The Wealth Of Nations
There is not much of a surprise that Adam Smith, and more particularly this book, are known to be the foundations of modern or rather 'classical' economics. With the ever growing populist demand for a government-controlled economy as well as financial crashes that have been seen within this decade, the importance of understanding his words, and his vision, only grows. Anyone that reads this book and takes away any idea that Smith was a selfish and privileged bastard with no care for the general population, an idea that I have heard many a time, simply failed to take away the true implications of the 'capitalist idea'.
This book served as the key cornerstone to the end of the mercantilist thoughts that ruined much of the wealth of many great countries, obviously, ideas accredited to imperialist ideology and helped to establish an idea that in many ways served the groundwork for the coveted globalised world that we now live in.
He argues clearly against monopolies, especially those propped up by the state like the British East Indian company of his time, giving it the clearest stamp of disapproval by comparing it to the South Sea company, which- well, we all know how that ended.
He argues that a merchant would much rather keep his capital close to him, even if he has to forsake some profit for it, thus providing the countries economy with boost by its own effect, and not needing any government taxes or incentives for it to position capital favourably. The idea of 'the invisible hand' long touted by proponents of socialism as 'bourgeoise' nonsense and supporters of a completely free market as a 'holy-grail' fix, has only been mentioned once in this book. I don't think it's much of a coincidence either, for while being a loud voice for how seemingly selfish actions can turn to the best interest of 'society', Smith also very clearly recognised it's shortfalls.
Smith, while certainly being a proponent for smaller government (justified considering just how BIG government was then, having seen the shortfalls of the East Indian company, or the crashes akin to those of the south sea company), was still a champion of welfare. He advocated for a government that supported education, and other areas that would serve the 'common good' but might not be rightly undertaken by the private sector. This is an idea that must be acknowledged today as we struggle to find the right amount and right kind of government in our economies, in other words, the Goldilocks. If the porridge if ever too hot or too cold, you'll either see gross mismanagement of resources and stagnation of economies or you'll see millions of people unable to participate in the economy due to insufficient safety nets.
On education he was rather scathing, even of Oxford, where he taught, calling the professors there having given up even the 'pretence of teaching'. His fix was to have a mix of a sort of salary and another 'bonus' based upon student feedback, for he acknowledged that government bodies could only force teachers to show up and give lectures- no matter how poorly given.
Along with establishing certain public bodies, Smith saw only two roles for government. The first being the protection of its sovereignty and the second the justice system. All this merely served to affirm my belief in the case for the government (one that actually works), and struck me as oddly Hobbesian? Perhaps my bias plays at work here, yet I truly believe a leviathan would certainly be for free markets... And speaking of armies, he makes an intelligent note on the correlations of its obedience and submission (which is best when one lives with their general, according to him) and it's effectiveness.
Smith also provides great arguments for the 'collective' growth. He says, "Private people who want to make a fortune....resort either to the capital or to some of the great commercial towns. They know that where little wealth circulates, there is little to be got; but that where a great deal is in motion, some share of it may fall to them." From that conclusion, he argues that a nation, in a similar manner, could only make much growth when it is surrounded by similarly rich and commercial nations. With this simple logic, he refuted the long-standing argument that trade is a zero-sum game, that 'wealth' was merely hoarding gold rather than the produce of the people.
He gives a vast number of examples of government intervention during the colonial years, where it has lead to worse. A particular example I recall is of wool manufacturers, claiming that English wool was somehow 'superior' to that found in other parts of the world, and thus convincing the government to ban its exportation. This was so that the English wool manufacturers could create fine cloth that has no competition, sell at high prices around the world and make a considerable wealth from this 'most advantageous balance of trade'. Expectedly all this did was limit British wool producers to the local market, tanking their prices and allowing wool manufacturers to make high profits because the reality stood as follows- English wool was really just shit (Spanish was supposedly better), but intervention only served the merchants and not Britain's economy or the poor wool sellers. This may seem comically obvious now, yet it isn't reassuring to hear politicians lament about 'trade deficits' and hurt economies and companies (cough Harvey Davidson cough) in the name of 'making production great again' or something?
Perhaps one of Smith's ideas I'd argue against are those on 'wages' being the primary income. When he says- "The produce of labour constitutes the natural recompense or wages of labour. In that original state of things, which precedes both the appropriation of land and the accumulation of stock, the whole produce of labour belongs to the labourer. He has neither landlord nor master to share with him." He further explains that in such a 'rude' state of society was demolished when the 'ownership' of private property was introduced and thus giving the way for Marx to argue his theory of labour exploitation. Many economists have tried to argue against this by referring to the risk a capital owner carries, the spending he forgoes to get his capital and also the 'time' theory which says a dollar today would be worth more than a dollar tomorrow thus labour isn't exploited. Here I'd disagree with these economists, Smith and of course Marx in saying that the original income wasn't 'wages' but rather profits, something supported by many classical economists such as Mill, when he said "Demand for commodities, is not demand for labour".
Reading this book, understanding his logic (very vastly justified with examples and data tables) is imperative to educating one about the economy and history. However, I think a key takeaway should also be an openness to discussion, change and implementations of ideas, for it does on good to remember, Smith was ultimately a philosopher. And the conversation in philosophy never ends.