The Wealth of Nations
Updated: Feb 28, 2020
By Adam Smith
Listening to media and politicians, more government, fewer liberties, and free stuff for all can be solved by just printing more money. Never mind the size of the national debt. Never mind ever re-paying the debt. I needed to revisit Adam Smith and The Wealth of Nations. Smith firmly believed in free market and limited government.
The Wealth of Nations by Adam Smith
This is the classic on economics, concentrating on importance of free trade and limited government. Since Smith wrote the world has become much more complex…but the principles are as valid today as they were decades ago.
Today we hear a great deal about socialism and how it can “level the playing field.” Socialism has failed and bankrupted the government and citizens in almost all countries it has been tried over the last few hundred years.
Smith talked about the value of a division of labor. That concept is as important in our society today as it was then. We are using more robots and AI to gain more value from division of labor. We are still doing it, we’ve just changed from mass production factories, to mass production in individual restaurants, hotels, retail stores, computer gaming, services, right down to AI.
When productivity increases we get a surplus of unwanted products. With advent of AI we also get a surplus of workers. Division of Labor from today’s specialization requires significantly greater skills.
We are in middle of trade restrictions and greater tariffs. Free trade is best system…but only when both parties to an agreement honor it in the same way. There has to be give and take. Problems today stem from China, North Korea, Iran, and to extent Russia being unwilling to give up advantages they have had last few decades.
A complexity since The Wealth of Nations was written: Demand for highly skilled labor is increasing exponentially, far outstripping skills of majority of populations world wide.
Smith understood that acting in one’s own self interest is beneficial to the individual and the nation. But Smith also understood need for citizens to contribute to both. Today's problem: Millions of citizens lack skills to enable them to make reasonable cost of living. Worst still, they lack the skills to make meaningful contribution to society. When this occurs in any population those without turn to government to provide for them, from proverbial birth to grave.
More pressure we put on government to solve all social ills, the smaller the work force available to contribute the money to pay for social programs. Downward spiral.
The role of government in any society, starts with government to protect society from violence, ensure rule of law, and build and maintain public works. As a society places more and more emphasis on providing more of the basics for citizens, the society starts to decline.
How is government paid for? Each individual should contribute taxes in proportion to their income. Here in America over 50% of population pays no meaningful taxes. We also have all the welfare programs. When people don’t pay taxes, or pay for the welfare they receive of course they want more. That starts an economy downhill.
I re-read The Wealth of Nations because I’m concerned about the direction of America. Before I can work on solutions for the future I needed to be reminded of the past. Society is redefining the role of government. Each of us needs to contribute to that. How we communicate and develop employees and our communities, and how we anticipate and structure the future of the companies we run/work for will help shape America.
The Wealth of Nations is good read for people trying to redefine role of government and what a “great society” should look like. To change the present, it’s important to understand the past. When societies have not understood the past they have made the same mistakes that doomed the previous society they copied.
Reading the book, premises outlined seem simplistic. But reflecting, principles are still valid. Modifications are needed in how we implement them.
Next presidential election is going to be very important for the future of America. Books like The Wealth of Nations remind us of questions we need to ask to hold political candidates accountable
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