The Wealth of Nations [Theory]

In 1776 Scot Adam Smith composed what is perhaps the most famous economics manifesto ever created, The Wealth of Nations.

In the eighth chapter of the first volume Smith outlines his belief that when a business owner makes more money than she/he requires, they will logically reinvest this money into their productive assets (capital), in order to increase yield even further.

In 1776 the most efficient way of doing this was to employ more workers, since human labour represented the critical factor of production. It so followed, Smith argued, that these workers would thus have more money, and the collective wealth would be increased.

This was the first depiction of a system of ‘trickle-down economics’ that in today’s Western societies we too often take for granted.

It was this very idea that created the basis for a moral justification for action based solely on a desire to increase profit, and thus capitalism was born.

In the globalised world of the 21st century Smith’s idea is no longer just an economic theory, it is a global ethic. It sets out objective teachings of economics rights and wrongs, with growth as the supreme tenet holding all other world goodness in line.

To ask a capitalist how to solve social and political crises across the world, let alone economic issues, he will more often than not enlighten you with a speech on the liberating power of the free-market.

It is important to realise that Smith’s theory is just that, a theory. Like all theories it should be subject to critique and improvement, and when it becomes clear that its guidelines have failed to solve certain human concerns, it should be adapted or replaced with a more efficient theory.

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