally,Steuart'sstatedintentionin the last paragraphof the
Introduction to the Principlesis the"endeavorto furnishsome materialstowardstheforming of a good" economic
system[29, 19]. Hence,inourjudgement itis a reasonableguessthatSmith's"manofsystem... apt to be verywisein
hisownconceit"was proximately Steuart.

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 SIR JAMES STEUART 465

Steuart's studentsare very sensitiveabout their writerbeing unfairlydismissed

as merelythe last of the greatmercantilists. Allegedly,the levelof sophisticationachieved
by Steuartabsolves himfromthechargeof mercantilist disrepute.On thisparticularpoint
we concur with Steuart's moderndefenders,but for different reasons. It has been well
established[6; 4] that the English mercantilistwriters(in particular,those mentioned
by Smith in his discussionof "the mercantilesystem,"Child, Petty,and Postlethwayt)
were advocates of a generallyclassical liberaleconomic policydomestically,if not inter-
nationally.They shareda highrespectforindividuallibertyand forthe efficiency of free
markets.
This has broughtsome scholarsto chargethatSmith'scharacterization ofthemercan-
tilistpositionin Wealthis purelya strawman.The mercantilists, afterall, wentmost of
the distanceideologicallywithSmith.This is exactlywhywe thinkSteuartis important.
Steuartwas, ineffect, a consistentchampionofwhatSmithcharacterizedas "themercantile
system."
The issue at stake betweenSmithand Steuartwas morefundamentaland significant
than a semanticaldispute over the correctdefinitionof wealth. At issue was basically
whetherthe price systemin a marketeconomywould functioneffectively to allocate re-
sources.To Steuartpriceswereinflexibleand failedto communicateinformation regarding
relativescarcitiesto rationalactors.This view was entirelyconsistentwithhis viewof the
market-as-failure (as opposed to a concernwith"marketfailures").Smithtooktheopposite
position, and as Sowell notes [26, 35], clearlyenunciatesthe basic outlineof what later
became knownas Say's Law of Marketsin Wealth.
The underlyingtheme of Wealthis widelyaccepted as a broadside aimed at the
"MercantileSystem."But the mercantilist writerswere,ironically,in generalthemselves
criticalofthemercantilesystem,withtheprimaryexceptionbeingtheadvocacyofvarious
limitedprotectionist measuresrationalizedby concernwith"the balance of trade."This is
withtheimportantexceptionof Steuart,who,unlikehis mercantilist predecessors, offered
a veryconsistentprogramof economicstatism.
We are notarguingthatSmithwrote Wealthmerelyas a replyto Steuart'sPrinciples.
Instead, we propose that Smith correctlyperceivedSteuart to be his chiefintellectual
opponent,and thatin thissensethelattersignificantly influencedthecourseofdevelopment
of Wealth--a work which mighthave taken on a less critical tone and complexion
in Steuart's absence. If Smith had a strawman,it was most definitelythe totalitarian
mercantilism of Steuart.
Modern commentatorshave generallyfailed to recognizethe radical natureof the
dichotomybetweenthe views of Smith and Steuart,but nonethelessthe existenceof a
debate of sortsbetweenthe two writersis widelyaccepted [13, 24]. However,the debate
between the two is typicallydismissedas phoney,because Steuart's proposals in the
Principlesweredecisivelydefeatedby historicalforcesevenas theywereleavinghis pen (a
fact presumablyknown to Smith, who is portrayedas ridingthe crest of developing
popular prejudices).The fact that Smith's Wealthand not Steuart'sPrinciplescame to
dominatediscourseon economic policydid not reflecta victoryforSmith'spositionin a
debate, but was merelya foregoneconclusion.
In the wordsof Campbell and Skinner,in the Introductionto the Glasgow editionof
Wealth:". .. above all, Steuart'ssupportforgovernmentintervention placed him in a
different camp from Smith ... which was not popular among the increasingly influential

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466 Gary M. Andersonand Robert D. Tollison

elementsin contemporary society"[3, 47]. Sen arguesthatSteuartwas less persuasivethan

Smithbecause he did notoffera "simpleslogan"(although,as we have seen,Steuarthad a
simpletheme:the state mustorganizethe economyin detail by the use of force),but the
main reasonwas ". . . thatwhilethe Wealthof Nationswas theworkofa geniuswho gave
mostfelicitousexpressionthethe Zeitgeistof histimes,the PoliticalOeconomywas purely
a workof intellect. .. out of harmonywiththe socioeconomicrequirements of the age"
[22, 186]. As a result,Steuartwas "consignedto oblivion."
Unfortunately forthis sociologicalinterpretation of the triumphof Wealthover the
Principles, events of the time fail to corroborate it. When Steuart's Principleswas first
published, it was well received. Shortly after its publicationin 1767, Steuart'sbookseller
Rouet "was able to informhimthattheworkcommandeduniversalapprobation,and had
sold 370 copies" [23, xlvi]-a phenomenalperformance forsucha largework.The presti-
gious Monthly Review examined it shortlythereafter, providing". . . extensiveand often
sympathetic criticism"[23, xlvi]. Another scholar has maintained that" The Principleswas
at thetimea respectedand widelyconsultedpiece of work"[31, 167]. Steuart'sreputation
was so sound thatearlyin 1772,the East India Company hiredhimas a consultantin the
fieldof monetaryaffairs-a lucrativepositionhe receivedoverAdam Smith,who was also
considered[22, 155].
Meanwhile,thepublicationofthe Wealthwas metwitha distinctly lukewarmreception.
Even Hume's attitudewas pessimistic,at least in the short-run.In a letterto Smith
dated April 1, 1776, he wrote: "Not but that the Reading of it necessarilyrequiresso
much Attention,and the public is disposed to give so littlethat I shall still doubt for
some timeof its being at firstverypopular" [16, 186]. The criticalreceptionof Wealth
was tepid at best; The Gentleman'sMagazine ignoredit, and initiallyit receivedonly
a two-page(lukewarm)reviewin the 1776 Annual Register[16, 186]. Rashid [18, 73-4]
details how the MonthlyReview--the most influentialof the contemporary journals--
published a generallyfavorablereviewof Wealthin 1776, which commended Smith's
overall systembut reservedjudgementon his individualarguments.The ambivalence
became clearerwhen the Monthlypublishedin the followingyear a glowingreviewof
GovernorPownal's broadsidecritiqueof Wealth.Again, in 1778 Smithwas mentionedin
the Monthly,this time in a reviewof James Anderson's Observationson ... National
Industry(and onlybecause thelatterauthordirectyattackedSmith'streatment oftheCorn
in
Bounty Wealth); the reviewer recommended that Smith "reconcile the seemingcontra-
of
dictions and inaccuracies reasoning here pointed out, or to give up the argument
entirely"[18, 74]. Followingthis,Smithwas onlyonce referred to in articleson economics
overthenexttenyears- and thatone piece is the noticeof theAdditionsand Corrections
to thesecondeditionof Wealth!Rashid'sconclusionis unambiguous:"thetraditionalview
of the victoryof Smithianideas is unacceptableforthe periodendingin 1790. Sir James
Steuartwas notignored,and thecomplexof ideas he represented remainedofconsiderable
importance"[18, 78]. Wealthbegan to sellon a steadybasis aftera shakystart,butwas not
cited in Parliamentuntil 1783- seven yearsafteritsfirstpublication(17, 87]. Generally,
thiscan be regardedas an extremelymediocreperformance fora worksupposedlyriding
"the Zeitgeistof theage."
Even thiscursoryexaminationofthePrinciplesand Wealthincontemporary historical
context reveals that an objectiveobserverat the time mighthave hesitatedto predict
Smith's(long-run)triumphand Steuart's(long-run)obscurity.Each man would have had

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 SIR JAMES STEUART 467

reasonto regardtheotheras a seriousthreatin competitionto influencepolicymakersand

the reading public. Assumingthat this was Smith's perception,it would have been a
rationalstrategyforhim to use the vehicleof Wealthto critiquethe vision of economic
orderpresentedin the Principles.This is notto suggestthat Wealthwas solelydesignedas
a broadsideaimed at Steuart,but merelythatconfutingthelattercaused Smithto writea
book than mightotherwisehave been thecase.
different

VII. Conclusion

On one importantpointwe fullyagree withrecentscholarshipon Sir JamesSteuart: The

Principlesof Political Oeconomy deservesto be rescued fromoblivion and closely re-
examined. But we also believethatany attemptto rehabilitateSteuart'seconomicanalysis
and policyprescriptions is fraughtwithdifficulties.Our intentionhere,however,has not
been to offera detailedcritiqueof the Principlesand Steuart'splan of politicaleconomy,
but ratherto suggestthat Adam Smith performedthis task in The Wealthof Nations.
We do not claim that Smith's magnumopus was solelya critiqueof the Principlesor
"Steuartism."Instead,we would arguethatSmith'sconcernwithconfutingthe"fallacious
principles"of Steuartsignificantly influencedthe formand structureof Smith'swork. In
Wealth Smith was not merelysystematicallyrestatinga body of doctrinewhich was
universallyaccepted, but joining a contemporarydebate. Only withthe wisdomborn of
hindsightcan the claim be made that the outcome of Smith'sstupendousvictorywas a
foregoneconclusion. In short,Smith took Steuartseriously;in the latter'sabsence, the
emphasisin Wealthmighthave been significantly different.

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