Adam Smith published The Wealth of Nations in 1776 – not as a textbook, but as a polemical cannon aimed at governments that were subsidizing and protecting their merchants, their farmers, their manufacturers, against “unfair” competition, at home or from imports. Smith set out to demolish the mercantilist theory from which those politics flowed. He challenged the powerful interests who were profiting from unfree markets, collusive prices, tariffs and subsidies, and obsolete ways of producing things.
So comprehensive is its range, so perceptive its probings, that it can dance, within one conceptual scheme, from the diamond mines of Golconda to the price of Chinese silver in Peru; from the fisheries of Holland to the plight of Irish prostitutes in London. It links a thousand apparently unrelated oddities into unexpected chains of consequence.
Do the Wall Street shuffle
Hear the money rustle
Watch the greenbacks tumble
Feel the Sterling crumble
You need a yen to make a mark
If you wanna make money
You need the luck to make a buck
If you wanna be Getty, Rothschild
You’ve gotta be cool on Wall Street
You’ve gotta be cool on Wall Street
When your index is low
Dow Jones ain’t got time for the bums
They wind up on skid row with holes in their pockets
They plead with you, buddy can you spare the dime
But you ain’t got the time …
Is it the wealth of nations and the poverty of the individual? Is a creeping Slumdog Millionaire the result of the inevitable march of capitalism; a reflection of the positive humanistic belief in the progress of humankind. In “The Wealth of Nations” Adam Smith gave the world a new witty and literate perception of the dismal science. But what would he have said about Verizon, Microsoft and Google?
In Europe Adam Smith made the acquaintance of the physiocratic philosophers and economists Quesnay and Turgot, as well as Voltaire and other notable contemporaries, and used his time and mind well. He then returned to Kirkcaldy Scotland, where, for the next twelve years, subject to lengthly sojourns in London and to the despair of some of his friends who feared he would never finish, he engaged himself in the writing of “The Wealth of Nations”.
This great book was published in 1776, a few weeks before the Declaration of Independence, and if there is coincidence in the dates, there was also association in the events. Unlike his friend David Hume who had died that August, Smith deplored the separation. He had wanted instead full union, full and equal representation of the erstwhile colonies in Parliament, free trade within the Union, equal taxation along with equal representation, and the prospect that, as the American part developed in wealth and population, the capital would be removed from London to some new Constantinople in the West. Practical men must have shuddered.
Oh, Howard Hughes
Did your money make you better?
Are you waiting for the hour
When you can screw me?
‘Cos you’re big
To do the Wall Street Shuffle
Let your money hustle
Bet you’d sell your mother
You can buy another
You buy and sell
You wheel and deal
But you’re living on instinct
You get a tip
You follow it
And you make a big killing
On Wall Street ( The Wall Street Shuffle, 10cc )
However, “The Wealth of Nations” at least among the knowledgeable, was an immediate success. Gibbon wrote of “the most profound ideas expressed in the most perspicacious language”. Hume, in a much quoted letter was exuberant. “Euge! belle! dear Mr Smith, I am much pleased with your performance, and the perusal of it has taken me from a state of great anxiety. It was a work of so much expectation, by yourself, by your friends, and by the public, that I trembled for its appearance, but am now much relieved. Not but that the reading of it necessarily requires so much attention, and the public is disposed to give so little, that I shall still doubt for some time of its being at first very popular, but it has depth, and solidity, and acuteness, and is so much illustrated by curious facts that it must at last attract the public attention.”
The public response was also good. The first edition was soon sold out. Smith spent the next couple of years in London being, one gathers, much feted by his contemporaries for his accomplishment, and then, having been appointed Commissioner of Customs in Edinburgh, an admirable sinecure, he returned to Scotland. He died in Edinburgh in 1790 at age 67.
“The scale and simplicity of the Madoff scam seems to be moving the conventional wisdom in a sober new direction: We all fooled ourselves somehow by believing vast wealth could be easily generated. But here is a bit of actual wisdom, courtesy of Adam Smith:
But the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin.”
By this time, “The Wealth of Nations”, though at first ignored by politicians , was having an influence on men of affairs. A year and a half after Smith’s death, Pitt, introducing his budget, gave the economist a rounding endorsement as proposing the best solution regarding all the myriad questions concerning the ideal system of political economy.
Smith has not been a popular subject for biographers. He was a bachelor. His best-remembered personal trait was his absent-mindedness. Once, according to legend, he fell into deep thought and walked fifteen miles in his dressing gown before regaining consciousness. His manuscripts, by his instruction, were destroyed at his death. He disliked writing letters, and few of these have survived. If Smith’s life has attracted little attention, perhaps it is because so much attention has centered on ” Inquiry into the nature and Causes of the Wealth of Nations” , to give the title of his masterpiece the full resonance.
With “Das Kapital” and the Bible, “Wealth of Nations” enjoys the distinction of being one of the three books that people may refer to at will without feeling they should have read it. Scholarly dispute of what is Smith’s principal contribution has gone on endlessly. This is partly because there is so much in the book that every reader has full opportunity to exercise his own preference.
One achievement has been his gift for language. Few writers ever, and unlikely any economist since, have been as amusing, lucid, or resourceful; or on occasion as devastating. Most rightly remember his conclusion “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” He also noted that “The late resolution of the Quakers in Pennsylvania to set at liberty all their negro slaves may satisfy us that their number cannot be very great” .
And, anticipating Thorstain Veblen, that ” With the greater part of rich people , the chief enjoyment of richesconsistes in the parade of riches. ” On the function or nonfunction of stockholders , no one in the next two centuries was more penetrating in however many words: “Stockholders seldom pretend to understand anything of the business of the company, and when the spirit of faction happens not to prevail among them, give themselves no trouble about it, but receive contentedly such half-yearly or yearly dividend, as the directors think proper to make them.”
One of Smith’s most famous observations, it may be noted, is not in “Wealth of Nations” . On hearing from Sir John Sinclair in October 1777, that Burgoyne had surrendered at Saratoga and of his friend’s fear that the nation was ruined, Smith said, “There is a great deal of ruin in a nation.” As a writer Smith was a superb carpenter but a poor architect. The facts appear in lengthly digressions that have been criticized as such, requiring much discrimination and a love of expository prose and “curious facts.”
It is a clumsy, sprawling, elephantine book. The facts are suffocating, the digressions interminable, the pace as maddening as the title is uninviting: An Inquiry into the Nature and Causes of the Wealth of Nations. But it is one of the towering achievements of the human mind: a masterwork of observation and analysis, of ingenious correlations, inspired theorizings, and a persistent and powerful cerebration of delightful ironies that amounted to a direct attack on the business corporation which he deplored.
Adam Smith on self interest:”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 self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own neccessities but of their advantages.”