Adam Smith is often called the first theorist of capitalism, who promoted free enterprise or liberal capitalism. Smith called this system “the system of natural liberty,” or the condition in which “things were left to follow their natural course, where there was perfect liberty.” (Strauss & Cropsey, 1987, p. 294) Smith, like Locke, believed that men are social creatures, and as social beings, we can cooperate and become prosperous.
The ability to work together is built-in man as Smith states, “In civilized society, he stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons.” Man also can truck, barter, and exchange one thing for another (Capaldi & Lloyd, 2011, p. 116).
He believed that self-interest and the profit motive are the driving force behind a nation’s wealth (Strauss & Cropsey, 1987, p. 293). At the same time, those who wish to temper profits can also use Adam Smith as a model to ensure workers receive high wages. Imbalances in profits and wages can be “fully balanced by a statement of the broad, compensatory benefits” (Strauss & Cropsey, 1987, p. 294)
We divide our labor into different industries and trade with each other for mutual benefit. Dividing work into specialized tasks allows industries to produce more goods. This surplus of goods allows for a better quality of life for the average person (Capaldi & Lloyd, 2011, p. 112). Labor division can become antisocial because workers are stuck doing a very restrictive routine of simple tasks. There is a tradeoff at hand. The worker becomes skilled, but “at the expense of his intellectual, social, and martial virtues” (Strauss & Cropsey, 1987, p. 293). To help solve this problem and provide the nation with better citizens, Smith advises the establishment of public schools (Capaldi & Lloyd, 2011, p. 155).
Adams Smith’s use of the invisible hands points us toward his belief in God. Smith believed that the God of the bible would design a world in which ambitious and capable men’s desire for personal gain would steer them toward helping those less fortunate. In The Theory of Moral Sentiments, Smith writes, “When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition” (162)
Finally, chapter IV discusses the transition period of the end of the feudal system. Towns provided stable markets for farm products. With this increased land value, wealthy people from the city bought farmland to make a potential profit. Eventually, wealthy feudal lords began to spend more money on material items and less on tenants and retainers until both were dismissed altogether (Capaldi & Lloyd, 2011, p. 131). The gradual improvements of art manufacture and commerce brought an end to the “great barons’ power” and “the whole temporal power of the clergy” (Strauss & Cropsey, 1987, p. 295).
Capaldi, N., & Lloyd, J. G. (2011). Adam Smith. In The two narratives of political economy (pp. 109–162). essay, Scrivener Pub.
Strauss, L., & Cropsey, J. (1987). Adam Smith. In History of political philosophy (pp. 287–296). The University of Chicago Press.