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Adam Smith
Champion of Prosperity

Adam Smith did not write about capitalism or capitalists, but about free economies. (The words capitalism and capitalists would not be coined until 1792, fifteen years after he wrote.) He gazed into the human character and recognised that most of us want the best for ourselves and that this is a character trait that is unlikely to change. One of his brilliant insights is that when we have the freedom to create a living for ourselves within a system of just laws, we will cooperate with others in order to help ourselves, and our cooperation will be good for us and for other people, too.

Born in Fife in 1723, a grammar school boy who attended Glasgow College and Oxford University, Adam Smith taught and wrote in Edinburgh about ethics and the rights and duties of individuals. In 1764, at the age of forty he resigned his chair and became a tutor, joining his student on a tour of France that enabled him "to collect evidence on the fiscal problems of the world's most powerful absolute monarchy" (DNB). When he returned, he moved back to Kirkcaldy, where he worked slowly and indefatigably on The Wealth of Nations, took solitary walks and swam in the sea.

In 1773 he moved to London, socialized with Joshua Reynolds, Edmund Burke, David Garrick, Edward Gibbon, James Boswell, and Oliver Goldsmith, and revised his book. There in 1776, at the age of 53, he created a sensation by publishing An Inquiry into the Nature and Causes of the Wealth of Nations.

Adam Smith focused on understanding how people can freely make a living, which was what Brits had been doing with considerable success for hundreds of years. He grasped the concept that people prosper when they can freely choose the terms of their business or their work and trade freely, unhampered by government or monoplies, and protected by the rule of just law from unprincipled exploiters.

He attacked convention ideas that everyone believed at the time, for instance that "the luxuries of the few were conditional upon the poverty of the mass; and the impossibility of combining high wages with better and cheaper goods for consumers" (DNB). He insisted that -

No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged. (Smith, WN, 96)

He believed that a 'system of natural liberty and justice' (WN, 157) combined with free trade and division of labour would make virtually every member of society prosperous if they were interested in self-help. For Adam Smith liberty meant not only freedom of speech and freedom of religion, but freedom to earn a living, freedom from burdensome taxes and trade restrictions, freedom from excessive government regulations, and the freedom to own and use property to create a new business. He believed in the creative power of hundreds of millions of individual decisions under the rule of just law creating the power and prosperity of free markets.

Poverty-stricken mother and child in Africa.  Africans lack property rights, honest governments, freedom for women

The poor desperately need property rights, rights for women, freedom of religion, and just laws. Especially in Africa they need property rights so they can leverage what they own to start businesses, feel safe at home, improve their property and leave it to their children. Who wants to improve property they don't own?

Photo: alaincouillaud@istockphoto.com

Adam Smith understood economics mathematically, statistically, psychologically, and morally. He understood how the natural forces of self-interest and freedom combine to create a tide that will lift all boats. Freedom unleashes individual effort and creativity because free individuals protected by just laws create prosperous and inventive societies. Free individuals and free markets create the wealth of individuals and nations, while simultaneously raising the standard of living of poor citizens.

Adam Smith created the first blueprint for economic success

Smith described the problems that occur when government or monoplies reduce freedom. He was the first in the world to describe free enterprise, to examine the results of economic freedom, and to explain the role of self-interest, the division of labour, the rule of law, and free markets. Tongue slightly in cheek, he pondered the need for the division of labour and the need for imports by looking at how English hardware and kitchen utensils were traded for French wine - to avoid an oversupply of pots and pans in Britain, of course!

He saw government's role in national defence, the administration of justice, public works beyond private initiatives, and education. He was concerned that division of labour not narrow an individual's creativity and interest in life.

Adam Smith demonstrated that individual interest guided economies efficiently and produced prosperity and personal fulfilment on a scale unprecedented in human history. Our only quarrel with him is that he used the term "invisible hand" to describe how this kind of economy worked. In fact, it is millions of individual hands and the wisdom of many free minds that make for prosperous economies.

Today there are some who blame the world’s ills on capitalism. Supposedly wanting the best for others, and aiming to control how everyone lives, they like to think they can create ‘utopias’ with control economies run by government.  They remain unaware that history repeatedly shows that centrally run economies, which by nature are not free, are stupid and corrupt. They allow a few people to enrich themselves while rendering everyone else unfree, unhappy, and poor. 

A significant modern tendency is to see making money as capitalism and capitalism as evil. In contrast, Adam Smith would never have reduced an economy to the inadequate and banal noun capitalism. He was interested in the economies that free men and women create with their ideas, hard work, team work, and capital.

He fought the trade monopolies that protected the few at the expense of the many. He denounced the destruction of property rights and free trade in Ireland, which impoverished the Irish, and made them vulnerable to famine. He opposed taxes on labour, preferring taxes on luxury consumption because they hurt an economy and people least.


Nations that observe Smith’s philosophy of free economies attract immigrants. Very few people are migrating to countries that are not economically free. Who wants to be poor and die young?

Adam Smith had the endearing habit of giving away a great deal of what he owned to those in need. He never talked about these donations when he was alive. They were discovered after he had died.

Adam Smith believed that creating wealth had to be governed by the Christian principle to "do unto others as you would have others do unto you" (Matthew 7:12). For him, Christ's teachings were a practical source of ethical action. If nations tried to create wealth without living by this principle, society would come apart at the seams, and people would lose their hope of happiness.


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Copyright 2006, 2007, 2008 David Abbott & Catherine Glass