Plague of Inequality CHAPTER FIVE Adam Smith “A COMBINATION OF THE RICH TO OPPRESS THE POOR”

Williams makes clear that Adam Smith, John Stuart Mill and Karl Marx were all economists, as in political economists. Smith was actually a moral philosopher turned political economist, a fact overlooked way too often by modern economics using SIT in Microeconomics, a theory and framework devoid of Ethical considerations.  Yet, importantly, in the hands of said thinkers “... economics became (ever more) a science. But these intellectuals still share much in common with their predecessors --- something that distinguishes them from many contemporary economists today. They are moral and political philosophers. Economics in their hands was not a ‘pure science’ to be fenced off from moral and political philosophy—it was, rather, one branch of it (p. 171).” 

Unfortunately, as made clear in Lynne (2025), building on the 7-books by Deirdre McCloskey relating to what led to the Great Enrichment --- most if not all ordinary and not so ordinary people became more wealthy ---  after about 1780: One needs serious and systematic inquiry using an integration of science & humanities, not just science, to make sense of economics and what drives both Great Enrichment and extreme inequality. Economics needs to be about the Human with their ethic left in, as McClosky says it.  Economics is not only to be about the Incentive.

So,  modern economics needs better science, too, in order to move away from the cargo-cult (make believe) science it has become since Adam Smith (again, see Lynne 2025), a make believe about Incentive only.  Smith would not be happy that the focus has shifted strictly to ego-based self-interest riding on Incentive-only --- the max U Econ --- the arrogance of self-love as in amoure-propre about which Rousseau was also concerned.  Said somewhat differently, the focus has shifted toward attention only to the Incentive without regard for the Ethic that is essential to tempering it (again, see Lynne 2025). Smith was about Incentive & Ethic not just Incentive.

Extreme Inequality Assures the Economy and Society Will Not Be Flourishing and Will Be Unhappy

Because Adam Smith was concerned about the Ethic and not just the Incentive, Smith was also concerned about extreme inequality, as in “No society can surely be flourishing and happy … of which the far greater part of the members are poor and miserable (p. 172).”  And while The Wealth of Nations frame of reference was about building wealth for everyone, Smith was also concerned about the rich taking too much, leading to the moral corruption of the rich. 

So, there was a need to avoid the extremes, to dampen the “… tendency to accumulate undue social and political power … (which led to) excessive and corruptive influence on the morals of poor people, and perhaps most of all, the corrosive effects of inequality on the ability of citizens to experience mutual sympathy across a broad class divide (p. 172).” Resentment and envy of the extreme wealth and power would bring down the economy & society. The Moral Sentiments (the Ethic) had to temper the pursuit of The Wealth of the Nation (the Incentive).

Growing the Economy Can Help

Smith believed the Market economy could unbridle the poor, in effect eliminating poverty.   Smith economy was mainly about alleviating absolute poverty.  Yet, extreme inequality was in play:  “Thomas Piketty reports that in 1780, the top 10 percent of wealthiest British citizens possessed 90 percent of total private property; the top 1 percent possessed slightly more than 60 percent. The bottom 50 percent possessed less than 5 percent (pp. 175-176).”  The wealthy were clearly not paying enough downstream, ensuring extreme rather than optimal inequality.

Resentment is Assured Unless Extreme Inequality is Addressed

And, it led to resentment, with predictable violence as the poor had essentially nothing to lose:  “Wealthy clothing industrialists complained to Parliament in 1718 and 1724 that workers ‘threatened to pull down their houses and burn their work unless they would agree with their terms’ … Labor disputes throughout early industrial Britain in 1726–1727 resulted in weavers ‘breaking into the houses (of masters and blacklegs), spoiling of wool, and cutting and destroying the pieces in the looms and the utensils of trade’ (pp. 176-177).” 

As DIT makes clear, the problem was operating on path 0G rather than on an ethical, reasoned path 0Z. The Incentive only system inherently leads to extreme inequality unless tempered by the Ethic of shared interest in adequate incentive while avoiding resentment.

Mutual Sympathy Driven by Mutual Actions in Empathy-With the Other is Essential

Smith recognized the way to fix the problem was with “mutual sympathy.” The self-interest had to be tempered, as in the shared other-interest between employee and employer led to a kind of concordance about what was reasonable. And, while Smith understood self-interest as primal, it was also understood it could and had to be tempered by the shared other-interest in harmony, concord, as made possible with mutual sympathy. 

The Theory of Moral Sentiments book was actually written before The Wealth of Nations book, and, in that sense, also gave context to the pursuit of Wealth.  The latter had to be tempered by the Sentiments, the empathy-based move to mutual sympathy.

Smith Anticipated Findings in Modern Behavioral and Neuroscience

Modern SIT in Microeconomics mistakenly assumes “... that selfishness is the sole principle of (Adam Smith’s) moral psychology—a sentiment best represented by George Stigler, who once asserted, ‘The Wealth of Nations is a stupendous palace erected upon the granite of self-interest’ (p. 178).”  Well, Adam Smith wanted that granite tempered with the Moral Sentiments, tempered by the shared other-interest as represented in DIT. Such tempering was essential in order to achieve the true wealth of the Nation. Smith intuitively understood the dual nature of Human nature, as in ego & empathy at play in evolution.

Mutual sympathy was key.  In DIT, said mutual sympathy is represented in the empathy-based other (shared with the other, yet internalized within the own) interest.  It arises on some path 0Z. It simply says we are all in the situation together, seeing the shared payoff in paying attention to the content of path 0M. The difficulty is in seeing and building a shared other-interest beyond the family, beyond the few people a person may interact with on a daily basis, including the social class with which one identifies.  The problem is in building the shared other-interest with everyone in the Market, and, writ large, crossing social class lines, moving to building the shared other-interest in the Nation and beyond.  Not doing so could lead to extreme inequality, and disharmony in the system.

Tempering the Arrogance of Self-interest Also Benefited the Wealthy

Not tempering the self-interest in ever more wealth could lead to excessive, destructive pride and vanity. The wealth attract attention and admiration, which could become a problem rather than being good for the economy & society. An inflated sense of superiority could emerge, as in the presumption the wealth is somehow deserved. The awarding of “… public esteem—derived, he insists, not from his justice, wisdom, or virtue but merely from the possession of wealth itself—” was problematic not only for the wealthy but also for the poor holding the wealth in esteem.  To Smith, “… the public naturally defaults ‘to admire, and almost to worship, the rich and powerful, and to despise, or, at least to neglect persons of poor and mean condition’ (p. 180).” 

Achieving the true wealth of the Nation --- which included justice, wisdom and virtue --- becomes impossible. The moral sentiments would become corrupted, as “… the wealthy and the proud are consumed by their own ‘natural selfishness and rapacity’  (and the) poor suffer the effects of  shame (p. 181).”  The poor get framed by the rich, and can come to believe in the frame of being without talent and lazy.  The mutual sentiment is corrupted.

Innovism Threatened by Workers Not Having the Time and Energy to Innovate

Smith was also concerned about how factory work in the emerging industrial age in the 1700s would dumb down the population, also taking away time and effort to innovate.   As McCloskey (again see Lynne 2025) makes clear, Innovism by ordinary people is what brought true wealth after about 1780.  Progress after 1780 also depended upon mutual sympathy across all classes, which had never been the case for centuries before that time. 

Sympathy had been a one way street, from poor toward the upper echelons of wealth, and never in the other direction. Smith understood the need to change that pattern, as in empathy-sympathy based shared sentiment going in every direction, including up and own the income and wealth ladder. As Smith had observed, “The poor receive no such sympathy from the wealthy. Rather, they are subjected to indifference or worse (p. 184),” and, it had to change to produce true wealth. Extreme inequality exacerbated the problem of not building and working with mutual sympathy: “Often physically removed from other classes, the rich struggle to feel much of anything for the poor (p. 185).”

Factions could also then evolve from extreme inequality, in broad brush, the faction of the rich vs the faction of the poor.  Mutual sympathy would become impossible as the factions turned ever more disconnected, the shared interest going toward zero. It destroys the moral code:  “The wealthy are subjected to the ‘loose’ or ‘liberal’ moral code, which tolerates a vast array of behaviors often casually considered dissolute—the ‘the vices which are apt to arise from great prosperity”…  Transgressions of this moral code are largely dismissed with good humor and should not obstruct the transgressors’ future success and happiness.

The poor, by contrast, are subjected to an ‘austere’ moral code in which the slightest violations are sanctioned with enduring ‘ruinous’ consequences (pp. 187-188).” The rich in effect feel deserving to violate the rule of law while the poor are held in accord with it.  Sounds like 2025 in Trump-America.

Adam Smith Solutions

Growing the economy with the hope that everyone will benefit is the main solution Smith offered.  But, it would not happen with just arrogant self-interest on some path 0G.  The synergistic growth that Smith saw --- growth that would benefit both rich and poor --- was as a real possibility only on some path 0Z. Notice how the Figure 2 possibility frontiers are depicted as moving out rapidly if one stays on the path 0Z. 

Good balance in Incentive & Ethic would not only assure a growing economic pie, but would also assure true Wealth would be produced. Good balance in Incentive & Ethic means everyone would benefit from it.

It Was Not Only About Prudence

It is essential to understand that Adam Smith was not only about the prudence underlying self-interest associated with producing and consuming money-valued goods.  The other virtues represented in the shared other-interest (temperance, justice, courage, faith, hope, and love), the moral sentiments as Adam Smith characterize same, also mattered.  So, people producing non-money valued goods (e.g., school teachers, health care givers, and, yes, professors of moral philosophy teaching about the virtues) also counted. True wealth was about far more than extreme greed (as in amour-propre, arrogant self-love). The excesses of extreme greed had to be tempered, as made clear in DIT, and Adam Smith would agree.

Some Specific Solutions: Smith Did Provide a Few

So, what were some specific solutions?  Smith was not real specific, but the Econ did have to go to the Station of the Impartial Spectator and reflect, which in the frame of John Rawls, would be behind the Veil of Ignorance.  It was hoped the reflection would temper the  arrogance of self-love, the arrogance of self-interest only,  and bring it down to something the other could go along with.  Said somewhat differently, it was essential for the Econ to emerge from the act of mindful empathy-with the other at that Station to bring the primal arrogance of the Econ down to something the other could go along with, to become Human. Also,  it was about mutual sympathy --- everyone was to visit the station of the impartial spectator --- which was essential for mutual gain in the Market.  And, sometimes Government was also needed to ensure it happened, when failures in self-command, failures in self-discipline of the rich and powerful as well as the poor failed to temper the excesses. Also, the Rule of Law would be essential to temper the Rule of Men.

Most Importantly: Visit the Station of the Impartial Spectator

Such visits to the station with mindful attention while using the frame of empathy-with the other would were essential to ensure modern innovations like “… (the) aged (being) supported (everyone, poor through rich having) access to cleaner water, better health care, superior nutrition, larger libraries, and (ever) more remarkable technologies (p. 189).” Such activity at the station was essential in order to offset the rich turning to extreme inequality driven “ … (unjustified) pride, vanity, shame, injustice, class tensions, inadequate sympathy for the poor, and the lust for domination (p. 190,” so, it was not just about eliminating poverty. It was also about finding some semblance of an optimal inequality.

It was About Bringing the Empathy-With Conscience into Play

Bringing the conscience into play at the station also meant that some “… private interest (of the rich would have to be) sacrificed to the public interest of his own particular order or society (p. 190).”  DIT clarifies that some private interest on path 0G must be sacrificed to achieve the shared public interest on path 0Z, the path of joint, nonseparable, absolutely interdependent private & public interest. On path 0Z, one has curbed the “… tendencies toward selfishness, pride, and domination … (in which case)  one could … have it all—both the alluring wealth of market society and the social harmony of the virtuous (pp. 190-191).”  It just took the Ethic to temper the Incentive, and both wealth & harmony could be achieved.

Smith as Pragmatic:  Some Had Little Time to Reflect, and Others Would Not Choose to Do So

Smith also was quite pragmatic, realistic in pointing to the problem of the people at the lower rungs on the income and wealth ladder not having enough time, health and wealth to put in the effort to develop the virtues beyond just surviving, which pointed only to prudence.  And, the problem at the other end was that the rich and wealthy would be prone to vanity, and often idle pursuits, also not working at the building of virtue. 

Also, the poor often admired the mere wealth of the people at the top, so that class of people thrived on self-interest and public adulation. The latter was often misplaced because the rich and wealthy were not being rewarded for virtue, the kind of virtue essential to true wealth.  It all led to people becoming stupid and ignorant, as the other virtues were necessary to offset said tendencies. Overall, the Incentive to pursue the other virtues were weak over the spectrum of wealth and class.

Education Would Be Key, Including Moral Education

Smith did suggest some solutions, especially highlighting the need for education at all levels.  We might suppose Smith would have specifically called for education on the matter of ethics and the moral dimension of same. It was about bringing enlightenment to everyone, helped by a joint education in science & humanities (especially ethics).

Justice and the Rule of Law --- not the Rule of (Rich) Men --- Must Play

Smith also saw the key role of justice brought into play through the rule of law, not the rule of men. It was essential for commercial societies to “…  employ government, laws, and rules since without them, selfishness and domination are free to wreak havoc (p. 193).”

Williams (p. 193) quotes Smith:  “Justice … is the main pillar that upholds the whole edifice. If it is removed, the great, the immense fabric of human society, that fabric which to raise and support seems in this world, if I may say so … must in a moment crumble into atoms (from the Theory of Moral Sentiments).”  

The rule of law had to apply to everyone, without special favors for the rich and powerful who could also manipulate the law to serve the arrogant self-interest preferred by same. Government was essential to assure the rich did not change the law to favor same.  Williams (p. 194) again quotes Smith:  “Civil government, so far as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor, or of those who have some property against those who have none at all (from The Wealth of Nations).”   Smith was concerned, and rightfully so (no pun intended), that the rich would use the law “ … to preserve partiality, inequality, and injustice … reflecting the ‘natural rapacity of the rich’ (pp. 194-195).” 

Divine Justice Might Help, But Could Be Abused

And, while not an overly if at all religious person, Smith also pointed to how fear of “divine justice” might also play a role in tempering the excesses.  That kind of justice was also pointed to be by Socrates and Plato, Hobbes, and, absolutely by Jesus, brother James, and Paul. And, the downside was:  The faithless rich could exploit the faithful poor, claiming a kind of divine right in wealth and power.  The faithful poor could also be promised milk and honey in heaven, while the rich lived in heaven on earth.

Being realistic about how the rich and powerful could manipulate the law, Smith also favored more progressive taxes, such as in taxing expensive properties at heavier rates than the properties of lower income people. And, while some claim Smith wanted limited Government, Smith clearly saw a need for that limited Government to address extreme inequality.

Conclusions

Williams closes out by  pointing to “ Smith’s decision to prioritize economic growth … Stimulating the economy would create greater social wealth, the benefits of which would redound to the whole community, not just the rich. Everyone would benefit from scientific, technological, and material advances (p. 200).”  The focus by Smith was on growing the economic pie and less on how it came to be shared among all people, but, Smith was also not oblivious to the problem of extreme inequality.  The point to progressive taxes, and the key role of the Government built on a rule of law that applied to everyone are cases in point.

Williams quotes economist Deirdre McCloskey on the same point, referred to by McCloskey as  ‘the Great Enrichment’ (again, for the Review, see Lynne 2025) which really gets huge momentum after about 1780 --- ‘Poor people in the United States and other developed countries live better than 18th-century European monarchs. Today, supermarkets and other stores are stocked with an ever-growing variety of goods, lifespans have been extended by decades, and (in the past 40 years alone) billions of people have been lifted from poverty. These are just some of the amazing achievements that have come about as the result of the Great Enrichment, a flowering of opportunity and economic growth unparalleled in human history’ (p. 200).” Well, yes, but McCloskey also does not give enough attention to the downside of the extreme inequality that has also tended to be the reality in the  Great Enrichment (see Lynne 2025).

Williams also points to “… thinkers like Steven Pinker, who has argued that even though inequality may be growing, this development is trivial in comparison to the gains made by unleashing the forces of capitalism and liberalism (p. 200) …  So, inequality no longer a problem?  Perhaps. … Both McCloskey and Pinker appear convinced that these gains can be sustained indefinitely by following the same policy of ignoring inequality and promoting economic growth through free markets (p. 200).”   Not, as DIT makes clear. 

Optimal inequality is essential for economic growth and efficiency on some better path 0Z.

Williams goes on:  “… unlike Smith, who emphasized the real moral, social, and political difficulties associated with inequality, McCloskey and Pinker instead dismiss inequality altogether (p. 201). So, to McCloskey and Pinker (and mainstream SIT in Microeconomics in general) inequality --- and poverty --- is a kind of blessing, as it is the supposed only driver of innovism.  Again, not. Williams continues: “Whereas, even though Smith prioritizes economic growth and poverty relief, no one can accuse him of embracing inequality as a blessing. It is, at best, a mixed blessing—a trade he makes with full awareness of its limitations and inconveniences (p. 201).”  It is not a blessing to operate on the excessive greed path 0G.

Looking forward to the final two authors, chapters in the Williams book:  “For Mill and Marx, Smith’s markets had already achieved all the good they possibly could. It was now time to exchange the benefits of growth for those of greater equality (p. 201).”   DIT would say: Seek optimal inequality, which is about adequate incentive while not building resentment.  It is about what reasoned people can go along with.