In his introduction to the Modern Library paperback edition of Adam Smith’s The Wealth of Nations (originally and more formally known as An Inquiry into the Nature and Causes of the Wealth of Nations), Robert Reich writes (pp. xix-xx):
Smith did not live to see large-scale industrialization and the scandalous conditions of urban poverty, unsafe workplaces, child labor, and pollution that scarred the nineteenth and twentieth centuries. One of the ironies of the history of ideas is that The Wealth of Nations — a book dedicated to improving the welfare of the common man rather than just the merchants or nobility — should have been used by the rising class of industrialists as theoretical justification for not seeking to remedy these and related social ills. Yet Smith did not argue against government per se. He opposed the use of government by economic interests seeking to block commerce for their own benefit. “People of the same trade seldom meet together, even for their own merriment and diversion, but the conversation ends in conspiracy against the public, or in some diversion to raise prices,” he warned.[†] The results were monopolies, restrictive preferences, privileges, and protections that hurt the common man while enriching the vested interests with the power to “intimidate the legislature” into giving them what they want.
. . . .
. . . In these times, as when Adam Smith wrote, it is important to remind ourselves of the revolutionary notion at the heart of Smith’s opus — that the wealth of a nation is measured not by its accumulated riches, but by the productivity and living standards of all its people.
Following on Reich’s point, these selections from The Wealth of Nations seem especially pertinent these days:
“All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.”
[Book III, Chapter IV, p. 444]
“Wherever there is great property, there is great inequality.”
[Book V, Chapter I, Part II, p. 766]
“Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”
[Book I, Chapter IX, p. 113]
“When masters combine together in order to reduce the wages of their workmen, they commonly enter into a private bond or agreement, not to give more than a certain wage under a certain penalty. Were the workmen to enter into a contrary combination of the same kind, not to accept of a certain wage under a certain penalty, the law would punish them very severely; and if it dealt impartially, it would treat the masters in the same manner.”
[Book I, Chapter X, Part II, p. 164]
“The government of an exclusive company of merchants is, perhaps, the worst of all governments for any country whatever.”
[Book IV, Chapter VII, Part II, p. 615]
“Whenever the legislature attempts to regulate the differences between masters and their workmen, its counsellors are always the masters. When the regulation, therefore, is in favor of the workmen, it is always just and equitable; but it is sometimes otherwise when in favor of the masters.”
[Book I, Chapter X, Part II, p. 164]
“The inequality with which a tax of this kind [i.e., a tax on the rent of housing] might fall upon the owners of different ground-rents would arise altogether from the accidental inequality of this division [i.e., inequality of circumstances affecting “the inhabitant of a house” vis-à-vis “the owner of the ground”]. But the inequality with which it might fall upon the inhabitants of different houses would arise not only from this, but from another cause. The proportion of the expence of house-rent to the whole expence of living is different in the different degrees of fortune. It is perhaps highest in the highest degree, and it diminishes gradually through the inferior degrees, so as in general to be lowest in the lowest degree. The necessaries of life occasion the great expence of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expence of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be any thing very unreasonable. It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion.”
[Book V, Chapter II, Part II, Article 1, pp. 906-07 (emphasis added)]
† Should read: “People of the same trade seldom meet together, even for their own merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” [Book I, Chapter X, Part 1, p. 148]
Source: Adam Smith, The Wealth of Nations (Modern Library paperback ed. 2000; introduction by Robert Reich) (from the 5th edition, published in 1789; first edition published in 1776).
Also recommended:
- Adam Smith, The Theory of Moral Sentiments (Penguin Classics paperback ed. 2009; introduction by Amartya Sen) (250th Anniversary edition) (from the 6th edition, published in 1790; first edition published in 1759).
- Nicholas Phillipson, Adam Smith: An Enlightened Life (Yale 2010).
- Moshe Adler, Economics for the Rest of Us: Debunking the Science That Makes Life Dismal (The New Press 2010).
- Justin Fox, The Myth of the Rational Market (also see By Justin Fox).
- Robert Reich, “The Limping Middle Class,” N.Y. Times, September 4, 2011 (Sunday Review).
- David Leonhardt, “Theory and Morality in the New Economy,” N.Y. Times, August 23, 2009 (Sunday Book Review).