Gopnik On Smith And What Obama Said: I.E., What Does "That" Mean

A simply excellent note on what Obama said, in his putative "biggest gaffe of the campaign" by Adam Gopnik on what Obama said and Adam Smith, aka, what "that" is: (I liked it so much I'm repeating it word for word rather than just pasting the link.) ....

July 20, 2012, Barack, Mitt, and Adam Smith Posted by Adam Gopnik, The New Yorker


 From the meaning of what “is” is to the meaning of “that”—American political discourse can sometimes move in depressing monotony around its little circles. Where former President Clinton’s defense of his famous sentence on his deposition turned on the problem of the past tense, President Obama’s so-called “un-American” words depend on his using “that” as a kind of pronoun, with the question being the antecedent to which this “that” referred, if that, uh, makes any sense. 

Anyway, his precise words are worth reviewing:

...Look, if you’ve been successful, you didn’t get there on your own. You didn’t get there on your own. I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something—there are a whole bunch of hardworking people out there. If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business—you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet. The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together...

 What President Obama was saying was perfectly clear: the “that” in his statement refers to the bridges and roads and “this unbelievable American system.” He wasn’t, despite what one may have heard from Mitt Romney, saying that you didn’t build your own business. He was saying that your neighbors and ancestors helped. We drive on roads built for each by all. What is strange about this bizarre adventure in amplified untruth, apart from its simple mendacity, is that what the President was saying was not some late arriving, New Deal-style codicil to the theory of free markets; it’s what the theory of free markets is. It’s the premise at the very heart of all free-market theory as Adam Smith—the guy whose profile is on every libertarian tie—conceived it. 

As I had occasion to write in a long piece on Smith’s thought a year or so ago, the notion of Adam Smith as an apostle of laissez-faire who would have recoiled in horror, or even narrowed his eyes in suspicion, at the idea that a healthy state precedes and oversees a truly free market is not merely a caricature of his actual thought—it is in many ways the direct reverse of what he said and argued for length and with great lucidity. Smith’s work comes in two volumes, his “Theory of Moral Sentiments” and his “Wealth of Nations.” In both, his primary concern is not to free mankind from the hold of government but to free the market from the undue influence of a handful of hereditary plutocrats (nothing personal, Mitt) who seek to escape the rules of the market, control their own costs, and set their own prices, contributing only as much to the public weal as they feel like. It’s a radical, not a conservative doctrine (which is why Dr. Johnson distrusted him so much). 

Smith was for a government that intervened regularly and actively on behalf of consumers and against the natural tendency of “producers”—i.e., very wealthy people, whether aristocratic landowners or manufacturers or, perhaps, financial-leverage experts—to band together for their own benefit. The laissez-faire economy, truly “left alone,” becomes a conspiracy of producers against consumers, of sellers against buyers, and makes the submissive state hostage to special interests. As Smith wrote, “The interest of the dealers”—i.e., manufactures and merchants—“in any particular branch of trade or manufacture, is always in some respects different from, and even opposite to, that of the public.” Smith, as I wrote, does not think that “government is the problem”; he thinks problems arise when the rich are able to make the government take their side. 

A healthy sovereign state is what serves the public against the producers. (He was all for high wages, by the way, on the now old-fashioned grounds that the actual wealth of a society can be discerned not by how much its top class has—you can find rich topsters in Ur or ancient Egypt—but by the dissemination of wealth to the many. “The high price of labor,” he wrote, “is the essence of public opulence.”) It isn’t just that a free market can survive regulation; it’s that the free market is the product of regulation, regulation designed to protect the public from the kind of arrangement that, let’s say, allows people with undue influence on the government to have a lower tax rate than people who don’t. 

This makes Smith, as I wrote, a firm believer in public goods: his state has an obligation to build roads and schools, establish an army, build bridges and highways, and do all the other things necessary for a sane polity in which the market can function naturally. Everyone should pay for them, and the rich should always pay more than others. “The rich should contribute to the public expense not only in proportion to their revenue,” Smith writes, “but something more than in that proportion.” (He also thought, Mitt, that taxes should be paid with joy, as a contribution to the well-being of all.) And this—that—all goes deeper than questions of efficiency, to questions of what we can only call the common emotional tone that lets prosperity happen. 

As Emma Rothschild writes in “Economic Sentiments,” her matchless 2001 study of Smith’s thought, it depends on what might be called niceness: Smith’s “faith … is in the mildness and thoughtfulness of most individual men and women. He is induced thereby to believe that they will usually not pursue their interests in grossly oppressive ways, and that they will usually wish to live in a society in which other people are not grossly oppressed or deprived.”

 Even if more money can be made by the producer by enclosing the land the peasant’s animals grazed on or by hiring child labor—or by looting someone’s pension funds—a decent concern for the opinions of mankind will stop the wise producer from doing these things, because he will know that they will break the bonds of common sympathy, the sense that we’re all in this together, on which the producer’s—or the equity manager’s—well-being ultimately depends. It’s always easy, Smith knew, to provoke a cycle of exploitation, rage, and revolution; that’s what most of history has been. 

What’s hard is to replace it with one of “mildness”—of public decency, progressive reform, and shared prosperity. You couldn’t have a free market unless you had all the institutions of trust in place that only a sovereign state can guarantee. (If you want to know what capitalism looks like without those institutions, think of words like “Russia,” “oligarchs,” and “kleptocracy.”)

 Everything we mean by a free market depends on a functioning, sympathetic state—a state rooted not in selfish individualism but in a social sympathy so broadly articulated and institutionalized that every man is confident that he can make an honest deal with his fellow man. So the view that the President was articulating the other day in the “that” speech wasn’t even a mild and “acceptable” form of social democratic reproach; it was the root foundational view of the free market as its greatest apostle imagined it. 

So don’t apologize, Mr. President, and don’t explain. Say it again! What you were articulating were the principles on which the free market, and with it this republic, is built. And that … is … that...