Liberal economy or Utopia?: the paradox of Thomas Reid – Kris Grint
Any discussion of the Scottish Enlightenment typically conjures up images of two of Scotland’s most eminent intellectuals: Adam Smith and David Hume, with the former’s achievements in economics only matched in stature by the latter’s accomplishments in philosophy. These reputations are well deserved, but there is of course more to the Scottish Enlightenment than the contributions of these two heavyweights. For more-or-less the entire second half of the 18th century, Scots from across the country elucidated and discussed profound and wide-ranging ideas, from politics to religion, science to jurisprudence. Why the Enlightenment took hold in Scotland in the way it did is a question still central to much current historical debate. My aim here is much less broad: it is to attempt to illuminate – excusing the pun – some of the lesser-known thinkers who participated in it, and show how their ideas had an impact that still resonates today.
Thomas Reid (1710–1796) is a good starting point in this endeavour, since he succeeded Smith as Professor of Moral Philosophy at the University of Glasgow in 1764 and was also regarded as a perennial thorn in the side of Hume. Reid was the founder of what has come to be known as the‘Common Sense’ school of philosophy, common sense being not what every schoolchild knows, but a set of innate ideas that we possess from birth as opposed to acquiring through our senses. This cast him in opposition to Hume’s more sceptical position about human nature but, as we shall see, this was only one of many disputes between the two.
Whilst historians have focused on Reid’s philosophical inquiries, rather less studied are his ideas on political economy and, more specifically, his thoughts on money, credit and trade. Much of Reid’s thinking on these topics is the subject of a recent publication of his works entitled Thomas Reid On Society and Politics published by Edinburgh University Press.
Reid had some strikingly modern ideas about money. Money had to be removed, for instance, from the capricious reach of the monarch or other political ruler who might attempt to fix its value or debase it. But Reid also claimed (following Smith) that money had little relationship with the riches of a nation: he could see no sense in prohibiting the export of bullion, for example, or, purposely minting money out of base metals that no-one abroad would want. These views align Reid’s thinking with the fiat money system still with us today. Meanwhile the quantity theory of money, as put forward by Hume amongst others, was in Reid’s view mistaken: an increase in the supply of money did not automatically lead to a similar increase in prices. And Hume’s related questioning of the utility of paper money was also misguided: it was simply an extension of metallic money which, taking the previous point as given, meant it also had no direct correlation with price. For Hume, reliance on paper money (‘paper credit’) undermined the economic competitiveness of a nation. But Reid believed prices rose because the circulation of paper money increased trade. The instrument itself was not the stimulus. The benefits of this increased trade, meanwhile, heavily outweighed the disadvantage of higher prices.
Reid also took an interest in the deregulation of markets. His response to the 1773 Corn Law was nuanced. He thought that artificially keeping the price of corn high had considerable knock-on effects on the cost of life’s necessities, on wages, on the price of manufactured goods, and ultimately on the competiveness of the nation. But he welcomed the law’s provisions for the warehousing of grain because they allowed for the establishment of public granaries that would both smooth supply problems and, perhaps, encourage a Scottish grain trade to rival that of the Dutch. Whilst Reid rejected Hume’s ideas about the need to raise agricultural wages in order to incentivise workers to be more productive, he also could not give his assent to Smith’s notion that controls over wages and food prices should be left to the market, because he was concerned about wages falling below a ‘necessary subsistence’. Instead, Reid believed that effective government meant minimising fluctuations and controlling wages to avoid extremes of indigence or excess. Reid went much further than Smith, however, in his views about money-lending. Since money had progressed from being a mere token of value to being a commodity in and of itself, it could be traded much like grain. Reid thus advocated the abolition of the usury laws which limited the interest rate that could be charged on lending, believing that whilst such restrictions were applicable in baser societies, for the modern Scottish economy they were a drag on commerce.
How influential are Reid’s economic ideas to modern times? With the advent of pay-day lenders, his views on usury are being tested to the very limit. His acknowledgement that agricultural wages had to be set above a certain level, meanwhile, has clear echoes in modern minimum wage policy. Reid tempered this interference with market forces by advocating a series of liberalizing reforms that would strengthen the grain trade in other ways. One of the most important was his argument for the establishment of free ports, where foreign goods destined for re-export could be brought in without attracting the complex array of British taxes, duties and bounties. Reid’s belief that this encouragement of a ‘carrying trade’ would generate huge economic benefits not only foreshadows the free trade areas of today, but fed into his more general principle that that the spirit of trade transformed society.
Why, then, has there been such a lack of general acknowledgement of Reid in the same way as someone like Smith? Notwithstanding the eloquence (and commercial success) of Smith’s Wealth of Nations, one obvious answer lies in Reid’s political thought. Inspired by Thomas More’s Utopia, Reid was actually in favour of abolishing private property, which he thought was the cause of all modern forms of moral and political corruption. In Reid’s utopia, this meant production would eventually end up in the hands of the state. The commercial system he described would still exist, but only for the purposes of international, not domestic, trade. Visions of utopia affect political theorists and commentators to this very day, so perhaps we can indulge Reid his speculation on this alternative future. To his credit, Reid acknowledged its unlikely occurrence, and whilst he clung to the hope of its establishment, he was pragmatic enough to acknowledge that the reality of the 18th century was very different. When focusing on the practical, Reid achieved some impressive insights into the foundations of liberal economic thought, even if the paradox apparent in his position makes him a rather unlikely hero of its history.
Dr Kris Grint is a historian of eighteenth and nineteenth-century Britain.