As calls for deficit spending, tax hikes, fair trade, and overregulation in the name of equality and environmental purity continue to grow, supporters of free-market capitalism are facing challenging times. A recent poll conducted by the Fraser Institute reveals that 43 percent of those under age 35 believe that socialism is the best system, versus 40 percent who disagree. This makes it all the more important to celebrate the 300th birthday of Adam Smith on June 16, the Scottish Enlightenment figure who published The Wealth of Nations in 1776, the year of the American Declaration of Independence. Smith’s book laid the intellectual foundation of capitalism, free markets, and individual choice, which have helped nations achieve prosperity and political freedoms.
Since the decline of Communism, there has been a significant reduction in poverty worldwide, with the absolute poverty rate falling from 42.7 percent in 1981 to less than 9 percent today. Even China, which retains a Communist Party that monopolizes power, has experienced rapid growth driven by the power of the market and the non-state sectors. Economist Weiying Zhang of Peking University has called China’s vitality “a victory of Adam Smith’s concept of the market.”
Smith’s thesis is that setting people free to pursue their own self-interest produces a collective result far superior to what you get when you try to impose regulatory straitjackets. Free people allowed to make free choices in free markets will satisfy their needs far better than any government can. Smith was also the first great exponent of free trade, believing that allowing people and countries to specialize and trade freely would produce enormous wealth. As Smith wrote, “Little else is required to carry a state to the highest degree of opulence but peace, easy taxes, and a tolerable administration of justice.”
Despite accusations that Smith ignored the poor and unfortunate in his explanation of how an economy works, Nobel Prize-winning economist Vernon Smith points out that The Wealth of Nations discussed how people are driven by self-interest to maximize their own advantages, as well as how they are compelled by the experience of living in a free society to be empathetic and considerate of the feelings of their family members, friends, and neighbors.
As we celebrate Smith’s 300th birthday, it is important to acknowledge the many attacks against him and attempts to undermine his ideas. However, Smith himself was an optimist when it came to human progress, believing that “the uniform, constant, and uninterrupted effort of every man to better his condition… is frequently powerful enough to maintain the natural progress of things toward improvement, in spite both of the extravagance of government, and of the greatest errors of administration.” For the sake of the world, let us hope he is right.
