Smith’s ‘Division of Labour’ Is Source of Society’s Wealth, Mr President, Not the State

In a revealing passage from The Wealth of Nations, Adam Smith wrote: 

Political œconomy, considered as a branch of the science of a statesman or legislator, proposes two distinct objects; first, to provide a plentiful revenue or subsistence for the people, or more properly to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the publick services.  It proposes to enrich both the people and the sovereign (IV.1).

For Smith, it is obvious that wealth is created by civil society — especially through the division of labour — which in turn sets aside a portion to the State, for those public amenities deemed necessary to the common good.  In a recent speech, however, the American president overturns this relationship, suggesting rather that the State is the source of wealth, from which a dependent citizenry seeks its sustenance and survival. 

Empowering the political class with such influence — even if only in its own self-aggrandising imagination — is a recipe for trouble, and much the cause for Smith’s writing Wealth of Nations, as he argued against the protectionist and mercantilist policies which marked the economic landscape of his time.  Indeed, Smith’s classic text has many contemporary lessons for those who once more aim to put the hierarchy of political economy back into proper perspective. 

Click here for my full argument at the Adam Smith Institute.

Can the GOP Defend Capitalism?

No doubt like many non-Americans, I too have been caught up in the drama — farce? — of the Republican party’s race to select a presidential candidate to face Barack Obama in November.

Many political issues are of especial concern for conservatives: limited government and fealty to the, respect for States’ and individual rights, and defence of the Republic. One of America’s more immediate (and seemingly more intractable) problems concerns its growing debt burden, a situation made worse by continuing billion-dollar deficits, high unemployment numbers, and unfunded liabilities (principally Medicare, Medicaid, and Social Security).

On all of these issues, though, the Republican presidential contenders — save for one individual (with some candidates better or worse, depending on the issue) — are showing themselves woefully inadequate. Recent debate on reviving America’s economy highlights the GOP’s weakness in understanding the philosophy of capitalism, let alone crafting a pro-marketplace campaign that will resonate with voters.

Click here for my full argument at the Adam Smith Institute. (My appreciation to Sam Bowman, Director of Research.)