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Adam Smith Writes The Wealth of Nations:

1776

 

Adam Smith, a Scottish political economist and philosopher, wrote The Wealth of Nations in 1776. This landmark book, fully titled An Inquiry Into the Nature and Causes of the Wealth of Nations, was written during the years of strife between Britain and its colonies and published the same year as the American "Declaration of Independence." The Wealth of Nations became the foremost manifesto against mercantilism and for free trade.

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Smith was appointed professor of logic at Glasgow University in 1751 where he became chair of moral philosophy in 1752. During his years at the school, Smith lectured in ethics, rhetoric, jurisprudence and political economy. In 1759 he published Theory of Moral Sentiments, which is often considered the psychological foundation of The Wealth of Nations. In this work Smith explained that human beings are driven by passion, but at the same time, regulated by reason. From this observation, he concluded that human involvement in economics is "led by an invisible hand...without knowing it, to advance the interest of the society." After this publication, he began to focus on jurisprudence and political economy. In 1763 he resigned his professorship to become the tutor of the duke of Buccleuch. Fifteen years later, he was appointed commissioner of customs in Scotland.

Excessive regulation of colonial trade by parent countries alarmed Smith, and he wrote The Wealth of Nations mainly as a reaction to the mercantilist system. In this book, Smith describes the five main stages he saw in the historical evolution of society: the state of hunters, the state of nomadic agriculture, the state of feudal or manorial farming, and the state of commercial interdependence. The final stage was the system of perfect liberty, and it became known as laissez-faire capitalism. The shift from one stage to another, according to Smith, was induced by the desire for self-betterment and guided by reason.

Humans chose to move on to capitalism because of the extraordinary benefits it allowed them, said Smith, who discussed the nature of labor and production and their effect on the populace. Economic growth came mainly from the division of labor, which allowed for efficiency and productivity. With greater production individuals, companies, and even entire nations could enjoy wealth, which Smith defined wealth as the capability to enjoy the necessities, conveniences, and amusements of life.

The economic market, according to Smith, was a self-correcting mechanism which did not need to be regulated by government. The "invisible hand" was sufficient to guide economics, and humans were capable of properly following its lead. In a capitalist system, business owners freely managed their own companies and workers freely chose their pursuits. By nature, noted Smith, humans work better when they are striving for personal profits than when they are aiming for the public good. With self-interest as a motivator, capitalism was able to flourish through individual efforts.

Some of Smith's arguments are often misinterpreted as encouraging greed, yet Smith did not explicitly promote avarice. Smith discussed labor as being solely motivated by the desire to gain profit, and he explained how individuals and nations strive to gain and maintain wealth. Yet Smith was merely describing humanity as he saw it, and he provided a practical response to the selfishness inherent in humans. Although capitalism, as seen in Smith's literature, does require an amount of self-interest, Smith neither created nor condoned greed--he only encouraged a productive outlet for a characteristic that has always existed in humanity.

Clearly, The Wealth of Nations, with its introduction of capitalism, was a revolutionary book. Smith remarkably changed the nature of labor by making it more efficient through division and more desirable through self-motivation. These changes have had significant influence on production and have caused capitalism to flourish. In the last 200 years, capitalism has grown and thrived in most of the Western world, and its enormous economic impact on the entire world is apparent to all. Since its appearance in 1776, Smith's publication remains the most important book on political economy.

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