Adam Smith: Egalitarian or Anti-egalitarian?
His Responses to Hume’s and Rousseau’s Critiques of Inequality
Satoshi Niimura
Abstract:
Purpose - There has been controversy about whether Adam Smith is an economic egalitarian because he
expresses at least four distinct views on equality, in two of which, he approves inequality, and in the other
two, he claims otherwise. The purpose of this paper is to isolate and consider these four views carefully to
understand Smith’s complete position on equality.
Design/methodology/approach - The article examines Smith’s apparently contradictory views on equality
as his evolving response to Hume’s and Rousseau’s critiques of inequality.
Findings - Hume and Rousseau criticize any income inequality that is disproportionate to industry between
the rich and poor. Smith’s response to their critiques evolves over time. In his first response in early
writings, he defends inequality in a civilized society by comparing it with a poor primitive society.
However, in his second response in The Wealth of Nations, he eventually accepts Hume’s and Rousseau’s
critiques of inequality. According to Smith, an equal and opulent society will evolve. A primitive society is
equal but poor. In contrast, an existing civilized society is opulent but unequal. In each society, equality
and opulence are incompatible. However, Smith believes that a future civilized society will fully achieve
both equality and opulence.
Originality/value - The article analyses both historically and theoretically the comprehensive structure of
Smith’s egalitarian views.
Keywords: egalitarian, equality, distributive justice, Adam Smith, David Hume, Jean-Jacques Rousseau
1. Introduction
Is Adam Smith an egalitarian? Does he favour equality? These questions are not easily answered for two
reasons. First, in general, ‘egalitarian’ and ‘equality’ have diverse meanings. There are various aspects to
human beings, and each person attaches different values to different aspects. Most people claim that
equality ought to apply to the aspect to which he or she attaches the most value. Consequently, the essential
question concerning equality is ‘equality of what?’.[1]
Many commentators agree that Smith is a moral egalitarian who prioritises moral impartiality and
the equality of human dignity (Darwall, 1999; Griswold, 1999; Rothschild, 2001; Fleishacker, 2004a,
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2004b, 2013; Debes, 2012). Smith is also an egalitarian of natural talents (Peart and Levy, 2005; 2008). [2]
Smith is no doubt a legal egalitarian who supports equality under the law and equality of civil rights and is
also a gender egalitarian who criticizes gender inequality in laws and politics.[3]
Yet, Smith has apparently self-contradictory views on economic equality. Commentators disagree
significantly about whether Smith is an economic egalitarian, that is, whether Smith supports equality of
income distribution. It is difficult to be certain because Smith expresses at least four distinct views on the
subject, in two of which, he approves of economic inequality, and in the other two, he does not.
Commentators’ conclusions regarding this issue reflect which of Smith’s views they prioritise. We must
isolate and consider these four views carefully to understand Smith’s complete position.
First, Smith endorses the ‘usefull [sic] inequality in the fortunes’ (LJA, vi.19, p.338) between
industrious and idle labourers because it incentivises diligence. Thus, he regards piecework as more
desirable than fixed wages. Smith does not agree with equality of outcome in the sense that all labourers
should receive an equal wage regardless of the degree of diligence.
Second, Smith prefers an unequal and opulent civilized society to an equal and poor primitive
society. He acknowledges that incomes are distributed neither fairly nor equally in a civilized society,
where rewards are inversely proportional to labour. Even so, those occupying a civilized society’s lowest
level are much better off than those at the top of a primitive society. This prosperity or opulence of a
civilized society is caused by increased labour productivity through division of labour. This second view
has been the most important reason for the anti-egalitarian interpretations of Smith (Hont and Ignatieff,
1983; Muller, 2006; Aspromourgos, 2010). However, commentators who regard Smith as an egalitarian
have not refuted the anti-egalitarian interpretations with sufficient conviction. To interpret Smith as a
coherent egalitarian, we must consider the relationship between his egalitarian position and acceptance of
economic inequality in a civilized society.
Third, Smith believes that wage rates will rise and rates of profit and interest will fall through the
accumulation of capital, thus reducing economic inequality between labourers and the owners of capital.
Furthermore, he expects that, following thereform of succession laws, the amount of land owned by each
landowner will decrease over time, thus reducing economic inequality between landowners and people of
the lower classes.
Fourth, Smith advocates egalitarian policies for income redistribution through taxation and public
expenses (Pack, 1991; Fleishacker, 2004a, 2004b; McLean, 2006). Smith insists that the government
should impose a direct tax on rent alone, and not on profit or wages, and it should impose an excise tax
only on luxuries and not on the necessaries of life.
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When we put these four views in the historical context of social, economic, and political thought,
we will find that they are Smith’s responses to the claims of various philosophers of his era, especially John
Locke, David Hume, and Jean-Jacques Rousseau. I argue that Smith defends two contradictory views of
equality in his writings. He accepts inequality in his early writings, such as The Theory of Moral Sentiments,
Lectures on Jurisprudence and the‘Early Draft’ of Part of The Wealth of Nations, while supporting equality
in The Wealth of Nations (hereafter referred to as Moral Sentiments, Lectures, ‘Early Draft’ and Wealth of
Nations, respectively). I show that these views are, in effect, Smith’s different responses to Hume and
Rousseau’s respective critiques of inequality.
This article proceeds as follows. In Section 2, I consider the justification of income inequality
defended by Locke, Hume, and Smith. Section 3 reviews Hume and Rousseau’s respective critiques of
inequality. Section 4 examines Smith’s first response to them, expressed in Lectures and ‘Early Draft’,
wherein he justifies income inequality. In Section 5, I consider Smith’s second response to Hume and
Rousseau’s critiques of inequality, contained in Wealth of Nations, where Smith supports increasing
equality in a more developed civilized society. Section 6 argues that Smith proposes policies for income
redistribution through taxation and public expenses. Section 7 concludes that Smith is a moderate and
thoughtful egalitarian who believes in the gradual attainment of an equal and opulent society.
2. Locke’s Justification of Inequality in Labour Incomes
One of the main subjects of modern thought on natural laws is the justification of property. In his so-called
labour theory of property, Locke insists that labour produces the product and property right; ‘different
degrees of Industry were apt to give Men Possessions in different Proportions’ (Locke, 1988, p. 301). This
view implies that the inequality of property can be justified because different degrees of industry cause it.
Thus, Locke founds the work principle in distributive justice, namely, distribution proportionate to work,
labour, or industry. This principle has been adopted by Hume, Rousseau, Smith, and many other thinkers
up to the present day.[4]
Hume has two different and apparently opposite views on equality. Hume’s first view appears in
An Enquiry Concerning the Principles of Morals (hereafter referred to as Enquiry), wherein he insists that
equality harms economic development. Hume’s second view appears in Essays on Political Discourses
(hereafter referred to as Essays), wherein he argues that equality is ‘suitable to human nature’ and useful to
the society and state. We consider the first view in this section and the second in the next.
In Enquiry, Hume declares that ‘the levellers, who claimed an equal distribution of property, were a kind of
political fanatics’ (Hume, 1985a, p.194). Hume argues that ‘ideas of perfect equality’ are ‘really …
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impracticable’ because ‘men’s different degrees of art, care, and industry will immediately break that
equality’ (Ibid. p.194). Hume’s assertion that different degrees of industry inevitably cause inequality of
property follows Locke’s justification of inequality, that is, the work principle.[5] Furthermore, Hume
contends that inequality is ‘extremely pernicious to the human society’ because ‘if you check these virtues
[art, care and industry], you reduce society to the most extreme indigence; and instead of preventing want
and beggary in a few, render it unavoidable to the whole community’ (Ibid. p.194). Thus, a forced equal
distribution would discourage industry, spread idleness, and cause general poverty.
Adam Smith follows Locke’s and Hume’s justification of inequality (the work principle) in
Lectures:
They [law and government] maintain the rich in the possession of their weath [wealth] against the
violence and rapacity of the poor, and by that means preserve that usefull [sic] inequality in the
fortunes of mankind which naturally and necessarily arises from the various degrees of capacity,
industry, and diligence in the different individuals. (LJA, vi.19, p.338)
Smith also accepts the work principle and proportional rewards in Wealth of Nations:
Nothing can be more absurd, however, than to imagine that men in general should work less when they
work for themselves than when they work for other people. A poor independent workman will
generally be more industrious than even a journeyman who works by the piece. The one enjoys the
whole produce of his own industry; the other shares it with his master … The superiority of the
independent workman over those servants who are hired by the month or by the year, and whose wages
and maintenance are the same whether they do much or do little, is likely to be still greater. (WN,
I.viii.48, p.101)[6].
3. Hume’s and Rousseau’s Critiques of Inequality
Hume adopts quite different positions on the inequality of property in Enquiry and Essays, even though he
wrote them at about the same time.[7] He criticizes ‘extreme inequality’ of property in Essays, thus:
A too great disproportion among the citizens weakens any state. Every person, if possible, ought to
enjoy the products of his labour, in a full possession of all the necessaries, and many of the
conveniences of life. No one can doubt, but such equality is most suitable to human nature, and
diminishes much less from the happiness of the rich than it adds to that of the poor. (Hume, 1985b,
p.265)
Thus, Hume criticizes ‘a too great disproportion’ and claims ‘equality’ of income distribution. What does
he mean by ‘equality’ here? He says that a labourer ‘ought to enjoy the products of his labour’, and shortly
after the passage quoted above, he argues that workers who ‘work for low wages’ will ‘retain but a small
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part of the fruits of their labour’ (Hume, 1985b, p.266). Consequently, he equates ‘equality’ with high
wages that enable labourers to get a higher share of the products of their labour, producing a more equal
income distribution. Moreover, when Hume says that ‘such equality … diminishes much less from the
happiness of the rich than it adds to that of the poor’, ‘equality’ refers to the relationship between ‘the rich’
and ‘the poor’. Hume thinks that raising wages will cause a kind of income transfer from rich employers to
poor labourers, diminishing ‘much less from’ the happiness of the former than increasing that of the latter.
Thus, a more equal distribution of wealth will produce greater happiness for society as a whole.[8]
Hume’s critique of equality in Enquiry and his claim of equality in Essays appear mutually
contradictory at first sight. However, on closer examination, they do seem compatible. Hume uses
significantly different conceptions of ‘equality’ and ‘inequality’ in the two books. The type of equality
described in Enquiry concerns the relationship between the industrious and idle in the same class, namely
labourers. In contrast, the other type of equality in Essays concerns the relationship between ‘the rich’ and
‘the poor’, namely between non-labourers and labourers—different classes. The ‘complete equality’
criticized in Enquiry is the former. In contrast, the ‘extreme inequality’ criticized in Essays is the latter.
Therefore, his two views of equality expressed in Enquiry and Essays do not contradict each other. Rather,
both rely on the same work principle, namely distribution proportionate to labour; both ‘complete equality’
and ‘extreme inequality’ prevent people from enjoying wealth proportionate to their labour. Under
‘complete equality’, everyone can enjoy an equal amount of products; idle labourers can enjoy as much
wealth as industrious labourers. Similarly, under ‘extreme inequity’, the rich (landowners or masters), who
usually perform no or little labour, can enjoy more wealth than industrious labourers. Hence, under either
‘complete equality’ between idle and industrious labourers, or ‘extreme inequity’ between non-labourers
and labourers, income distribution is disproportionate to labour. Hume believes that wealth should be
distributed among people proportionately to their labour; therefore, he criticizes both ‘complete equality’
and ‘extreme inequality’. The work principle is the key concept in Hume’s view of equality, based on
which he justifies both proportional wages in Enquiry and high labour share in Essays.
It is important to note that when Hume refers to ‘a full possession of all the necessaries, and many
of the conveniences of life’ in the quotation above, he eventually relies on the needs principle in
distributive justice; namely distribution proportionate to needs. Hence, Hume combines both the work and
needs principles, as he believes that high labour share enables labourers to fulfil basic needs.[9]
Following Locke and Hume in Enquiry, Rousseau admits that income inequality results from
inequalities of labour and ability in the early state of society. In A Discourse on Inequality, he notes:
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This origin [labour] is all the more natural, in that it is impossible to conceive of the idea of property
arising from anything other than manual labour … It is his labour alone which, in giving the
cultivator the right to the product of the land he has tilled, gives him in consequence the right to the
land itself … Things in this state might have remained equal if talents had been equal … but … the
stronger did more productive work, the more adroit did better work, the more ingenious devised
ways of abridging his labour; …the one earned plenty while the other had hardly enough to live on.
(Rousseau, 1985, p.118)
Moreover, following Hume’s Essays, Rousseau criticizes income inequality in a civilized society: ‘when
estates became so multiplied in number and extent as to cover the whole of the land ... no estate could be
enlarged except at the expense of its neighbour’ (Rousseau, 1985, p.118). Consequently, the strong, who
acquire their estates, become rich while the weak, who do not, become poor. This new type of inequality
between the strong (landowners) and weak (non-landowners) increase with growing civilization.
Thus, Rousseau, like Hume, distinguishes between the two types of inequality. The first inequality,
between the industrious and idle, exists in the early state of society. The second, between the strong
(landowners) and weak (non-landowners), exists in a civilized society. Rousseau, like Hume, endorses the
first and rejects the second.
It is well known that Smith was deeply influenced by both Hume and Rousseau (Rasmussen, 2008).
When he read Hume’s two books, he must have noticed Hume’s apparently contradictory views of
inequality. In addition, when Smith wrote ‘A Letter to the Authors of Edinburgh Review’ (Smith, 1980), he
paid a great deal of attention to Rousseau’s A Discourse on Inequality and quoted many long passages.
Nevertheless, he made no detailed comment. It seems to have taken considerable time for Smith to respond
to Hume and Rousseau with sufficient conviction. I examine his two responses, negative and positive, in
the following two sections.
4. Smith’s First Response: Trade-off between Equality and Opulence
Adam Smith, like Hume and Rousseau, recognizes that the extreme income inequality between labourers
and non-labourers in a civilized society does not result from different degrees of industry. In Lectures and
‘Early Draft’, Smith describes the inequality of income distribution in a civilized society in the following
ways.
The labour and time of the poor is in civilized countries sacrificed to the maintaining the rich in ease
and luxury. The landlord is maintained in idleness and luxury by the labour of his tenents [sic], who
cultivate the land for him as well as for themselves. The moneyd [sic] man is supported by his
exactions from the industrious merchant and the needy who are obliged to support him in ease by a
return for the use of his money. But every savage has the full enjoyment of the fruits of his own
labours; there are there no landlords, no usurers, no tax gatherers. (LJA, vi.26, p.340)
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In a civilized society … there is no equal division, for there are a good many who work none at all.
The division of opulence is not according to the work. (LJB, 213, pp.489-90).
But with regard to the produce of the labour of a great society, there is never any such thing as a fair
and equal division. In a society of an hundred thousand families, there will perhaps be one hundred
who do not labour at all, and who yet, either by violence or by the more orderly oppression of law,
employ a greater part of the labour of the society than any other ten thousand in it. The division of
what remains, too, after this enormous defalcation, is by no means made in proportion to the labour
of each individual. On the contrary, those who labour most get least. (ED, p.564)
In Smith’s view, income inequality should not exist between industrious and idle labourers but between
labourers and those who do not labour or who scarcely labour. Accordingly, his understanding of income
inequality in a civilized society is similar to that found in Hume’s Essays and to of Rousseau. However,
their evaluations of inequality differ widely. Hume and Rousseau criticize income inequality that is
disproportionate to labour, but Smith justifies it. How so? This question is fundamental to understanding
the nature of Smith’s political economy. To justify inequality in a civilized society, Smith compares it with
a primitive society. After describing inequality in a civilized society, he asks:
In the midst of so much oppressive inequality, in what manner shall we account for the superior
opulence and abundance commonly possessed even by this lowest and most despised member of
civilized society, compared with what the most respected and active savage can attain to. (ED,
p.564)
Smith claims that though a civilized society is more unequal than a primitive one, the poorest member of a
civilized society is more opulent than the richest in a primitive society. Consequently, measured by
opulence or prosperity, an unequal civilized society is better than a more equal primitive society, thus
justifying inequality in the former.[10]
Smith’s next question is how the poorest member of a civilized society can be more opulent than
the richest in a primitive society. He believes that the improvement of the productive power of labour,
caused by the division of labour, will bring about general opulence or prosperity. Even though civilization
engenders tremendous inequality in a society, it also develops the division of labour that improves its
productive power. Consequently, the poorest labourer in a civilized society can enjoy a more opulent life
than the richest in a primitive society. Both Rousseau and Smith contrast an equal primitive society with an
unequal civilized society. However, Rousseau supports the former for its equality, while Smith supports the
latter for its opulence. This argument is based on the needs principle. Hume combines the work and needs
principles to criticize a civilized society as he believes that a high labour share enables labourers to fulfil
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basic needs; in contrast, Smith separates two principles to defend a civilized society; he thinks that in spite
of a low labour share, labourers can fulfil basic needs.[11]
Moreover, it is essential to distinguish between the two
justifications of income inequality
presented by Hume and Smith. In Enquiry, Hume justifies income inequality because it encourages
industry and promotes economic development. This justification eventually assumes a classless society
wherein all people work, as in a primitive society or a society of independent workmen alone, or only a
working class. Within such a classless society or a working class, one can argue that income inequality
proportionate to industry encourages it and promotes economic development. Smith provides a similar
justification. However, he presents an additional, completely new justification for income inequality, which
assumes a class-based society comprising labourers and non-labourers. Smith insists that income inequality
which is inversely proportional to labour, promotes the division of labour, and hence, economic
development. As Hume’s justification of inequality in Enquiry cannot apply to a class-based society of
labourers and non-labourers, Smith establishes a new type of justification of income inequality for a
class-based society. In his theory, an improvement in labour’s productive power results partly from the
encouragement of industry but mainly from the development of the division of labour. Thus, Hume
emphasizes the subjective aspects of productive power, namely industry and ability, whereas Smith focuses
on its objective aspects, namely the division of labour and accumulation of capital.
In Enquiry, Hume’s argument assumes that a civilized society is composed only of labourers.
However, Smith considers a civilized society as a capitalist market society, comprising labourers, owners
of capital, and landowners, wherein the most important institutional basis is private ownership. Thus, Smith
appreciates that, although each owner of capital or landowner does not work, the private ownership of
capital and land, accompanied by property incomes (profit, interest, and rent), is an indispensable
institutional basis for the capitalist market economy; it enables the efficient allocation of resources and
encourages saving and investment, thus promoting capital accumulation and improving the productive
power of labour. Smith clearly acknowledges that the extreme inequality of incomes in a civilized society
results not from the difference in wages but from the gap between wages and property incomes such as rent
or profit. Landowners and masters have higher incomes than labourers, not because they work harder than
labourers but because they acquire property incomes that labourers cannot.
5. Smith’s Second Response: Compatibility of Equality and Opulence
How does Smith amend his early vision of a civilized society in Wealth of Nations? Most commentators
think that Smith refines his economic theory but essentially maintains his earlier vision of a civilized
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society, that is, an unequal but opulent society. In fact, in Wealth of Nations, Smith compares primitive and
civilized societies and demonstrates that the poorest member of the latter is more opulent than the richest
member of the former. Thus, he illustrates how general opulence requires the unequal ownership of capital
and land in a civilized society.
However, in a later significant development, Smith presents the theory of capital accumulation
under the influence of the Physiocrats in Wealth of Nations. He considers the social and economic
evolution of a civilized society as well as the historical trend of capital accumulation. Thus, he compares
the existing civilized society with a more developed one. In Lectures and ‘Early Draft’, Smith compares a
primitive society with an existing civilized society, whereas in Wealth of Nations, he compares existing and
future civilized societies. Thus, Smith extends his understanding of economic development from two stages
to three: primitive, existing, and future. When Smith describes the expected consequences of economic
development in a civilized society by comparing the present stage with the ideal future, he appears to
believe that income inequality increases during the evolution from a primitive society to the present, but
that it that decreases from the present to a future civilized society. Hence, the gap between wages and profit
or rent increases in past years and decreases in the future. Let us examine Smith’s view on the evolutionary
changes of wages, profit, and rent individually.
First, Smith thinks that both nominal and real wages increase with the accumulation of capital.
Nominal wages rise because the demand for labour increases more rapidly than does the working
population. Besides, real wages rise beyond nominal wages because the necessaries of life become cheaper.
Smith illustrates this theory by referring to the actual rise of nominal and real wages in England and North
America in the late-17th and 18th centuries (WN, I.viii. 22-23, 34-35, pp.87-88, 93-96). Second, Smith
predicts that profit and interest rates will continue to decline because of increasing competition and rising
wages, both resulting from the accumulation of capital.[12] Smith also expects the interest rate to decline
more rapidly than the increase in capital; consequently, the amount of interest owned by each owner of
capital will decrease. Thus, the number of people who can live on interest alone will decrease with a
declining rate of interest. When the interest rate is sufficiently high, the owners of capital can, by lending it
to others, live on the interest alone. However, when the interest rate declines, the owners of capital must
employ it themselves to earn profits by means other than lending. Smith believes that as the accumulation
of capital progresses, the following society will evolve.
In a country which had acquired its full complement of riches, where in every particular branch of
business there was the greatest quantity of stock that could be employed in it, as the ordinary rate of
clear profit would be very small, so that usual market rate of interest which could be afforded out of
it and would be so low as to render it impossible for any but the very wealthiest people to live upon
9
the interest of their money. All people of small or middling fortunes would be obliged to superintend
themselves the employment of their own stocks. It would be necessary that almost every man should
be a man of business, or engage in some sort of trade. The province of Holland seems to be
approaching near to this state. It is there unfashionable not to be a man of business. (WN, I.ix.20,
p.113)
As the interest rate falls, the number of idle men living on interest will decrease, and that of industrious
men of business, who employ their capital themselves, will increase.[13] Additionally, Smith not only
expects the interest rate to fall naturally in the long term, but he also recommends that the government fixes
the highest interest rate to lower the market interest rate artificially. He predicts that the law prohibiting
usury prevents ‘prodigals and projectors’ from borrowing money at a high rate and enables ‘sober people’,
who ‘were most likely to make a profitable and advantageous use of it’, to borrow it at a suitable low rate
(WN, II.iv.15, p.357).
Third, Smith believes that the rate of rent rises over time. If each landowner owns a fixed size of land, the
amount of rent will rise in proportion to the rate of rent. However, Smith claims that the laws of
primogeniture and entails should be abolished because ‘nothing can be more contrary to the real interest of
a numerous family, than a right which, in order to enrich one, beggars all the rest of the children’ (WN,
III.ii.4, 384). If those laws are abolished, the average size of land properties will decline with each
succession. Consequently, most large landowners will own smaller properties and receive less rent. Smith
notes, ‘in Pensylvania [sic] there is no right of primogeniture, and lands … are divided equally among all
children of the family. … Though … too great a quantity of land should sometimes engrossed by a
particular individual, it is likely, in the course of a generation or two, to be sufficiently divided again’ (WN,
IV.vii.b.19, p.572). Thus, abolishing the laws of primogeniture and entails will decrease inequality of
property between landowners and non-landowners. Smith expects a decreasing inequality in the amount of
income distributed to each member of a future society. Additionally, he expects great changes in the
industriousness of the three classes, namely, labourers, capital owners, and landowners, in the future
society. Let us examine the changes in these three classes.
First, the labour class will become more
industrious over time for two reasons: increasing wages, and the increasing ratio of productive labourers to
unproductive ones. According to Smith, the rapid accumulation of capital increases the demand for labour
and causes high wages, which, in turn, encourages the industry of labourers.
The liberal reward of labour … increases the industry of the common people. The wages of labour
are the encouragement of industry, which … improves in proportion to the encouragement it
receives. ... Where wages are high, accordingly, we shall always find the workmen more active,
diligent, and expeditious than where they are low. (WN, I.viii.44, p.99)
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Moreover, the increasing ratio of productive labourers to unproductive ones has a huge effect on
industriousness. Smith argues that capital increases more rapidly than revenue (rent and profit).
Consequently, productive labourers, who are usually employed by capital, increase more rapidly than
unproductive ones, who are typified as menial servants and are usually employed by revenue. Productive
labourers are generally more industrious than unproductive labourers. With the accumulation of capital, the
ratio of productive labourers to unproductive ones increases. Thus, labourers of a society become
increasingly industrious overall. Smith describes a historical trend of increasing industriousness of people.
We are more industrious than our forefathers; because in the present times the funds destined for the
maintenance of industry [productive labourers] are much greater in proportion to those which are
likely to be employed in the maintenance of idleness [unproductive labourers] than they were two or
three centuries ago. … The proportion between capital and revenue … seems every where to
regulate the proportion between industry and idleness. (WN, II.iii.12-13, pp.335-37; cf. II.iii.7,
p.333)
Second, the class of capital owners also become increasingly industrious. When the interest rate is
sufficiently high, owners of capital can live on interest without conducting business. However, when it
declines, owners of capital must themselves employ it productively to earn profits. With a declining rate of
interest, the number of idle people living on interest alone will decrease and that of industrious men of
business will increase. Third, Smith predicts that the landowner class will also become more industrious.
He distinguishes large landowners from small ones. As large landowners generally do not work, Smith
notes the following, particularly for large landowners:
They are the only one of the three orders whose revenue costs them neither labour nor care, but
comes to them, as it were, of its own accord, and independent of any plan or project of their own.
That indolence, which is the natural effect of the ease and security of their situation, renders them
too often, not only ignorant, but incapable of that application of mind which is necessary in order to
foresee and understand the consequences of any public regulation. (WN, I.xi.8, p.265)
Smith describes how small landowners differ greatly from larger ones:
A small proprietor, however, who knows every part of his little territory, who views it with all the
affection which property, especially small property, naturally inspires, and who upon that account
takes pleasure not only in cultivating but in adorning it, is generally of all improvers the most
industrious, the most intelligent, and the most successful. (WN, III.iv.19, p.423)
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Smith claims that should a society abolish the laws of primogeniture and entails, idle large landowners will
decrease and industrious small landowners will increase respectively. Overall, landowners will become
more industrious in the long term.
In Lectures and ‘Early Draft’, Smith compares industrious labourers with owners of land or capital
who work very little, if at all. Here, the distinction between the industrious and idle corresponds, overall, to
the distinction of classes. However, this correspondence does not exist in Wealth of Nations because each
class contains both the industrious and idle: namely, industrious productive labourers and idle unproductive
labourers, industrious men of business and idle men living on interest, and industrious small landowners
and idle large landowners.
Smith believes that after a society abolishes the laws of primogeniture and entails, and people
rapidly accumulate capital, industrious people such as productive labourers, men of business, and small
landowners will increase, whereas idle people such as unproductive labourers, men living on interest, and
large landowners will decrease. Consequently, most members of the future society will work industriously
and earn incomes in proportion to industriousness. The work principle in distributive justice will recover
substantially in the future civilized society. Simultaneously, the increasing division of labour and rise in the
productive power of labour will fully achieve general opulence or prosperity.
Thus, according to Smith, an equal and opulent society will evolve. A primitive society is equal
but poor. In contrast, an existing civilized society is opulent but unequal. In each society, equality and
opulence are incompatible. However, Smith believes that a future civilized society will fully achieve both
equality and opulence. It will be equal and equitable because incomes, including wages, profit, and rent, are
generally proportionate to industriousness. It will be opulent because the rise of the productive power of
labour produces general opulence. Thus, a future society, which is more civilized and economically
developed than that of Smith’s era, becomes equal and opulent, wherein both the work and needs principles
are realized; everybody works and earns income in proportion to industriousness and equally fulfils basic
needs.
In Smith’s first response to Hume’s and Rousseau’s critiques of inequality (in Lectures and ‘Early
Draft’), he rejects such critiques and defends inequality in an existing civilized society by comparing it
with a poor primitive society. In his second response (in Wealth of Nations), he accepts Hume’s and
Rousseau’s critiques of inequality, and convincingly supports gradually-attained equality in a more
developed future society.
6.
Income Redistribution through Taxation and Public Expenses
12
While Smith predicts that income equalisation will occur naturally in the long term, he proposes some
policies for income transfer or redistribution to reduce income inequality immediately. Those policies may
be regarded as part of Smith’s second response to Hume’s critique of inequality, wherein he proposes a
kind of income transfer from non-labourers to labourers, by raising wages.
Fleischacker highlights three methods of income redistribution in general and applies them to Smith’s
work: ‘Wealth can be redistributed either by a direct transfer of property from the rich to the poor, or by
taxing the rich at a higher rate than the poor, or by using tax revenues, gathered from rich and poor equally,
to provide public resources that will mostly benefit the poor’ (Fleischacker, 2004a, p.205). We examine
these three ways below. First, the Poor Laws facilitated the most important direct transfer of property in
Smith’s era. However, his attitude toward them is quite vague. He criticizes only the law of settlements as a
part of the Poor Laws in England because he argues it prevents free circulation of labour but says nothing
about the relief of the poor in itself through the Poor Laws (cf. WN, I.x.c.45-59, pp.152-57; Himmerfarb,
1984, p.69). Why so? Smith does not explicitly support the Poor Laws probably because he believes that
increases in wages and employment are more preferable remedies for low wages and unemployment than
are the Poor Laws. When unemployment and low wages exist in reality with no remedy except the Poor
Laws, the immediate abolition of these laws would cause the poor extreme distress. However, without
abolishing them, if wages continue to increase and employment expands sufficiently in consequence of
capital accumulation, the Poor Laws will become largely useless.
The second type of income transfer mentioned by Fleischacker is ‘taxing the rich at a higher rate
than the poor’. Let us consider Smith’s policy of taxation in Wealth of Nations. Smith asserts that the first
maxim of taxation is ‘equality’, and that the tax burden should be in proportion to ‘abilities’ to bear the tax,
‘revenue’, or ‘interests’ (WN, V.ii.b.3, p.825). However, these three factors do not always amount to the
same value. As described below, Smith often attaches greater importance to ‘abilities’ than to ‘revenue’ or
‘interests’. In general, distributive justice concerns not only benefits but also burdens, specifically taxes. In
either case, there is more than one measure, and equality or equity in taxation exists in equal ratios of the
amount of tax to a particular measure. Usually, ‘ability’ is a measure for progressive taxes, ‘revenue’, for
proportional ones, and ‘interest’, for tolls.
Most importantly, Smith argues that the government should impose a direct tax only upon rent and
not upon profit or wages among the three large revenue categories. He believes that rents ‘are a species of
revenue which the owner, in many cases, enjoys without any care or attention of his own’.Consequently,
although ‘a part of this revenue should be taken from him in order to defray the expences [sic] of the state,
no discouragement will thereby be given to any sort of industry’ (WN, V.ii.e.10, p.844). Similarly, Smith
13
suggests that the government should impose an excise tax only on luxuries and not on the necessaries of
life, because a tax on the necessaries of life, unless it raises the nominal wages and, consequently, the
prices of all commodities, ‘must necessarily diminish more or less the ability of the poor to bring up
numerous families, and consequently to supply the demand for useful labour’ (WN, V.ii.k.8, pp.872-73).
Who largely and finally bears these taxes? The tax on rent is paid by landowners; furthermore, even though
some of the consumption tax on luxuries is paid by the working class (cf. WN, V.ii.k.6, pp.871-72), it is
mainly paid by the rich, especially the landowner class, who spend a larger portion of revenue on luxuries
than do the poor. Hence, the tax on luxuries is a progressively heavier burden on the rich than is the tax in
proportion to revenue. Generally, any change in the share of products owned by each class
necessarily causes an income transfer or redistribution. Thus, a policy of increasing a tax on
rent and reducing one on wages necessarily causes income transfers from landowners to
labourers. Similarly, a policy of increasing a tax on luxuries and reducing one on the
necessaries of life causes income transfers from the rich to the poor.
Commentators considering Smith’s policies for income redistribution and progressive taxation are
likely to focus on expressly progressive burdens such as house-rent tax or road toll (examined below). They
underestimate the redistributive effects of taxes on rent and luxuries (Pack, 1991; Fleischacker, 2004a;
Mclean, 2006), probably because these taxes are not progressive burdens in themselves but rather are
proportional to the amounts of rent or prices of luxuries. However, when there is no tax on profit or wages,
the tax on rent is eventually a progressive tax on income. There is more than one effective tax rate, which
differs according to classes. Similarly, when there is no tax on the necessaries of life, the tax on luxuries is,
although proportional to the prices, eventually a progressive tax on income. There are different effective
tax rates between the rich and poor.
In regard to the house-rent tax, Smith asserts that the rich should pay an amount that is more than
proportional to their revenues. When Smith argues that road and bridge tolls should be generally
proportional to the benefits, he asserts that the rich, in order to ‘contribute … to the relief of the poor’,
should bear a higher burden of the road toll than is proportional to the carriage weight, which represents the
benefit or interest received from the road (WN, V.i.d.5, p.725). In these two cases, Smith attaches greater
importance to the ability to pay than he does to revenue or interest. Smith’s policy of taxation is not
intended to impose a tax in proportion to income on all people. Rather, it wishes to impose a tax that is
progressively greater than proportional to income on the rich, particularly on the landowner class.
Finally, the third type of income transfer mentioned by Fleischacker is ‘to provide public resources that
will mostly benefit the poor’. Smith’s proposal for public education belongs to this type. Smith notes the
14
adverse effects of the division of labour on a common labourer: ‘Of the great and extensive interests of his
country he is altogether incapable of judging, and … he is equally incapable of defending his country in
war. … His dexterity at his own particular trade seems … to be acquired at the expense of his intellectual,
social, and martial virtues’ (WN, V.i.f.50, p.782). To mitigate these effects, Smith advocates establishing
‘little schools’, such as parish schools in Scotland or charity schools in England, which will enable almost
all the people to acquire ‘the most essential parts of education … to read, write, and account’ (WN, V.i.f.54,
p.785). Smith describes who should set up and bear the expenses of this public education programme:
‘The public can facilitate this acquisition by establishing in every parish or district a little school, where
children may be taught for a reward so moderate that even a common labourer may afford it; the master
being partly, but not wholly paid by the public’ (WN, V.i.f.55, p.785). The public, in other words, the
taxpayers should bear the expenses of establishing little schools and a part, but not the whole, of the
teacher’s reward, so that even common labourers can pay the rest, and teachers remain motivated to teach.
Moreover, Smith suggests teaching children ‘the elementary parts of geometry and mechanics’ to
improve their mechanical ability: ‘There is scarce a common trade which does not afford some
opportunities of applying to it the principles of geometry and mechanics, and which would not therefore
gradually exercise and improve the common people in those principles’ (WN, V.i.f.55, p.785). Smith’s
proposed public education programme implies not only transferring income from taxpayers to poor
children and their parents, but also providing children with basic technical education to make them skilled
labourers who can earn high wages. Thus, by breaking the vicious circle of poverty and cheap unskilled
labour, the public education programme will raise wages and reduce income inequality.
7.
ConclusionNow, we can answer the question asked at the beginning of this paper: ‘Is Adam Smith an
egalitarian?’ He certainly is not a simple and naïve egalitarian who regards equality as unconditionally
inviolable. Instead, he approves of various forms of inequality. Like many contemporary thinkers, such as
Locke, Hume, and Rousseau, Smith approves of income inequality among labourers in proportion to
industry. Hume and Rousseau criticize income inequality when it is disproportionate to industry between
the rich and poor, or the strong and weak, that is, non-labours and labours. Smith’s response to their
critiques evolves over time. In his first response in Lectures and ‘Early Draft’, he defends inequality in a
civil society by comparing it to a poor primitive society. However, in his second response in Wealth of
Nations, he eventually accepts Hume’s and Rousseau’s critiques of inequality in a very refined manner.
According to Smith, a primitive society is equal but poor, and the existing civilized society is opulent but
unequal. In each society, equality and opulence are incompatible. Smith believes that a future civilized
15
society will fully achieve both equality and opulence. Smith expects such an ideal society to evolve
naturally in the long term with no government intervention, after the laws of mercantilism, primogeniture,
and entails are abolished. However, he does not wish merely to wait for the realization of an ideal future
society, but rather proposes a policy for income redistribution through taxation on rent and luxuries, to
reduce current inequality immediately and attain a more equal society. Thus, we may conclude that Adam
Smith is a moderate and thoughtful egalitarian who, while recognizing the harsh reality, believes in the
gradual attainment of an ideal equal and opulent society in the future.
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Notes
1. Plato notes that different concepts of equality depend on different values or worth: ‘offices and taxes and
grants may be arranged on the basis of what a man is worth. It’s not only his personal virtues or his
ancestor’s that should be considered, or his physical strength or good looks: what he’s made of his wealth
or poverty should also be taken into account. In short, the citizens must be esteemed and given office ... on
exactly equal terms of “proportional inequality”’ (Plato, 1970, p.168). This view has been accepted and
extended by many thinkers such as Aristotle, Karl Marx, and Amartya Sen. Sen says, ‘Equality is judged
by comparing some particular aspect of a person (such as income, or wealth, or happiness, or liberty, or
opportunities, or rights, or need-fulfilments) with the same aspect of another person’ (Sen, 1992, p.2).
‘What really distinguishes the different approaches is the variation in their respective answers to the
question “equality of what?”’(Ibid. p.130). See Aristotle (1980, pp.112-13; 1995, p.180; Sen, 1997, p. 77,
87-89; Fleishacker, 2013, p.485).
2. Smith follows Hobbes’s egalitarian view on natural talents. Hobbes criticizes the ‘Pride’ of philosophers:
‘I know that Aristotle … maketh [sic] men by Nature, some more worthy to Command, meaning the wiser
sort (such as he thought himselfe [sic] to be for his Philosophy;) others to Serve, (meaning those that had
strong bodies, but were not Philosophers as he;) ... which is not only against reason; but also against
experience. ... every man acknowledges other for his Equall [sic] by Nature. The breach of this Precept is
Pride’ (Hobbes, 1991 p.107). Smith also criticizes ‘the vanity of the philosopher’: ‘The difference between
the most dissimilar characters, between a philosopher and a common street porter, for example, seems to
arise not so much from nature, as from habit, custom, and education. … [But] the vanity of the philosopher
is willing to acknowledge scarce any resemblance’. Peart and Levy call this view ‘analytical egalitarianism’
(Peart and Levy, 2005; 2008).
3. Smith insists, ‘The laws of most countries being made by men generally are very severe on the women,
who can have no remedy for this oppression’ (LJA, iii.6, p.146). Smith criticizes gender inequality in
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modern Europeans compared with North American Indians: ‘In North America, the woemen [sic] are
consulted concerning the carrying on of war, and in every important undertakings. The respect paid to
woemen in modern times is very small’ (LJB, 105, p.439). In general, Smith thinks that political and
economic equality will exist in future societies as they did in some primitive ones.
4. Relying on the work principle, some socialists and social liberals criticize property income as unearned
income, whereas libertarians, like Nozick (1974), condemn welfare benefits as unearned income. Therefore,
both regard Locke as their forerunner.
5. By criticizing the equality of income amounts, Hume is eventually promoting equality in the ratio of
income to labour. In such a proportional distribution, equality and inequality are two sides of the same coin.
Plato calls a proportional distribution ‘proportional inequality’, whereas Aristotle calls it ‘proportional
equality’, as the former focuses on unequal amounts and the latter on equal ratios. See note 1 and Aristotle
(1995, p.180).
6. In this quotation, Smith justifies high labour share in the first half and proportional wages in the second;
both are based on the work principle. Compare this with Hume’s two views examined in this section and
the next.
7. Hume supposedly wrote the two books from 1749 to 1751 and published Enquiry in December 1751 and
Essays in January 1752.
8. This view is a prototype of egalitarian utilitarianism declared by A.C. Pigou in his welfare economics:
‘any transference of income from a relatively rich man to a relatively poor man of similar temperament,
since it enables more intense wants to be satisfied at the expense of less intense wants, must increase the
aggregate sum of satisfaction’(Pigou, 1952, p.89).
9. On the work and needs principles, see Sen (1997, pp.77ff).
10. Locke also contrasts a king in America and a day labourer in England to demonstrate that ‘Property of
labour should be able to over-balance the Community of Land’ (Locke, 1988, p.296).
11. In Moral Sentiments, Smith defends a civilized society due to a substantially equal distribution of
necessaries of life performed by ‘an invisible hand’: ‘The capacity of his [the landlord’s] stomach bears no
proportion to the immensity of his desires, and will receive no more than that of the meanest peasant. …
The rich only select from the heap what is most precious and agreeable. They consume little more than the
poor … and they divide with the poor the produce of all their improvements. They are led by an invisible
hand to make nearly the same distribution of the necessaries of life, which would have been made, had the
earth been divided into equal portions among all its inhabitants’ (TMS, IV.i.10, p.184). Moreover, Smith
defends economic inequality in a civilized society as a useful foundation for political order as well as
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general opulence (TMS, I.iii.2.3, p.52). His vision of an unequal civilized society in Moral Sentiments
largely corresponds to that in Lectures and ‘Early Draft’.
12. Smith thinks that increasing wages diminish profits and interest: ‘The demand for productive labour, by
the increase of the funds ... grows every day greater and greater ... the owners of capitals find it difficult to
get labourers to employ. Their competition raises the wages of labour, and sinks the profits of stock ... the
rate of interest, must necessarily be diminished with them [profits]’ (WN, II.iv.8, p.353).
13. Smith and J.M.Keynes has a similar critical view on interest and rent. Smith argues that profit
‘naturally divides itself into two parts’: ‘that which pays the interest’ and ‘the compensation ... for the risk
and trouble of employing the stock’. ‘Like the rent of land, it [interest] is a neat produce which remains
after completely compensating the whole risk and trouble of employing the stock’ (WN, V.ii.f.4, pp.847-48).
Later, Keynes advocates lowering the interest rates to cause ‘the euthanasia of the rentier’, as he thinks that
the interest ‘rewards no genuine sacrifice, any more than does the rent of land’ (Keynes, 1973, p. 376).
20