Adam Smith got it way, way wrong!

coal miner with a light

We do labor and we amass capital. But are we all really just miners of the wealth of the earth?

I love the way John Michael Greer’s latest book, The Wealth of Nature, opens, with a good skewering of the premise on which the modern pseudo-science of economics depends. Exposing 18th century philosopher Adam Smith’s thinking in The Wealth of Nations as flawed, Greer goes on to explain what Smith missed, why it’s important, and how we can turn the error in history around.

The ultimate source of value

It’s not that Greer dismisses Smith out of hand. A formidable lay historian, Greer contextualizes Smith in his time and place, and acknowledges his appeal, properly crediting him as the father of modern economic thought.

But if he is the father, Greer says, he spawned a few centuries of lopsided thinking and out-of-balance economic growth by missing one key element in his thesis. As Greer explains

Once again we can begin this exploration with Adam Smith. The Wealth of Nations begins with the following sentence: “The annual labor of every nation is the fund which originally supplies it with all the necessities and conveniences of life.” This same concept, variously phrased, forms one of the least-questioned assumptions in modern economics; even most of those who dispute it offer what are at most slight variations — arguing, for example, that the labor of previous years embodied in capital is also crucial to understanding the economic process. Left unrecognized is the crucial fact that the annual labor of a nation would be utterly useless without the goods and services provided free of charge by Nature, which enable labor to be done at all by making human life possible in the first place and by providing all that labor with something to labor on.

This is no idle or abstract philosophical point by Greer. It’s not an “angel dancing on the head of a pin” question whose presuppositions are more formulaic and perfunctory than legitimately critical. The architecture of the argument is grounded in the real world of physical realities which, however much we might wish to eschew them through fiscal abstractions, is the beginning and the end, the alpha and the omega, the final analysis of all legitimately viable discussions of the world’s true physical wealth. And no where is this more clear than in our energy-based economy.

The Wealth of Nature book cover

The Wealth of Nature by John Michael Greer, New Society Publishers, 298 pp, $18.95.

With a raft of books on economy out, both from within the peak oil community and beyond, many of the issues Greer covers in The Wealth of Nature: Economics as if Survival Mattered, will be familiar to anyone following the fractional reserve banking crisis, the sovereign debt crises, federal budgetary issues, the Fed’s quantitative easing levers and Wall Street’s bad bets against us. What Greer adds is a deeper understanding of the history and role of money, and the cultural tendency to mistake this representative currency with true wealth, another error compounding  flawed thinking.

The heart of the matter

What sets Greer apart is his unmatched ability to tell the story of all that stuff while rooting it in a bigger historical context, and a bigger resource context, all while using the most plainspoken, straightforward language to get his points across. By this I don’t mean to suggest his writing lacks imagination. Quite the opposite, really. Greer uses many devices—from simple (and often funny) illustrative examples to familiar colloquialisms to metaphorical tales to germane digressions to blatant parodies—to explore the story of our ultimate dependence on earth’s resources as the free storehouse of our economic wealth.

It is his very ability to avoid getting bogged down in overly complex technicalities that makes Greer’s points so clear. He does so without losing depth, but rather enhancing it with his accessible explanations and logic. On that final point Greer is such a lucid thinker, with honed reasoning and valid equations that handily support the weight of his assertions. He takes the story of modern economics and how it’s been gotten wrong for a few centuries and rights it, with little strain on the reader’s part, drawing an unmistakably clear line between the perilous energy crisis of peak oil and its impact on our economy.

Disbelief in environmental limits, as it happens, is far more common these days than belief in them. That’s a fascinating twist of fate, because the evidence for the power of environmental limits over human life is overwhelming. Ecologists have documented the myriad ways that environmental limits play a dominant role in shaping the destiny of every species, ours included. Historians have chronicled the fate of many civilizations that believed themselves to be destiny’s darlings, and proceeded to pave the road to collapse with their own ecological mistakes. From a perspective informed by these facts, the insistence that limits don’t apply to humanity is as good a case study as one might wish of that useful Greek word hubris, defined as the overweening pride of the doomed. Still, this makes it all the more intriguing that the power and relevance of environmental limits are anything but self-evident to most people in the industrial world today.

Surely there is no story as urgent as our understanding of our life with and responsibility to earth’s bounty in apprehending the tenuous state on which our own survival depends. Yet, occluded as it has been by Smith’s erroneous premise, and the lineage of thinking that came in its wake, our removal from a true understanding of our collective wealth and pleasure on what I might call God’s Green Earth has landed humanity on a fragile precipice, with converging crises threatening to cleave the cliff and drop the lot of us into a murky chasm.

Because his book is rooted in economics, recognizing the original nature of nature’s abundance is not merely the reverent posture of an admittedly earth-loving man. Greer affirms that nature serves quality of life, opportunities, manufacturing, production, consumption and life’s manifold pleasures. He’s neither scolding nor prissily moralistic in elucidating the extraction and use of earth’s raw materials for human enjoyment and development. But he does make clear that when thrown out of balance by intellectual misapprehensions, behavioral shortsightedness or economic miscalculations that very wealth can dry up and vanish, withholding its promise and revealing nature’s ultimate indifference, with us her casualties.

Or our own.

The primary economy and the rest

Describing the differences between the primary economy of nature, the secondary economy of goods and services and the tertiary economy of paper wealth and financial trade in his customarily precise manner, Greer exposes with a deft sleight-of-hand the collective tragic flaw haunting modern economies and societies. Suffice it to say that if there is anything you’ve failed to comprehend about the complexion of today’s economic woes, Greer blasts through them quickly yet resolutely — economically one might say — while going beyond the specifics to root the almost inevitable outcome in centuries of grossly mistaken economic comprehension. Greer explains

We are thus entering a period of prolonged economic contraction—not a recession, or even a depression, but a change in the fundamental dynamic of the economy. Over the centuries just past, a rising tide of economic growth was interrupted by occasional periods of contraction; over the centuries ahead, the long decline of the industrial economy will doubtless be interrupted by occasional periods of relative prosperity. Just as a rising tide lifts all boats, a falling tide lowers them all, and if the tide goes out far enough, a great many boats will end up high and dry. The result is that money can no longer be counted on to make money, and as this becomes apparent, the basis for most of today’s rentier class will go out of existence.

But Greer remains optimistic.

This simple little book, with its nods to E.F. Schumacher’s Small Is Beautiful, and its familiar remedies of relocalization, conservation and cogent earth stewardship has the potential in its shimmering and elegant simplicity to utterly turn the economic conversation around. Achieving that would create a badly needed opening for a new way of assessing and dialoging on humanity’s shared plight.

Read it, give it to everyone you know this holiday season, and talk about it whenever you can. The ideas in The Wealth of Nature are as rock solid as the earth, yet resound with a spiritual significance deserving of our glorious creation.

— Lindsay Curren, Transition Voice

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