Adam Smith on capitalism

November 24, 2016
Above all, it is in their

One of the books the Scottish philosopher Adam Smith (1723-1790) wrote, The Wealth of Nations (1776), theorizes about the nature of capitalism. The word “capitalism” derives from the word capital, itself deriving from the Latin word caput, meaning head (as in a head of cattle or chattel; a unit of movable wealth). In capitalism, money takes the place of cattle as the unit of movable wealth, and that wealth’s use and circulation through acts of exchange are privately determined by individuals, not the government. Capitalism is thus a system of social organization by which private money-making (the build-up of capital, of “herds” of money) is its chief end. Adam Smith defended this way of organizing human affairs, not just on pragmatic terms, but on moral ones, upending millennia of religion-based admonitions that one should aver selfishness. In Smith’s view, pursuing one’s interests to the general indifference of what happens to strangers is actually central to national prosperity. Free and mutually beneficial trade does a better job of assuring the general welfare than either selfless sharing or charity does:

[M]an has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want. . . It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. (638)

The millions of people that make up a nation, each one industriously busy in the pursuit of his or her “greatest value” (as privately and selfishly determined) is thus “led by an invisible hand to promote an end which was no part of his intention, ” that being “the publick good” (the general prosperity and happiness of society’s members as a whole). “By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it” (646-647).

For Smith, then, selfishness is natural (an aspect of human nature; of a piece with our essence). But if selfishness is natural, so is our sociality and desire to “truck, barter, and exchange one thing for another”—that is, to trade: “Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. Nobody ever saw one animal by its gestures, and natural cries signify to another, this is mine, that yours; I am willing to give this for that” (638). No animal, that is, except us.

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