An Inquiry into the Nature and Causes of the Wealth of Nations was first published in 1776. Several revisions appeared over the next decade. It was the first great work of political economy.The major work of the philosopher Adam Smith.
An Inquiry into the Nature and Causes of the Wealth of Nations was first published in 1776. Several revisions appeared over the next decade. It was the first great work of political economy.
The work sets out to explain the interior workings of capitalism, which in Smith's analysis is the fourth stage of human social organization, after the original state of hunters, followed by nomadic agriculture and the agriculture of large estates under feudalism. Each stage develops its own political institutions: In the hunter society "there is scarce any property . . . ; so there is seldom any established magistrate or any regular administration of justice." Agriculture and husbandry introduce private property, which causes the development of state authority and social inequality:
From these beginnings Smith describes the development of feudalism and its evolution into capitalism, which he called the system of perfect liberty because the motor of its progress are the many free decisions of individuals, who unknowingly and not necessarily with intent drive society forward.
The work contains a description of the mechanism of economic growth based on division of labour and increased scale of the industrial process. It anticipates declining profit and eventual stagnation. There is much overlap between Smith's analysis and the analysis of Karl Marx in Das Kapital. This is all the more remarkable because Smith lived in the age of pre-industrial capitalism and had no experience of big industrial complexes.
The major difference between Smith and Marx is the role of the individual in the process. Smith sees capitalism driven by the actions of individuals, who make decisions driven by selfishness, reason and sympathy for others. A century later Marx had seen the trade unions and emerging socialist parties and realized that the actions of individuals converge into class action and capitalism is determined by class struggle.
Heilbroner, R. L. (1995) Adam Smith. Encyclopaedia Britannica 15th ed.
Illustration: public domain