Nearly 250 years is not quite Shakespeare, but if The Wealth of Nations were a play, we would say it has had a pretty good run. Is it a dusty old warhorse, to be read while sitting in a winged-back chair with a snifter of brandy, or still relevant today? Can it solve the (deep) problems of the present and future? Is our almost faith-bound devotion to market forces still justified, or are new approaches needed?
A heavy topic requires heavyweights, and I found them at this past November’s “Center on Capitalism and Society,” at Columbia University’s 20th Anniversary Conference. The topic: Economy Policy and Economic Theory for the Future
The two-day event assembled a formidable crew of speakers, headlined by three Nobelists for Economics: Joseph Stiglitz (2001), Eric Maskin (2007) and Edmund Phelps (2006). They were joined by a “supporting cast” of 15 others, also heavyweights in their field, including the sociologist and urbanist Richard Sennett, the financial journalist Martin Wolf, Finnish philosopher Esa Saarinen, Ian Goldin of Oxford, economists Roman Frydman and Jean-Paul Fitoussi, Carmen Reinhart of the World Bank, and Jeffrey Sachs of Columbia and the UN.
In short, there were a lot of credentials in the room (either in person or remotely) and a number of extremely compelling presentations, but it is Sachs whom I want to talk about. He spoke first, after opening remarks by the extraordinary Ned Phelps (nearing 90, still writing, still speaking, and still mentoring and inspiring), and I assume that the choice was a tactical one. The organizers clearly anticipated that Sachs would do what Sachs does: devote his time to lobbing a little hand grenade into the proceedings: Capitalism, to his way of thinking, particularly the Anglo-Saxon version of Capitalism practiced in the United States, was no longer capable of taking on the big, global challenges. Read more »
Adam Smith’s The Wealth of Nations begins with this claim:
The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes….
In other words, labour is the ultimate source of a society’s wealth. In feudal times it had been common to view land in this way since it was the basis for all agricultural produce, and the 18th century French physiocrats still championed that view. But Smith agreed with John Locke’s observation that a loaf of bread is not just produced by a baker but also, indirectly, by the work of the ploughman, the reaper, the thresher, the miller, the people who trained the oxen, mined iron for the plough, quarried stones for the mill, and so on. In fact, Locke argues,
if we rightly estimate things as they come to our use, and cast up the several expences about them, what in them is purely owing to nature, and what to labour, we shall find, that in most of them ninety-nine hundredths are wholly to be put on the account of labour.
The idea that labour is the ultimate source of a nation’s wealth would seem to bolster the argument that that those who perform the labour should enjoy an appropriate share in the wealth that they create. This idea was certainly alive at the time of the English Revolution in the mid 17th century. The Digger leader Gerard Winstanley, claiming biblical authority for his position, denounced the enclosures of common land by the rich, arguing that God intended the Earth to be “a common store-house for all” and was dishonored by the idea that He approved of the current distribution of wealth, “delighting in the comfortable Livelihoods of some, and rejoicing in the miserable poverty and straits of others.”Read more »
I just read Adam Smith’s The Wealth of Nations for the first time. Not every word. It’s over a thousand pages, and there are long “Digressions” (Smith’s term) on matters such as the history of the value of silver, or banking in Amsterdam, which I simply passed over. I was mainly interested in what Smith has to say about work, so I also merely skimmed some other sections that seemed to have little relevance to my research. Time and again, though, I found myself getting sucked into chapters unrelated to my concerns simply because the topics discussed are so interesting, and what Smith has to say is so thought-provoking. Reading the book is also made easier both by Smith’s admirably lucid writing and by the brief summaries of the main claims being made that he inserts throughout at the left-hand margin.
By any measure The Wealth of Nations is one of the most influential books ever written and represents a monumental intellectual achievement, initiating a paradigm shift in political economy. Before its publication in 1776, the dominant view in Britain and many other countries was some form of mercantilism. According to this theory, the path to prosperity and power for a nation lay in its having a positive balance of trade, exporting more than it imported, thereby accumulating wealth at the expense of its rivals. Government policy thus sought to promote the production of goods while ignoring or even suppressing domestic consumption. Against this, Smith argues that the wealth of a nation does not reside in a store of goods or gold, but consists, rather, in the totality of the economic activity that its people and institutions are engaged in. Read more »