Monthly Book Recommendation: October 2019
The Wealth of Nations was published in 1776 during the initial stages of the American Revolution. Author Adam Smith sought to describe and analyze all phenomena in economics that would influence the growth of a country’s economy. Smith’s work has been held as one of the greatest philosophical and rational arguments in favor of the free market and capitalism. The Wealth of Nations has American economists and even the founding fathers through the concepts of wages, the division of labor, and the concept of the invisible hand.
In Smith’s chapter titled Of Wages and Profit in the Different Employments of Labor and Stock, he goes into depth on how wages should be determined in society. Smith states that jobs that require more physical labor or training should then require a higher payment, otherwise nobody will work those areas of labor (Smith 115). This coincides with conservative ideas based around the free market determination of wages. If someone believes a job is too difficult, either physically or intellectually, they will require a higher wage which will be determined by the free market. Smith also states that the terms and rates of labor should be decided by a contract between the employer and the employee (Smith 77). This affirms the idea that the free market should determine the wages of labor and not the government by an artificial price floor known as minimum wage.
The idea of trade deals and free trade agreements is also favorable for Smith. No matter what, there will always be countries that are protective over their own goods to make them more competitive. Smith states that it is in a country’s favor to make free trade agreements with other countries that have tariffs on other goods (Smith 585). This makes your products more competitive in their markets and their products more competitive in your markets. Conservative economists in the 20th and 21st centuries acknowledge that free trade is best for capitalist systems to thrive on the international market, only backing up the ideas of Adam Smith. Although free trade is important in The Wealth of Nations as Smith says it is one of the main facets of a wealthy country, he also states the issue of countries devaluing their currency. He states that if a country devalues its currency, it should pay some fee to its trade partners to offset their gains (Smith 596). This backs the idea that free trade is good, but there is still the importance of fair trade in the international economic system.
The final, and possibly the most important aspect of Smith’s writing is the concept of the invisible hand. As described by Smith, the invisible hand is the idea that there should be little government regulations or influence on the free market. Instead, individuals should act in a way that interests them, which will cause an unintended benefit to the economy (Smith 485). This unintended benefit to the economy is what is referred to as the invisible hand. This concept is the main idea behind conservative rhetoric concerning government regulation. Any conservative believes that the citizens of a country know their preferences more than the government officials, only further promote the concept of the invisible hand. This idea by Adam Smith is the cornerstone of most conservative economic thought on government regulation and the free market.
It is without question that Adam Smith’s work in The Wealth of Nations has influenced American statesmen throughout centuries. The ideas behind the free market and capitalism are some of the most important aspects of conservative thought which were born from the philosophy of Adam Smith. Without the ideas brought forth in The Wealth of Nations, the benefits of free trade may have been overlooked, especially in a time period where tariffs and protectionism was more prominent than ever. Adam Smith’s ideas of growing a nation’s wealth are the early concepts of conservative thought that are still valuable today in political economic thought.
Smith, Adam, 1723-1790. (2000). The wealth of nations / Adam Smith ; introduction by Robert Reich ; edited, with notes, marginal summary, and enlarged index by Edwin Cannan. New York :Modern Library