Adam Smith And Capitalism

Adam Smith is viewed as the foundation father of capitalism. He was both a political and capitalist economist of the 18th century. Born in 1973, he is credited with the development of the discipline of political economics and his treatise enquiry into the cause and nature of nations’ wealth. Before returning to Scotland to become a professor, he was a student at Oxford for seven years. His works were considerably influenced by Scottish philosophers David Hume and Francis Hutcheson.v

For three centuries, the philosophy and policy of mercantilism were prevalent in Europe. But Adam Smith put an end to mercantilism philosophy through his ideas of capitalism. His is respected as an economist for his works about the impact of a wealth of nations. The theory of moral sentiments first published in 1759 formed the foundations of the wealth of nation ideas and works. The ideas of the wealth of nations’ works were generated through Adam’s public interactions and more specifically through his tour to France where he had first-hand information on the working of mercantilism philosophy. The French government followed the mercantilist philosophy that Smith greatly criticised.

The ideas in Adam smith’s works

After observing the French government form of economy whereby the government interfered with the country’s trade system, Smith discovered that assigning specific tasks to particular workers significantly enhanced production. Allowing workers to specialise in discrete production functions (the division of labour) would maximise production. Smith believed that expansion division of work and expansion of markets led to the growth and development of trade and manufacture thus creating more national wealth.

Also, Smith advocated for non-government interference in the trade system as this would inhibit production and distribution of capital for the creation of wealth. Free market operations without government’s interference would result in efficient commercial and private enterprises. Although Smith opposed government’s intervention in the market mechanism, he argued that the government could take part in large national projects that are too large for the private sector. Smith argued that, for the economic wellbeing of the society as whole, individuals should be allowed to operate on their self-interest. The Self-interest would drive individuals to undertake economic activities with the highest reward.

Impact of Adam Smith and capitalism

Modern economists follow the footsteps and the economic philosophy of Adam smith. Most nations follow the principles and policies of the wealth of nations in their economic operations. The economic ideas as stipulated by Smith serve as guidance for most of the nations in the modern world.