Smith, Adam

(1723–1790)

   The founding theorist of classical political economy, Adam Smith was educated at Glasgow, where he came to know many of the key figures of the Scottish enlightenment, and at Balliol, Oxford. He became friends with David Hume and, in 1751, was offered a post as professor of logic at Glasgow, where he also taught moral philosophy. Smith’s first book, The Theory of Moral Sentiments was as much about the psychology as the ethics of moral feelings: in it he first used his famous phrase “an invisible hand,” conveying a notion that the world was a rational system characterized by natural balances. It was an idea that carried forward into Smith’s major work, the Wealth of Nations of 1776. Smith was influenced both by his meetings with contemporary

   French political economists and by his acquaintance with Charles Townshend, chancellor of the exchequer under William Pitt the Elder, and the prominent Scottish politician Sir Henry Dundas (later Lord Melville ). Wealth of Nations was a work of two volumes, treating numerous topics of political and economic - two categories not then separate - relevance, but focusing, as its title implied, on the historical, geographical, and political factors that made a nation wealthy or poor. Smith’s most famous argument related to the division of labor, which, enabled by its necessary concomitant, trade, made “the progress of opulence” possible. Smith began by describing wealth as the sum of material assets in a society, from which “the necessaries and conveniences of life” were supplied, and that wealth was originally the creation of labor. These ideas were directly opposed to the mercantilist doctrine then current that bullion was equivalent to wealth. International trade, he taught, should be freed of protectionist impediments designed to accumulate specie. For Smith, society progressed through various stages of history, although there is little trace of determinism in his account. No opponent of class privilege -class differences being for him a simple fact of life - Smith nevertheless argued that a prosperous nation was one in which the poor had a basic standard of living above mere subsistence. The Wealth of Nations had no great immediate impact - the British political world being somewhat preoccupied with the wars of 1775–1783 - but in subsequent decades it came to be regarded as a canonical work. It influenced William Pitt the Younger’s 1786 trade agreement with France and became the standard point of reference for subsequent political economists. Although to some degree Smith was overtaken as a theoretical economist by David Ricardo and John Stuart Mill, and was superseded by the marginal economics of W. S. Jevons later in the century, his arguments for free trade became a standard text for politicians in the nineteenth century, and his name has remained a touchstone for free market advocates to this day. Smith was a strong supporter of the Scottish Union, which had opened imperial markets to Scottish merchants, as well as an advocate of an Irish Union. In directly imperial matters, Smith’s distaste for the bullion-centered theories of wealth led him to emphasize the corrupt character of the Spanish Empire, and by contrast the wholesome character of the British Empire of settlement. His opposition to protectionism on grounds of the theory of comparative advantage led him to oppose closed mercantilist colonial schemes as counterproductive and at any rate unenforceable. He thought the British colonies in America the most productive in the world and attributed this to “plenty of good land, and liberty to manage their own affairs,” although he thought they were of no direct value to England. Smith was a determined opponent of chartered companies of the East India type, holding that theirs was the worst of all governments. He was not, however, a dogmatic free trader, recognizing that some public purposes, such as defense, were more important than trade. The wider impact of Wealth of Nations, beyond its specific policy arguments, was to function as the canonical text of the idea that free markets, and more generally capitalist economies in the round, were a progressive force making not merely for the “progress of opulence” but for the improvement of all concerned. Such ideas permeated Victorian thought and formed the environment in which both the imperialist and the anti-imperialist arguments of the nineteenth century were constructed.

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   FURTHER READING:

    Muller, Jerry. Adam Smith in His Time and Ours. New York: Maxwell Macmillan International, 1993;

    Ross, Ian Simpson. The Life of Adam Smith. Oxford: Clarendon, 1995;

    Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. 2 vols. London: W. Strahan and T. Cadell, 1776.

   MARK F. PROUDMAN