Adam Smith's Lost Legacy (Gavin Kennedy): Markets versus Capitalism?
…I am often commenting on people’s assertion that Adam Smith wrote about capitalism and using the illustrative point that he never mentioned the word ‘capitalism’ as it was not invented in English until its use in 1854 by Makepeace Thackeray in his novel the Newcomes (Smith died in 1790).
Wealth Of Nations was not about capitalism; it was about a commercial economy, then prevalent in the 18th century Britain, a mainly agricultural economy (nearly 50 per cent of what we call the GDP) with shops, market stalls, small workshops, artisans of various types and skills, and manufacturing activities that were mainly driven by hand power and not steam or electric power. It had a thriving international trade but these were relatively small sailing ships, supported inland by abysmal roads and a few canals.
It was the commercial market economy that drove the country towards the spread of opulence, and Smith saw the possibilities if the existing markets were kept free of interference by politicians, who thought they knew better than the price system, and by ‘merchants and manufacturers’, who saw personal gains from widening the market, narrowing the competition and raising their prices. But despite these interferences, some dire, many minor, the inner strength of markets continued to work for economic growth.
Hence, I don’t feel the need for particular affection for modern day capitalism. I am happy to see scores of senior executives caught with their hands in the till, alongside shifty politicians, and each big fine or jail sentence imposed is a cause of celebration – justice works! – and is not a sign of the ‘system’ collapsing, nor a need for more regulation, because strong laws and a willingness to implement them is enough for a free society. …
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