The true mark of genius, according to Goethe, is ‘posthumous productivity’. Adam Smith, then, must be considered a genius indeed. His words have entered the lexicon. In 2007, he became the first Scot to feature on a banknote issued by the Bank of England. Quite right, too: it is little exaggeration to say that Smith laid the foundation stone for modern free-market economics.

Like most thinkers, Smith had few original insights of his own. His skills were as an aggregator and expositor. But here his brilliance is beyond doubt. An Inquiry into the Nature and Causes of the Wealth of Nations, his most famous work, opens with a description of how a clear division of labour enhances productivity in a pin factory. Smith provided the metaphor of an ‘invisible hand’ to describe the way free markets coordinate individual activities. His central economic insight was that in healthy markets, self-interest could drive the common good: ‘It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.’

These Smithisms have long since shifted into the category of cliché, as the Conservative MP Jesse Norman knows. ‘Politicians, academics and pub bores around the world have found the authority of The Wealth of Nations and the simplicity of its core ideas an irresistible combination, and routinely draw on them to dignify and adorn their own beliefs or arguments,’ he writes. ‘The result has been to obscure Smith, to mistake the range and power of his ideas and to breed myths without number.’

The received view of Smith is as the founding father of laissez-faire economics (the institute that bears his name certainly provided intellectual fuel to the laissez-faire policies of Margaret Thatcher). But as Norman – mostly correctly – argues, this is wrong, or at least an incomplete view. His goal is to round it out. He is not engaged, however, in just an intellectual exercise. He is battling for the soul of modern conservatism and he wants Smith on his side.

In July 2008, a ten-foot statue of Smith was unveiled in Edinburgh. Behind him is a beehive, a tribute to Smith’s views on the link between individual endeavour and social order. His hand rests on a globe, a reminder of his support for free trade. The timing was inauspicious. The UK economy was shrinking and on the brink of recession. The culprit? Free markets, especially in capital. The political presumption in favour of free markets and free trade, only modestly tempered in the ‘Third Way’ politics of Blair, Schroeder and Clinton, was shattered by the financial crisis that broke two months later.

If Smith is the father of the free market, and the free market has caused such havoc, will they fall together? Norman is afraid so. But he insists, repeatedly and correctly, that Smith was far from a free-market ideologue. ‘He was not a market fundamentalist, an economic libertarian, or in that strong sense a laissez-faire economist. He was not an advocate of selfishness, pro-rich or a misogynist, the creator of homo economicus or the founder of predatory capitalism.’

Like most reinterpreters of Smith, Norman pays considerable attention to his other main work, The Theory of Moral Sentiments. In this book, Smith focuses on the development of moral and social norms. Drawing heavily on the writings of David Hume, his friend and mentor, Smith outlines the importance of self-examination, of becoming an ‘impartial spectator’: ‘To judge of ourselves as we judge of others … is the greatest exertion of candour and impartiality. In order to do this, we must look at ourselves with the same eyes with which we look at others: we must imagine ourselves not the actors, but the spectators of our own character and conduct.’

Smith’s argument for markets is in large part an argument for exchange, not merely of goods and services, but also of regard and respect. Social interaction encourages the impartial spectator in all of us. It is not in a state of nature but in society that we develop our characters most effectively. The retreat from open exchange and discourse is therefore morally corrosive. ‘Of all the corrupters of moral sentiments,’ Smith writes, ‘faction and fanaticism have always been by far the greatest.’

Smith’s most important work was produced while he was professor of moral philosophy, and he spent the last year of his life extensively revising not The Wealth of Nations but The Theory of Moral Sentiments. (Hume, by contrast, in his later years told his publisher that he would produce no more books on the grounds that he was ‘too old, too fat, too lazy and too rich’.)

Norman is not the first politician to offer us a less desiccated Smith. Gordon Brown claimed Smith for New Labour. Brown’s favourite Smithism was, ‘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.’ Brown – like Smith, a child of Kirkcaldy – invoked his writings in support of a society of mutual respect and responsibility, where the invisible hand of the market was complemented by the ‘helping hand’ of society.

Brown’s take on Smith is shared by others. The American conservative thinker Gertrude Himmelfarb, as brilliant on the Scottish Enlightenment as she is bonkers on US domestic policy, has pointed out that Smith was ‘notably progressive’ in his views on public education, taxation and labour market regulation. Take Smith on laws governing the balance of power between workers and bosses: ‘Whenever the legislature attempts to regulate the differences between masters and their workmen, its counsellors are always the masters. When the regulation, therefore, is in favour of the workmen, it is always just and equitable; but it is sometimes otherwise when it is in favour of the masters.’ Or on taxation of property: ‘A tax upon house-rents … would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.’

To Norman, Smith’s enthusiasm for the progressive potential of markets (when tempered by appropriate regulation) and his moral sensibilities make him ‘a moderate small-c conservative’. To which a cynic might respond: well he would say that, wouldn’t he? All of us want to see ourselves reflected in the eyes of our intellectual heroes. But Norman exonerates Smith too easily for the development of modern economics towards a laissez-faire model. Smith argued for markets not on purely instrumental grounds but by appealing to timeless laws. Strongly influenced by Newtonian physics – his first book was on the history of astronomy – Smith set out nothing short of a ‘system of natural liberty’.  To Smith, the operations of the market were akin to the movement of celestial bodies. It was partly for this reason that critics considered Smith to have been infected with the irreligiosity of Hume. John Ruskin, for instance, summarised his philosophy as: ‘Thou shalt hate the Lord thy God, damn His Laws, and covet thy neighbour’s goods.’

Norman’s book is broken up into three sections: on Smith’s life, thought and impact. This gives it an uneven feel and leads to some repetition. The main benefit is that readers can select what aspect of Smith they care most about. Few, I suspect, will want to know very much about Smith’s life, which, despite the turbulence of the era in which he lived, was almost remarkably unremarkable. With the exception of one excursion to France, allowing him to spend time with Voltaire and debate the Parisian physiocrats (the true originators of laissez-faire ideas), Smith spent his time cloistered in universities and debating clubs in Oxford, Glasgow, London and Edinburgh, before finishing his working years as commissioner of customs in the Scottish capital.

Norman’s discussion of Smith’s ideas on the development of social norms and moral codes provides his strongest intellectual showing. But readers looking for illumination on contemporary politics are likely to skip forward to the third section, where Smith’s ideas are brought to bear on the political challenges of today. Norman does not mince words: ‘As an ideology, neoliberalism is dead.’ He argues that the idea of open markets ‘must be challenged, revised and renewed to remain legitimate’ and that ‘if it is not challenged by those who believe in it’ then ‘it will be challenged by those who wish to destroy it’. Norman stops short of naming names, but it is not hard to imagine whom he might have in mind.

Norman attacks crony capitalism of all kinds and calls Smith as a witness for the prosecution. He makes a case for regulating markets to ensure more competition, aptly quoting investor Peter Thiel’s comment that ‘competition is for losers’. He worries about the power of the large technology companies. There is a sentence stating flatly, and uncontroversially, that the retail electricity markets are an example of cronyism at work. So what is to be done? Norman is on strong ground when he points to the deleterious consequences of separating economics not only from moral philosophy but from politics too. But he only hints at what the remoralisation of the market would look like in practice.

The attempts by his Conservative colleagues to fashion fresh policy agendas – Theresa May’s new industrial strategy, Greg Clark’s attempts to improve corporate governance, Michael Gove’s environmental drive – have yet to amount to much. The question Norman must face up to is how important a role Smith has to play here. Few voters in marginal constituencies are waiting for the Conservative Party to apply Smith’s theory of moral economy more accurately before deciding how to cast their ballots.

Norman is a member of an endangered species: the thinking politician. For the moment, the backbenches are supplying him with some refuge from the shambles of the Conservative government. He is also a fine writer, as his earlier study of Edmund Burke showed. But I fear that defending an 18th-century agrarian economist against – well, against whom exactly? – is not the best use of Norman’s time. It might be better for him to get stuck into the daily duties of a parliamentarian.

Politics is in a febrile state. The relationship between market economics and conservatism is a fraught one and in need of renewal. Norman believes that the challenge is to develop new ideas. But right now, actions are likely to speak louder than words.