Corn Laws and Witchcraft

In his critique of the Corn Laws, Adam Smith argues that the ancient English laws against "engrossers and forestallers" derive from two fallacious popular prejudices. The first is the fear that high corn prices harm the people. Smith thinks he has already dismissed that worry with his defense of disciplinary price gouging in times of scarcity. The second related fear is that merchants will buy up the supply of corn for the sake of selling it back at a higher price in the future. Smith thinks that the equilibrating power of the market resolves that worry. Either the merchant rightly predicts a coming scarcity, in which case his higher prices will benefit the people by inculcating thrift, OR he judges wrongly, and the market will duly punish him for failing to sell the corn at a profit when he had the chance.

Neither engrossing nor forestalling pose any real threat to the domestic market. Yet these remain the object of irrational, hysterical popular opposition:

The popular fear of engrossing and forestalling may be compared to the popular terrors and suspicions of witchcraft. The unfortunate wretches accused of this latter crime were not more innocent of the misfortunes imputed to them, than those who have been accused of the former. The law which put an end to all prosecutions against witchcraft, which put it out of any man's power to gratify his own malice by accusing his neighbour of that imaginary crime, seems effectually to have put an end to those fears and suspicions, by taking away the great cause which encouraged and supported them. The law which should restore entire freedom to the inland trade of corn, would probably prove as effectual to put an end to the popular fears of engrossing and forestalling.

And a few pages later:

The laws concerning corn may every where be compared to the laws concerning religion. The people feel themselves so much interested in what relates either to their subsistence in this life, or to their happiness in a life to come, that government must yield to their prejudices, and, in order to preserve the publick tranquility, establish that system which they approve of. It is upon this account, perhaps, that we seldom find a reasonable system established with regard to either of those two capital objects. 

This is all very interesting. These passages come in some of Smith's most famous and influential arguments. His insistence on the rational, self-regulating character of market forces is explicitly set against the irrational, superstitious prejudices of religion. The superiority of free trade is a kind of economic fact. Reason (free trade) stands against superstition (the corn laws).

E.P. Thompson is attentive to this Smithian line of argument in his classic essay, "The Moral Economy of the English Crowd in the Eighteenth Century." He notes that what Smith and other classical economic critics of the Corn Laws sought to do was "demoralize" the English economy:

By "de-moralizing" it is not suggested that Smith and his colleagues were immoral or were unconcerned for the public good. It is meant, rather, that the new political economy was disinfested of intrusive moral imperatives. The old pamphleteers were moralists first and economists second. In the new economic theory questions as to the moral polity of marketing do not enter, unless as preamble and peroration.

The free, demoralized corn market Smith favored was opposed by the prejudices of the people. As we have just seen, Smith analogizes this irrational opposition to free trade to the hysterical persecution of alleged witches. In both cases the people are moved by some superstitious frenzy to endorse a policy that ultimately harms their own interests.

As Thompson points out, however, Smith's own providential faith in the self-correcting market is at least as superstitious as whatever prejudices structured the pre-capitalist public imagination. What's more, Smith does not provide anything remotely close to a satisfactory empirical argument that the corn trade self-regulates in the manner he describes. All he has really done is lay out an elegant model.

It should not be necessary to argue that the model of a natural and self-adjusting economy, working providentially for the best good of all, is as much a superstition as the notions which upheld the paternalist model - although, curiously, it is a superstition which some economic historians have been the last to abandon. In some respects Smith's model conformed more closely to eighteenth-century realities than did the paternalist; and in symmetry and scope of intellectual construction it was superior. But one should not over- look the specious air of empirical validation which the model carries. Whereas the first appeals to a moral norm - what ought to be men's reciprocal duties - the second appears to say: "this is the way things work, or would work if the State did not interfere". And yet if one considers these sections of The Wealth of Nations they impress less as an essay in empirical enquiry than as a superb, self-validating essay in logic.

Thompson's broad aim in this essay is to uncover an internal moral logic that structured pre-capitalist social opinion. Classical economists like Smith look at the Corn Laws as exercises in brute irrationality. The occasional mob-like defenses of price controls and attacks on free-trading merchants is akin to the hysterical frenzy of a witch-trial. Not so, argues Thompson:

The men and women in the [rioting] crowd were informed by the belief that they were defending traditional rights and customs; and, in general, that they were supported by the wider consensus of the community. On occasion this popular consensus was endorsed by some measure of licence afforded by the authorities. More commonly, the consensus was so strong that it overrode motives of fear or deference. 

It is common to hear that modern economics has made progress. That Smith et al. discovered mistakes and fallacies that afflicted the minds of pre-capitalist peoples. (And indeed, that continue to afflict the minds of late-capitalist peoples). Yet that is simply not the case. The poor understood quite well that price controls on food brought costs. They understood too that there could be long-term benefits from temporary price gouging. These were not hidden, scientific truths that had to be discovered by economists. The past was not stupid, it just had different moral values. Perhaps better moral values.

The popular insistence on price stability and opposition to free trade in corn was not technical but ethical:

It is not easy for us to conceive that there may have been a time, within a smaller and more integrated community, when it appeared to be "unnatural" that any man should profit from the necessities of others, and when it was assumed that, in time of dearth prices of "necessities" should remain at a customary level, even though there might be less all round.

Of course these moral understandings were bound up in Christian religion. But that does not mean they were the functional equivalents of witch-hunting hysteria, as Smith suggests. Religious precepts and customary practices held together a paternalist, pre-capitalist moral consensus, that emphasized social cohesion and stability above all. It was these values that were threatened by abolishing customary price controls and unleashing the forces of the free market. Thompson--a good Marxist--is nostalgic for that feudal paternalism. He looks back to that complex web of mutual reciprocity and price regulation as a source of inspiration in diagnosing the evils of the modern, naked, cash-nexus economy.