8/6/13 - adam smith and the irish potato famine

In today's selection -- in 1845, a potato famine began in Ireland that would eventually lead to the deaths of a million people, and force another million to leave Ireland's shores resulting in a decline in Ireland's population of almost twenty-five percent. Yet the British government offered almost no assistance, since it was fully under the sway of Adam Smith and his landmark book of 1776 titled The Wealth of Nations which stated that markets were led by an invisible hand and government interference in markets was harmful:

"In 1845, Ireland had been a full [but poor] constituent nation of the United Kingdom for more than four decades, and an accessory of the British economy and polity, if often by force, for several centuries before that. ... The most telling evidence of its poverty was the near-total reliance of the rural economy and population on a single crop: the potato. So when the first reports of a disastrous failure of the Irish potato crop began to emerge in September 1845, they were brought at once to the attention of the government in Westminster.

"The government's initial response was quick. A scientific fact-finding mission was dispatched, the gravity of the situation was ascertained, and a Relief Commission established. ... [But] those praying for a merciful policy from [Britain]'s Treasury should, however, have been forewarned by the very first sentence of an editorial shot across his bows from The Economist magazine in late November 1845. It opened with a chilling warning: '[C]harity is the national error of Englishmen'. There was no question that the impending Irish famine was an economic disaster and a human tragedy. But simply sending aid was absolutely the wrong way to help. It would violate two central principles of economic theory. The first was the need to avoid moral hazard. Send aid, and one might alleviate the immediate problem -- but at the cost of reducing the Irish to a state of permanent dependency. The second was the hallowed principle of non-intervention in the operation of the market. Adam Smith had proved that it was allowing private self-interest to operate as freely as possible that most efficiently achieves the social good. For the government to interfere with the operation of the market in solving the crisis would therefore be a foolish error.

"A second editorial in The Economist, published in March 1846, captured the consensus which dominated the views of the British Establishment. Proactive intervention by the government, the editors warned, would be futile: 'To feed the Irish, to attempt which it is now practically driven, . . . is for the legislature physically impossible.' To attempt it therefore risked jeopardising the authority of government: it would 'only damage the interfering, unthinking lawmaker ... arms against him all the unsatisfied desires of the people, and must in the end destroy his power'. Ultimately, it would do more harm than good: 'The legislature therefore cannot effectively help Ireland . . . [I]t can no more relieve the wants of the Irish, than a man can cure delirium tremens by swallowing daily increasing quantities of ardent spirits. Above all, to deny these self-evident truths was proof not of an alternative political or moral disposition -- but of willful ignorance of objective, scientific fact. Appealing to the British people to send assistance to Ireland, the editors of The Economist wrote, 'appears like calling on us to unlearn the first rules of arithmetic, and do our sums by the assertion that two and two make five'. Within seventy years of its publication, Adam Smith's theory of monetary society had attained the status of scientific -- indeed, mathematical -- truth.

"Since virtually every official and politician dealing with Ireland was a devoted acolyte of these doctrines, they dictated British policy. Sir Robert Peel managed to have Parliament authorise a lone consignment of £100,000-worth of American maize before his government collapsed and with it any further hope of significant relief. The consequences of this inaction were catastrophic.

"Throughout the winter of 1845 and the spring of 1846 there was famine on a scale unprecedented in Ireland's history. By the summer of 1846 large bands of the poor were to be found roaming the countryside, living off weeds and nettles. The country was close to a breakdown of civil order: military rule was installed in all but name. Yet worse was to come. In August, to universal horror, the potato crop failed for a second year. None of this was secret; all of it was widely and vividly reported -- on 2 September, a leader-writer in The Times of London described the situation simply but clearly as 'total annihilation'.

Potato Famine Memorial, Dublin

"Incredibly, the policy debate in London continued at the level of abstract principles. Smith and his followers had proved that interference with the natural operation of monetary society can only be bad: it was essential not to heed the siren song of those calling for government intervention. 'We have no knowledge of any theoretical or scientific deduction whatever, so amply confirmed as this of Smith: thundered the editors of The Economist on 2 January 1847. Morality had nothing to do with it: it would be a travesty of reason itself if the government were to 'turn back to the old discredited principles of interference, and adopt practices the most unscientific and the most decried'. ...

"The new discipline of economics boldly claimed to reduce what had once seemed vital questions of moral and political justice to the mechanical application of objective scientific truths. The complicity of this new world-view in ethical disaster was not lost on all contemporary observers. It was Nassau Senior -- the Drummond Professor of Political Economy at Oxford and one of the government's chief advisers on Irish economic policy -- whom Benjamin Jowett, the great Master of Balliol College, Oxford, had in mind when he said years later: 'I have always felt a certain horror of political economists since I heard one of them say that he feared the famine of 1848 in Ireland would not kill more than a million people, and that would scarcely be enough to do much good."


Felix Martin


Money: The Unauthorized Biography


Bodley Head


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