And it is well that nature imposes upon us in this manner. It is this deception which rouses and keeps in continual motion the industry of mankind. It is this which first prompted them to cultivate the ground, to build houses, to found cities and commonwealths, and to invent and improve all the sciences and arts, which ennoble and embellish human life; which have entirely changed the whole face of the globe, have turned the rude forests of nature into agreeable and fertile plains, and made the trackless and barren ocean a new fund of subsistence, and the great high road of communication to the different nations of the earth.So we are induced by this deception to invent and discover. It is responsible for all the wealth and power man has created for himself. Yet the wealthy are only able to consume a tiny fraction of the wealth they create. The rest they squander on luxury goods that satisfy their vanity. By wasting their money, they redistribute downward to the poor. Thus, their wealth trickles down not from investment and job creation, but from stupid vanity:
The homely and vulgar proverb, that the eye is larger than the belly, never was more fully verified than with regard to [the miserly, rich man]. The capacity of his stomach bears no proportion to the immensity of his deisres, and will receive no more than that of the meanest peasant. The rest he is obliged to distribute among those, who prepare, in the nicest manner, that little which he himself makes use of, among those who fit up the palace in which this little is to be consumed, among those who provide and keep in order all the different baubles and trinkets, which are employed in the oeconomy of greatness; all of whom derive from his luxury and caprice, that share of the necessaries of life, which they would in vain have expected from his humanity or his justice. ... The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.This is all very famous stuff from Smith. The vain love of useless luxury leads the rich man to squander his wealth and (unintentionally) to share it with the poor.
Smith returns to these "trinkets and baubles" in the Wealth of Nations, this time to explain the way commerce destroys the rapacious feudal aristocracy. In pre-commercial societies, feudal elites spent their wealth to maintain their vassals and retainers. They used their wealth, in other words, to entrench their political power. (Their ultimate motivation in so doing is again a form of vanity, but this time the vain love of social domination).
Trade serves to destroy their social and political power because it dangles in front of them a new potential object of their vanity: Luxury goods. These trinkets and baubles provide a new way for the feudal aristocrat to distinguish himself. His vain conspicuous consumption will set him apart from the poor. Yet by buying these trinkets, he ceases to fund his retainers, thereby undermining his source of political power:
But what all the violence of the feudal institutions could never have effected, the silent and insensible operation of foreign commerce and manufactures gradually brought about. These gradually furnished the great proprietors with something for which they could exchange the whole surplus of their lands, and which they could consume themselves without sharing it either with tenants or retainers. All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind. As soon, therefore, as they could find a method of consuming the whole value of their rents themselves, they had no disposition to share them with any other persons. For a pair of diamond buckles perhaps, or for something as frivolous and useless, they exchanged the maintenance, or what is the same thing, the price of the maintenance of a thousand men for a year, and with it the whole weight and authority which it could give them. ... for the gratification of the most childish, the meanest and the most sordid of all vanities, they gradually bartered their whole power and authority.Again, these are familiar passages for Smith scholars. Vain conspicuous consumption brings down the feudal elite. Luxury thus serves a historically progressive role in liberating and enriching the peasants.
Rousseau, of course, was a great critic of vain, luxury consumption. Where Smith saw it as a (surprising) driver of social progress, Rousseau took luxury to be the ultimate symbol of decadence and moral corruption.
I recently came across a very striking passage on precisely this Smithian question in Rousseau's "Considerations on the Government of Poland." (This is a very interesting text in its own right, as is its companion piece the "Constitutional Project for Corsica," which explicitly defends a system of money-less economic central planning).
The text on Poland is full of wonderful passages, like the following:
Today, no matter what people may say, there are no longer any Frenchmen, Germans, Spaniards, or even Englishmen; there are only Europeans. All have the same tastes, the same passions, the same manners, for no one has been shaped along national lines by peculiar institutions. All, in the same circumstances, will do the same things; all will call themselves unselfish, and be rascals; all will talk of the public welfare, and think only of themselves; all will praise moderation, and wish to be as rich as Croesus. They have no ambition but for luxury, they have no passion but for gold; sure that money will buy them all their hearts desire, they all are ready to sell themselves to the first bidder. What do they care what master they obey, under the laws of what state they live? Provided they can find money to steal and women to corrupt, they feel at home in any country.But what most interested me is that Rousseau defends the EXACT OPPOSITE position from Smith in WN. Smith celebrated the nobility's suicidal destruction of their own political power in favor of useless, conspicuous consumption. He thought (not unreasonably) that the decline of feudal predation represented a major improvement. Yet Rousseau is NOSTALGIC for the power over retainers that the feudal nobility used to exercise. He PREFERS their vain exertion of domination of men to their modern, childish luxury consumption. There is something noble and exhilarating about the old form of social power. It is far superior to the decadence of the modern rich:
Where inequality reigns, I must confess, it is very hard to eliminate all luxury. But would it not be possible to change the objects of this luxury and thus make its example less pernicious? For instance, the impoverished nobility of Poland formerly attached themselves to the magnates, who gave them education and subsistence as retainers. There you see a truly great and noble form of luxury, the inconveniences of which I fully recognise, but which, far from debasing souls, elevates them, gives them sensibility and resilience; among the Romans, a similar custom led to no abuses as long as the Republic endured. I have read that the Duc d'Épernon, encountering one day the Duc de Sully, wanted to pick a quarrel with him; but that, having only six hundred gentlemen in his entourage, he did not dare attack Sully, who had eight hundred. I doubt that luxury of this sort leaves much room for baubles; and the example it gives will at least not serve to seduce the poor. Bring back the magnates of Poland to the point of desiring no other form of luxury; the result may be divisions, parties, quarrels; but the nation will not be corrupted. In addition, let us tolerate military luxury, the luxury of arms and horses; but let all effeminate adornments be held in contempt; and if the women cannot be persuaded to abandon them, let them at least learn to disdain and disapprove of them in men.The vanity of war and feudal responsibility is to be preferred over the vanity of trinkets and baubles.
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