Taxing the rich. Eliminating tariffs. Ending monopolies.
These are the rallying cries of many current economic debates. They could easily have come from the pen of the legendary economist Adam Smith, hailed by some as the “father of capitalism” and by others as an early progressive.
Smith knew nothing of Donald Trump or tech billionaires when he railed against commercial protectionism and extreme opulence in “The Wealth of Nations,” the most widely read economic work in history, celebrating its 250th anniversary this Monday.
“It is the maxim of every prudent master of a household never to attempt to make at home what it will cost him more to make than to buy,” wrote the Scotsman in this seminal work.
“Would it not be a reasonable law to prohibit the importation of all foreign wines, simply to encourage the production of claret and burgundy in Scotland?” he added.
The founding text of classical economics was published on March 9, 1776, the same year as the Declaration of Independence of the United States, 13 years before the French Revolution, and amidst the early convulsions of the industrial age.
Yet, it is not difficult to find parallels between the doctrines denounced in the book – such as rival mercantilist empires seeking to minimize imports and maximize exports – and the commercial tactics of President Trump, as well as his “America First” creed today.
And while Smith is most often cited for his zeal for free markets and free trade, when it comes to wealth distribution, he could almost be likened to Bernie Sanders or Alexandria Ocasio-Cortez, the American left-wing lawmakers.
“It is not very unreasonable that the rich should contribute to the public expenses, not only in proportion to their income, but for something more than this proportion,” wrote Smith in this more than 1,000-page tome, which covers everything from vine cultivation to pin manufactures.
“No society can surely be flourishing and happy, of which the greater part of the members are poor and miserable,” he said in one of his most famous quotes.
DEBATES RAGE ON ABOUT THE MEANING OF HIS THOUGHT
Many experts of the work – titled “An Inquiry into the Nature and Causes of the Wealth of Nations” in full – argue that it remains disturbingly relevant to the economic issues of our time, although debates continue to rage on what Smith really said.
Supporters of free-market economics have long claimed him as their spiritual father, while some more recent readings even depict him as a moderate progressive – close to a modern European social democrat leaning left.
“One can find a ‘Smith’ to support whatever one wants to say,” said Leo Steeds, a researcher at King’s College London, regarding the Scottish Enlightenment thinker.
Smith also believed that there were certain circumstances where tariffs were necessary, either because of unfair exchange conditions or for security reasons – arguments increasingly heard in the United States, Europe, and other trade blocs.
“Smith understood these arguments,” said Eamonn Butler, director of the Adam Smith Institute, a liberal think tank in London. “But he believed that these measures (tariffs) should be as temporary as possible. He thought that the more trade, the better everyone is.”
THE SLEIGHT OF HAND OF THE “INVISIBLE HAND”
One of the most famous metaphors in “The Wealth of Nations” is that of the “invisible hand,” often interpreted as the way free markets guide the personal interests of different participants toward the best outcome for all.
“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,” wrote Smith.
But other analysts of the work note that the metaphor of the invisible hand is only used once in the book and must be considered in parallel with his broader arguments, rather than used to justify laissez-faire policies.
“This book… is actually a critique of how special interests, monopolists, powerful people, and lobbies capture the state,” said Pratap Bhanu Mehta, a prominent Indian academic and intellectual.
“He says: you fix that, and then free markets come.”
American economist Joseph Stiglitz, a professor at Columbia University and Nobel laureate, agrees.
“It was much more about a clear self-interest looking at society more broadly,” he said. “Modern economics is based on infinitely selfish individuals. And clearly, Adam Smith did not believe in that.”
Indeed, Smith – who taught moral philosophy at the University of Glasgow – is explicit about his views on egoism at the expense of others.
“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,” he wrote.
“A TOOL TO PRODUCE IDEAS”
Events marking the 250th anniversary of “The Wealth of Nations” are taking place throughout the year in Glasgow, Edinburgh, London, and Kirkcaldy, Smith’s hometown on the Scottish coast.
Despite his lasting impact on popular imagination, there are limits to how Smith can be reclassified as a progressive or anything else by today’s standards.
While he criticized the rich and supported the idea that wealth accumulation by a few leads to the poverty of the many, Mehta argues that Smith, like many of his contemporaries, would have accepted levels of inequality unacceptable today.
Others – including Karl Marx decades later – criticized Smith’s ideas on the division of labor into small tasks, aimed at increasing production, as being deployed in factories to leave workers with menial and mind-numbing jobs.
Nevertheless, economic historian Richard van den Berg, a professor at Goldsmiths, University of London, stated that the many questions and diverging interpretations surrounding the book had clearly not diminished its appeal for subsequent generations.
“It is a tool,” he said. “A tool to produce ideas.”
