Tax the rich. Remove customs duties. End monopolies.
These are the rallying cries of many current economic debates. They could just as easily come from the pen of 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 wealth in “The Wealth of Nations”, the most widely read economics work in history, celebrating its 250th anniversary this Monday.
“It is the maxim of every prudent master of a house never to attempt to make at home what it will cost him more to make than to buy,” wrote the Scot in this seminal work.
“Would it be a reasonable law to prohibit the importation of all foreign wines, simply to encourage the production of claret and burgundy in Scotland?” he adds.
The foundational 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 era.
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” credo today.
And although Smith is most often cited for his zeal for free markets and free trade, when it comes to wealth distribution, he almost resembles Bernie Sanders or Alexandria Ocasio-Cortez, 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 that proportion,” writes Smith in this over 1,000-page tome, which covers everything from vine cultivation to pin manufacturing.
“No society can surely be flourishing and happy, of which the greater part of the members are poor and miserable,” he says in one of his most famous quotes.
DEBATES RAGE ON THE MEANING OF HIS THINKING
Many scholars of the work – whose full title is “An Inquiry into the Nature and Causes of the Wealth of Nations” – claim it remains hauntingly relevant to the economic issues of our time, although debates continue to rage on what Smith actually said.
Supporters of the market economy have long claimed him as their spiritual father, while some more recent readings even portray him as a moderate progressive – akin to a modern European social democrat leaning left.
“One can find a ‘Smith’ to support whatever one wants to say,” said Leo Steeds, researcher at King’s College London, about the Scottish Enlightenment thinker.
Smith also understood that there were certain circumstances where customs duties were necessary, either because exchange conditions were unfair or for security reasons – arguments increasingly heard in the US, 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 thought these measures (duties) should be as temporary as possible. He believed that the more trade there is, the better off everyone is.”
THE SLEIGHT OF HAND OF THE “INVISIBLE HAND”
One of the most famous metaphors from “The Wealth of Nations” is that of the “invisible hand”, often interpreted as the way free markets guide the self-interest of different participants towards 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,” writes Smith.
But other analysts of the work note that the metaphor of the invisible hand is used only once in the book and must be considered alongside 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 lobbyists capture the state,” said Pratap Bhanu Mehta, a prominent Indian scholar and intellectual.
“He says: you fix that, and then free markets emerge.”
American economist Joseph Stiglitz, 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 in his views on egoism to the detriment 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.
As a sign of his lasting impact on popular imagination, Smith’s ghost appeared last year as a character in a satirical musical comedy performed during the Edinburgh Festival on the collapse of the Royal Bank of Scotland in 2008.
However, there are limits to how much Smith can be reclassified as a progressive or anything else in today’s terms.
While he criticized the rich and supported the idea that the accumulation of wealth by a few led to the poverty of the many, Mehta argues that Smith, like many of his contemporaries, would have accepted levels of inequality that are unacceptable today.
Others – including Karl Marx decades later – have criticized Smith’s ideas on division of labor into small tasks, aimed at increasing production, as being deployed in factories to leave workers with moralizing and stupefying jobs.
Nevertheless, economic historian Richard van den Berg, professor at Goldsmiths, University of London, said the many questions and divergent interpretations surrounding the book had clearly not diminished its appeal for subsequent generations.
“It is a tool,” he said. “A tool to produce ideas.”
