The Wealth of Nations

Globe and Mail Update – 50 greatest books: The Wealth of Nations
April 5, 2008

Adam Smith’s Wealth of Nations, which appeared in London and Edinburgh in March, 1776, is to the modern intellect as important as the United States Declaration of Independence signed in Philadelphia that summer. At least 12 years in the writing, and 25 in the thinking, An Inquiry Into the Nature and Causes of the Wealth of Nations established an entirely modern way of looking at history and society.

Up to then, the rise and decay of states had been a theme for moralists or factional politicians, who peddled class and national loyalties, every sort of special pleading and odd bits of the supernatural. In contrast, as Irish philosopher Edmund Burke put it, Smith presented “a compleat analysis” of society not just in its industrial and commercial life, but in the arts, finance, justice, the military, the religious and educational establishments and the public administration.

Smith, a Scottish moral philosopher of peculiarly beautiful character and old-fashioned bachelor habits, was born in 1723 in a windswept country that was then one of the most backward in Europe, misruled by a delinquent aristocracy and a fanatical church just longing for the world to end. Scotland had lately been frog-marched into a forced union with its powerful neighbour to the south.

Smith used his deep knowledge of history and his profound curiosity to address Scotland’s plight through a pair of interlocking questions: Why are some countries rich and others poor? What is wealth anyway?
Wealth of Nations

His answers are self-evident to us, but only because The Wealth of Nations and the school of political economy that grew out of it have made them so. To attain opulence, a people needs just liberty of movement and profession, security, specialization or what he called the division of labour, an exact administration of justice, a restrained public administration paid for out of clear and fair taxes, and vigilance against special interests.

As for wealth, it is not, as the ancien régime thought, a matter of accumulation of gold and silver or costly colonies, but consumption, and consumption not by a spendthrift Crown and aristocracy, but by the poor. The wealth of a country can be measured in the access of the poor to the necessities and amenities of life.

Because Smith was writing before the great division of political life into left and right at the French Revolution of 1789, he has always had passionate adherents on both sides of the political house: on the left, Tom Paine and Karl Marx and the present British Prime Minister, Gordon Brown; on the right, Margaret Thatcher, Ronald Reagan and every businessmen’s club from Vancouver to Melbourne. The left Smithians like the master’s concern for the labouring poor and his contempt for colonialism, the right Smithians his withering attacks on big government.

Though his prose is as clear as Scottish burn water, and he is very, very funny, Smith is thought to be a difficult writer. No philosopher is so misquoted. Even the British banknotes misquote him. The two main fallacies, which are really just the reintroduction into economic philosophy of the supernatural, are that Smith believed that free markets repair all injuries of their own making (the “invisible hand” fallacy) and that the story of humanity has ended with modern Anglo-Saxon society. How could the greatest moral philosopher of his age abolish the moral problem? Or a great classical scholar ignore the fate of the Roman Empire? It would be much better if people read Smith more and praised him less.

And his faults? Well, in all the thousand pages of The Wealth of Nations there is one single reference to women — and it is both quixotic and hopelessly ill-informed.

Meanwhile, Smith was writing at the dawn of the industrial age and saw no limit to the bounty of the Earth or its improvement through the labour of a free and well-educated citizenry. He could not foresee that his “obvious and simple system of natural liberty” would, in the succeeding two centuries, do grave injury not only to the amenity of life but to nature itself.

Then again, nobody else in 1776 predicted we would convert our world into a slum.

James Buchan is the author of “Adam Smith and the Pursuit of Perfect Liberty.”

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