As the world reels under crisis, the creed of market economics does not appear to have delivered on its promise to empower all men acting individually in the pursuit of their own self interest in an open market.
While the free market ideal seemed promising, the negative realities of an unmoderated market economy under the 2008 and Coronavirus crises have revealed some of the limitations in Adam Smith’s Philosophy.
Nevertheless, his theories in the Wealth Of Nations have influenced classical Economics and the modern world the most.
Adam Smith was born on the East Coast of Scotland. At age of 14 he was admitted to the University of Glasgow, and in 1740 he proceeded to Oxford University on a Scholarship. In 1751 was appointed a Professor at Glasgow University.
Like Karl Marx, Smith was concerned with the workings of an Economy, and in particular the logic of individual Economic actors. In 1759 he published the Theory of Moral Sentiments which was a great success, becoming influential within the ranks of Europe’s prominent Enlightenment Philosophers.
During the 1760s Smith toured Europe where he observed that Economic activity was heavily regulated by European Governments which led him to consider an alternative system with minimal Government inteference.
In Smith’s view, the foundation of Economic activity was individual self-interest, and so economic prosperity for all could best be achieved through open markets that allowed equal participation in the pursuit of self-interest and competition.
An important cornerstone of his Theory was that the expansion of markets essential, and therefore anything that hindered the growth of Markets like Tariffs and other restrictions imposed by Guilds and Governments should be eliminated.
According to Smith, such an unregulated free market trade system would provide sustainable wealth for the whole nation guided by what he described as the invisible hand of the market which would ensure optimal market efficiency in a free market economy characterised by natural competition.
The publication of the Wealth Of Nations in 1776 coincided with the Industrial Revolution, and his work greatly influenced the Economic model and policies that have been pursued in the Western world since then.
Adam Smith passed away in 1790 after a spell as a Postal Administrator in the Scottish Government, and today he is recognised as the founding father of classical Economic Liberalism.
Since the 2008 Financial Crisis, his ideas have been constantly revisited, and with the now apparent failures of Globalization, the wisdom of classical Economic Liberalism has been brought into question as Free Market Economics has produced Oligarchies and widespread Global Poverty instead of being the Guarantor of the wealth of nations as Smith envisioned.
In addition, Smith’s theories have now also been criticised for being influenced by the structural Racism of his time, pointing to the ‘distinction’ between the ‘Civilised’ and ‘Savage’ Nations underpinning the World Of Nations.
As Adam Smith himself put it:
“Such (Savage) nations, however, are so miserably poor, that, from mere want, they are frequently reduced […] to the necessity sometimes of directly destroying, and sometimes of abandoning their infants, their old people, and those afflicted with lingering diseases, to perish with hunger, or to be devoured by wild beasts.
Among civilised and thriving nations, on the contrary […] the produce of the whole labour of the society is so great, that all are often abundantly supplied, and a workman, even of the lowest and poorest order, if he is frugal and industrious, may enjoy a greater share of the necessaries and conveniences of life than it is possible for any savage to acquire.”
These “savage” peoples all from South America, Asia and Africa are labelled as inferior and subject to persistent racial insults.
In the final analysis, despite its drawbacks, the influence of Adam Smith’s work on our modern world is undeniable.
However, today much like the world during Smith’s own time needed new Economic ideas, our world may need to transcend classical Liberal Economics in order to create a viable alternative for the future.