PJ O'Rourke: The original Republican Party Reptile is back

Of P J O'Rourke's many achievements – editing National Lampoon, becoming foreign editor of Rolling Stone, visiting the trouble spots of the world for his book Holidays in Hell, defending US imperialism in Give War a Chance – none has been more startling than his taking An Inquiry into the Nature and Causes of the Wealth of Nations to the top of the bestseller list.

First published in 1776, Adam Smith's dry-as-dust 900-page study of economics and free thinking was a masterpiece of the Enlightenment – and had lain mostly unread by all except academics for 230 years. But in January of this year, when O'Rourke's enthusiastic commentary On the Wealth of Nations was published in the US, there was a sudden rush for the original. The long-dead Glaswegian professor of moral philosophy found himself at the top of the New York Times Book Review bestseller list, rubbing shoulders with Tina Brown and Oprah Winfrey.

The idea, says O'Rourke, came from a lunch with Toby Mundy, head of the London office of Atlantic Books, which has published all O'Rourke's work. "He said to me: 'We're doing a series of 'Books That Have Changed the World'. You've read this, haven't you? It'll be a snap for you.'"

O'Rourke shrugs. He has, of course, dabbled in the subject before, in 1998's Eat The Rich: A Treatise on Economics. But he is coy about the extent of his expertise. "Of course one has a way of remembering that your research was much better than it actually was," O'Rourke says. "When I opened my old copy of The Wealth of Nations and looked at the underlinings, the marginal notes and so forth, I found I'd read about 18 pages of the goddamned thing."

But he can get by. He speaka da lingo. "I can listen to an economist talk and tell you what they mean, or think they mean, or when they're avoiding any meaning at all."

O'Rourke started out as a sophisticated quipmeister ("There are a number of mechanical devices which increase sexual arousal, particularly in women. Chief among these is the Mercedes-Benz 380SL convertible") and coiner of sage political apophthegms ("Giving money and power to governments is like giving whisky and car keys to teenage boys"). As he's grown older, his writings have become more serious and preachy, more concerned with objective truth and morality than with scoring points against Democrats. The former Marxist hippie has also become more stridently right-wing. So is his new book a ringing endorsement of free-market capitalism?

"Oh, I think there's a little bit of that," he says, "a ringing endorsement of the libertarian aspects of capitalism. I guess I'm an old Whig: I believe in law and private property and individual freedom and so on, and I have a bit of a reformist spirit. But as I point out in the book, Smith never said that if you leave capitalism alone, everything will be hunky-dory. He's deeply suspicious of merchants and manufacturers. He believes that, if they ever get together just to have a drink, they'll start working on cheating the public. He hated corporations."

Why should people pay attention to Smith today? "Because of the moral underpinning of individual liberty that's expressed in free markets. We tend to lose sight of the necessity of this freedom, and need to remind ourselves. Milton Friedman used to say he owed everything to Smith, and was really just a modern interpreter of his ideas."

O'Rourke investigates Adam Smith's three main tenets of a happy economy: the pursuit of self-interest, the division of labour and the freedom of markets. Isn't the pursuit of self-interest a bad thing when it encourages someone to build a tower that blocks your view of the Hudson river? "Smith wasn't talking about Gordon Gekko in Wall Street," laughs O'Rourke. "He was talking about poor crofters in Scotland. At the time he was writing, the majority of people the world over had no capacity to exercise self-interest. They were serfs, slaves, peons working for pitiful wages. All their behaviour was subject to the will of others. By self-interest, Smith saw them as having a chance to better themselves, to jack up their standards a bit, to have the liberty to start a business and not be interfered with by the rich and powerful."

I point out that Smith was actually quite rude about the poor, generalising about their work-shy natures and love of ease. O'Rourke, risking the wrath of the entire Caledonian race, sees Smith as typically Scottish: "They do that whole Presbyterian thing of saying, 'We may eat nothing but oats, but we've sent our child to college,' and Smith's own background was pretty straitened financially. He was from Scotland when it was pulling itself up by its bootstraps. He saw poor artisans and farmers struggling to educate their children, trying to start small businesses, get involved in trade. He probably looked at London and the squalid urban poor and saw them as shiftless, work-shy layabouts."

Does O'Rourke like the sound of Adam Smith as a person? Would he have been good company? "He shows a surprising sense of humour and a rather dry wit," says O'Rourke. "But then, it's a rather dry subject. He was well liked by his students as a lecturer, so that's a good sign. He had lots of very loyal friends, especially David Hume, probably the largest genius of the Scottish Enlightenment. But he obviously rubbed some people up the wrong way, people like Dr Johnson. They just didn't hit it off, perhaps because they were too alike. Smith could be a monopolist of conversation. He tended to just go on and on."

Britain now has another dry, moralistic Scots economist in charge of the country. Did O'Rourke take note of British politics? "Sure, lots of people pay attention to British politics," he replies. "We watch the post-Thatcher system very carefully, because it stands somewhere between our socio-political system and the continental socio-political system, and to the extent that things do or don't work for you, it's instructive for us." Did he find it odd that, despite 10 years of economic stability, Tony Blair left office with jeers ringing in his ears? Did it mean that the economy is never at the top of an electorate's priority list? "Well, so it seems, until the economy takes the slightest downturn. Remember what happened to George Bush Sr after the first Gulf war? His popularity ratings were as high as they could conceivably get, but within a year and a half he's thrown out of office by this unknown goofball with his bossy wife, on the basis of a sharp, but short, economic downturn."

When he's not berating the spirit of "mercantilism" that Smith saw as the enemy of growth, O'Rourke draws strength from Smith's earlier tome, The Theory of Moral Sentiments, in which Smith detects something called the "impartial spectator" in the heart or soul of every human. It's this spectral inner guide that gives us kindly impulses and decent instincts, "to protect the weak, to curb the violent and to chastise the guilty". It's piquant to see a long-standing professional cynic like O'Rourke embrace this comforting position, just as it is to hear him talk about the betterment of mankind: "Smith shows that individual freedom benefits not only the individual but mankind in general, that freedom for one benefits all; that's the crux on which the Marxist economy came apart."

So has O'Rourke changed a lot from the Republican Party reptile and aggressive super-patriot of old? Though he voted for George W Bush twice, he now betrays the odd squeak of concern about the direction in which his country has gone. "When you get into this mess in the Middle East, even I must find myself forced into a degree of nuance," he says. "It's amazing that no one seems to have foreseen the wrath, the bitterness and the depth of the anger and violence that followed the war. I never heard anyone predict what has happened. In fairness to all of us idiots everywhere, at least we have plenty of company on this."

An Inquiry into the Nature and Causes of The Wealth of Nations

The Wealth of Nations is, without doubt, a book that changed the world. But it has been taking its time. Two hundred thirty-one years after publication, Adam Smith's practical truths are only beginning to be absorbed in full. And where practical truths are most important – amid counsels of the European Union, World Trade Organisation, International Monetary Fund, British Parliament, and American Congress – the lessons of Adam Smith end up as often sunk as sinking in.

Adam Smith's Simple Principles

Smith illuminated the mystery of economics in one flash: "Consumption is the sole end and purpose of all production." There is no mystery. Smith took the meta out of the physics. Economics is our livelihood and just that. The Wealth of Nations argues three basic principles and, by plain thinking and plentiful examples, proves them. Even intellectuals should have no trouble understanding Smith's ideas. Economic progress depends upon a trinity of individual prerogatives: pursuit of self-interest, division of labour, and freedom of trade.

There is nothing inherently wrong with the pursuit of self-interest. That was Smith's best insight. To a 21st-century reader this hardly sounds like news. Or, rather, it sounds like everything that's in the news. These days, altruism itself is proclaimed at the top of the altruist's lungs. Certainly it's of interest to the self to be a celebrity. Bob Geldof has found a way to remain one. But for most of history, wisdom, beliefs, and mores demanded subjugation of ego, bridling of aspiration, and sacrifice of self (and, per Abraham with Isaac, of family members, if you could catch them).

This meekness, like Adam Smith's production, had an end and purpose. Most people enjoyed no control over their material circumstances or even – if they were slaves or serfs – their material persons. In the doghouse of ancient and medieval existence, asceticism made us feel less like dogs.

But Adam Smith lived in a place and time when ordinary individuals were beginning to have some power to pursue their self-interest. In the chapter "Of the Wages of Labour", in book one of The Wealth of Nations, Smith remarked in a tone approaching modern irony: "Is this improvement in the circumstances of the lower ranks of the people to be regarded as an advantage or as an inconveniency to the society?"

If, in the 18th century, prosperity was not yet considered a self-evidently good thing for the lower ranks of people, it was because nobody had bothered to ask them. In many places nobody has bothered to ask them yet. But it is never a question of folly, sacrilege, or vulgarity to better our circumstances. The question is how to do it.

The answer is division of labour. It was an obvious answer – except to most of the scholars who had theorised about economics prior to Adam Smith. Division of labour has existed since mankind has. When the original Adam delved and his Eve span, the division of labour may be said to have been painfully obvious. Women endured the agonies of childbirth while men fiddled around in the garden.

The Adam under present consideration was not the first philosopher to notice specialisation or to see that divisions are as innate as labours. But Smith was arguably the first to understand the manifold implications of the division of labour. In fact he seems to have invented the term.

The little fellow with the big ideas chips the spear points. The courageous oaf spears the mammoth. And the artistic type does a lovely cave painting of it all. One person makes a thing, and another person makes another thing, and everyone wants everything. Hence trade. Trade may be theoretically good, or self-sufficiency may be theoretically better, but to even think about such theories is a waste of that intermittently useful specialisation, thought. Trade is a fact.

Adam Smith saw that all trades, when freely conducted, are mutually beneficial by definition. A person with this got that, which he wanted more, from a person who wanted this more than that. It may have been a stupid trade. Viewing a cave painting cannot be worth 300lbs of mammoth ham. The mutuality may be lopsided. A starving artist gorges himself for months while a courageous oaf of a new art patron stands bemused in the Grotte de Lascaux. And what about that wily spear-point chipper? He doubtless took his mammoth slice. But they didn't ask us. It's none of our business.

Why an Inquiry into Adam Smith's Simple Principles is Not an Inquiry, First, into Adam Smith

Most things that people spend most of their time doing are none of our business. This is a very modern idea. It makes private life – into which we have no business poking our noses – more fascinating than private life was to pre-moderns. Adam Smith was a pre-modern, therefore this book is organised in an old-fashioned way. The man's ideas come first. The man comes afterward. Adam Smith helped produce a world of individuality, autonomy and personal fulfilment, but that world did not produce him. He belonged to an older, more abstracted tradition of thought.

When a contemporary person's ideas change the world, we want to know about that person. Did Julia Child come from a background of culinary sophistication, or did her mother make those thick, gooey omelettes with chunks of Velveeta cheese and Canadian bacon like my mother? I fed them to the dog. What elements of nature and nurture, of psychology and experience, developed Julia Child's thinking? But there was a time when thinking mostly developed from other thinking. The thinkers weren't thinking about themselves, and their audience wasn't thinking of the thinkers as selves, either. Everyone was lost in thought. Dugald Stewart, who in 1858 published the first biography of Adam Smith, excused its scantiness of anecdote with the comment: "The history of a philosopher's life can contain little more than the history of his speculations."

Another reason to put the history of Adam Smith's speculations ahead of the history of Adam Smith is that Smith led the opposite of a modern life – uneventful but interesting. He was an academic but an uncontentious one. He held conventional, mildly reformist political views and would have been called a Whig if he'd bothered to be involved in partisan politics. He became a government bureaucrat. Yet the essence of his thinking – "It's none of our business" – will eventually (I hope) upend everything that political and religious authorities have been doing for 10,000 years. In a few nations the thinking already works. There are parts of the earth where life is different than it was when the first physical brute or mystical charlatan wielded his original club or pronounced his initial mumbo jumbo and asserted his authority in the first place.

The whole business of authority is to interfere in other people's business. Princes and priests can never resist imposing restrictions on the pursuit of self-interest, division of labour, and freedom of trade. Successful pursuits mean a challenge to authority. Let people take the jobs they want and they'll seek other liberties. As for trade, nab it.

A restriction is hardly a restriction unless coercion is involved. To go back to our exemplary Cro-Magnons, a coercive trade is when I get the spear points, the meat, the cave painting, and the cave. What you get is killed.

Coercion destroys the mutually beneficial nature of trade, which destroys the trading, which destroys the division of labour, which destroys our self-interest. Restrain trade, however modestly, and you've made a hop and a skip toward a Maoist Great Leap Forward. Restrain either of the other economic prerogatives and the result is the same. Restrain all three and you're Mao himself.

Adam Smith's Less Simple Principles

It is clear from Adam Smith's other writings that he was a moral advocate of freedom. But the arguments for freedom in The Wealth of Nations are almost uncomfortably pragmatic. Smith opposed most economic constraints: tariffs, bounties, quotas, price controls, workers in league to raise wages, employers conniving to fix pay, monopolies, cartels, royal charters, guilds, apprenticeships, indentures, and of course slavery. Smith even opposed licensing doctors, believing that licenses were more likely to legitimise quacks than the marketplace was. But Smith favoured many restraints on persons, lest brute force become the coin of a lawless realm.

In words more sad and honest than we're used to hearing from an economist, Smith declared: "The peace and order of society is more important than even the relief of the miserable." Without economic freedom the number of the miserable increases, requiring further constraints to keep the peace among them, with a consequent greater loss of freedom.

Smith was also aware that economic freedom has its discontents. He was particularly worried about the results of excess in the division of labour: "The man whose whole life is spent in performing a few simple operations... generally becomes as stupid and ignorant as it is possible for a human creature to become." We've seen this in countless politicians as they hand-shake and rote-speak their way through campaigns. But it's worth it. Productivity of every kind can be increased by specialisation. And the specialisation of politics at least keeps politicians from running businesses where their stupidity and ignorance could do even greater harm to economic growth.

Adam Smith's More Complicated Principles

Smith's logical demonstration of how productivity is increased through self-interest, division of labour, and trade disproved the thesis (still dearly held by leftists and everyone's little brother) that bettering the condition of one person necessarily worsens the condition of another. Wealth is not a pizza. If I have too many slices, you don't have to eat the Domino's box.

By proving that there was no fixed amount of wealth in a nation, Smith also proved that a nation cannot be said to have a certain horde of treasure. Wealth must be measured by the volume of trades in goods and services – what goes on in the castle's kitchens and stables, not what's locked in strongboxes in the castle's tower. Smith specifies this measurement in the first sentence of his introduction to The Wealth of Nations: "The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes." Smith thereby, in a stroke, created the concept of gross domestic product. Without GDP modern economists would be left with nothing much to say, standing around mute in ugly neckties, waiting for MSNBC to ask them to be silent on the air.

If wealth is all ebb and flow, then so is its measure, money. Money has no intrinsic value. Any baby who's eaten a nickel could tell you so. And those of us old enough to have heard about the Weimar Republic and to have lived through the Carter administration are not pained by the information. But 18th-century money was still mostly made of precious metals. Smith's observations on money must have been slightly disheartening to his readers, although they had the example of bling-deluged but impoverished Spain to confirm what he said. Gold is, well, worth its weight in gold, certainly, but not so certainly worth anything else. It was almost as though Smith, having proved that we can all have more money, then proved that money doesn't buy happiness. And it doesn't. It rents it.

Adam Smith's Principles: Their Principal Effect

The Wealth of Nations was published, with neat coincidence, in the very year that history's greatest capitalist nation declared its independence. And to the educated people of Great Britain the notion of the United States of America was more unreasonable, counterintuitive, and, as it were, outlandish than any of Adam Smith's ideas. Wealth was not light reading, even by the weightier standards of 18th-century readers. But it was a succès d'estime, and something of an actual success. The first edition sold out in six months, shocking its publisher. Other than this, there is no evidence of Smith's work shocking his contemporaries.

For instance, Smith's suggestion of the economic primacy of self-interest didn't appal anyone. That self-interest makes the world go round has been tacitly acknowledged since the world began going round – a little secret everyone knows. And the worrisome thought that money is imaginary had been worried through by Smith's good friend David Hume a quarter of a century earlier. Indeed the fictitious quality of money had been well understood since classical times. In the 200 years between the reigns of the emperors Nero and Gallienus, imperial fictions reduced the silver content of Roman coinage from 100 per cent to none.

But, though its contents didn't make people gasp, something about The Wealth of Nations was grit in the gears of Enlightenment thinking. And that something is still there, grinding on our minds. I could feel it myself when the subject of self-interest came up.

Gosh, I'm not selfish. I think about the environment and those less fortunate than me. Especially those unfortunates who don't give a hoot about pollution, global warming, and species extinction. I think about them a lot, and I hope they lose the next election. Then maybe we can get some caring and compassionate people in public office, people who aren't selfish. If we elect an environmentalist mayor, the subdivision full of McMansions that's going to block my view of the ocean won't get built.

And let's face it, the "lower ranks of the people" do have too much money. Look at Britney Spears. Or I'll give you a better example, the moneybags buying those chateaux-to-go on the beachfront. You with your four-barge garage and the Martha-bitchin'-Stewart-kitchen that you cook in about as often as Martha does the dishes. You may think you're not the lower ranks because you make a lot of dough, but your lifestyle is an "inconveniency to the society" big time, as you'll find out when I key your Hummer that's taking up three parking spaces.

I know your type. All you do is work all day, 80 or 100 hours a week, in some specialised something that nobody else understands, on Wall Street or at fancy corporate law firms or in expensive hospital operating rooms. A person has to balance job, life, and family to become a balanced... you know, person. This is why my wife and I are planning to grow all our own food (rutabagas can be stored for a year!), use only fair-traded internet services with open-code programming, heat the house by means of clean-energy renewable resources such as wind power from drafts under the door, and knit our children's clothes with organic wool from sheep raised under humane farming conditions in our yard. This will keep the kids warm and cozy, if somewhat itchy, and will build their characters because they will get teased on the street.

Okay, yes, I admit that total removal of every market restraint would be "good for the economy". But money isn't everything. Think of the danger and damage to society. Without government regulation the big shots who run companies like Enron, WorldCom, and Tyco could have cheated investors and embezzled millions. Without restrictions on the sale of hazardous substances young people might smoke, drink, and even use drugs. Without the licensing of medical practitioners the way would be clear for chiropractors, osteopaths, and purveyors of aromatherapy. If we didn't have labour unions, 30,000 people would still be wage slaves at General Motors, their daily lives filled with mindless drudgery. And if there weren't various forms of retail collusion in the petroleum industry, filling stations could charge as little as they liked. I'd have to drive all over town to find the best price. That would waste gas.

Also consider the harm to the developing world. Cheap pop music MP3 downloads imported from the United States will put every nose-flute band in Peru out of business. Plus some jobs require protection, to ensure they are performed locally in their own communities. My job is to make quips, jests, and waggish comments. Somewhere in Mumbai there is a younger, funnier person who is willing to work for less. My job could be outsourced to him. But he could make any joke he wanted. Who would my wife scold? Who would my in-laws be offended by? Who would my friends shun?

This anonymous fellow, tens of thousands of miles away, might let his sense of humour run wild. He might, for example, be doing that amusing article I write about once a year concerning the trials and tribulations (and heartwarming moments) of taking the children to Manhattan at Christmastime. The kids get squashed against the glass department store windows, shoved under the tree at Rockefeller Centre, and sliced to ribbons on the Central Park skating rink by hordes of Midwesterners, Europeans, and Japanese. Mumbai-Me might be tempted to slip in a bit of tasteless doggerel.

In yule New York, while suff'ring the

Ugly, rude tourist parade, a

Gift-giving thought occurred to me

– Donation to al-Qa'ida.

For the sake of accountability, sensitivity to hurtful language, and all things socially responsible, Adam Smith's flow of goods and services needs to be accompanied by at least the threat of another flow – getting a drink thrown in my face.

Then there is the matter of those goods and services – Adam Smith's gross domestic product. I am as grossly domestic as anyone. Where's the product? How come all the goods and services flow out of my income instead of into it? Of course, I understand that money isn't what's valuable. Love is what's valuable. And my bank account is full of love or something closely related to it, sex. That is, I've got fuck-all in the bank. And if money isn't worth anything, why was Alan Greenspan such a big cheese for all those years? Did he just go to his office and do Sudoku puzzles all day?

None of us, in fact, take the axioms of Adam Smith as givens – not unless what's given to us are vast profits, enormous salaries, and huge year-end bonuses resulting from unfettered markets, low labour costs, increased productivity, and current Federal Reserve policy. Like the AFL-CIO, France, and various angry and addled street protestors, we quarrel with Adam Smith. If this is to be an intelligent squabble we need to examine Smith's side of the argument in full. The Wealth of Nations is – as my generation used to say when my generation was relevant – relevant.

P J O'Rourke on The Wealth of Nations, by P J O'Rourke, is published by Atlantic Books, priced £14.99. To order a copy for the special price of £13.50, with free P&P, call Independent Books Direct on 08700 798 897, or visit www.independentbooksdirect.co.uk