Adam Smith’s life and intellectual journey from BBC Radio 4’s In Our Time with the help of Gemini.
The 18th-century Scottish Enlightenment was a hotbed of intellectual ferment, producing thinkers whose ideas continue to resonate today. Among them, Adam Smith stands tall, his magnum opus, “An Inquiry into the Nature and Causes of the Wealth of Nations,” published in 1776, laying the groundwork for modern economics. This groundbreaking work, exploring the evolution of civilisation and the impact of individual actions on society, passionately advocated for the deregulation of markets. This concept remains central to economic debate.
In the early 18th century, Scotland was a nation grappling with its identity. The 17th century had been a period of turmoil marked by religious and civil wars, political instability, and economic uncertainty. The disastrous Darien scheme, an attempt to establish a Scottish commercial empire, underscored small states’ challenges in a competitive world. The pivotal moment came with the Union of 1707, uniting the parliaments of England and Scotland. This created a new free trade area, a remarkable experiment that posed a crucial question: would Scotland thrive or decline under the influence of its larger neighbour?
The Union, surprisingly, proved to be a catalyst for Scottish prosperity. While initially viewed with suspicion, it injected Scotland with immense economic energy. However, this newfound success did not erase deeper anxieties. Even as Scotland flourished intellectually and economically, the stability of commercial society remained a concern. Memories of Jacobite uprisings and fears of social and political upheaval lingered. Smith, witnessing this dynamic landscape, sought to understand the forces driving commercial society and to address the fundamental question: could this new order be justified and sustained?
Born in 1723, Adam Smith was a posthumous child, raised by his widowed mother. Despite a somewhat sickly childhood, he excelled in his studies, first at the local grammar school and then at the University of Glasgow at the remarkably young age of 14. He was a voracious reader, absorbing the intellectual currents of his time. His early intellectual development was significantly influenced by his teacher, Francis Hutcheson, a “new light” thinker who lectured in English rather than Latin and introduced Smith to new philosophical and scientific ideas. Smith also demonstrated a keen interest in natural philosophy and mathematics.
Before “The Wealth of Nations,” Smith penned “The Theory of Moral Sentiments,” a work he revisited and refined throughout his life. This book, often misunderstood as a juvenile precursor to his later masterpiece, is crucial to understanding Smith’s overall philosophy. “The Theory of Moral Sentiments” explores the balance between self-interest and altruism in human behavior. Smith argued that humans, despite their inherent selfishness, also possess a capacity for sympathy, allowing them to connect with others and engage in social interaction. This capacity for empathy and understanding forms the bedrock of his moral philosophy.
Smith’s intellectual development was shaped by a vibrant social and intellectual scene in Scotland. He was part of a network of thinkers, attending public lectures, participating in clubs and societies, and engaging in lively debates. He was friends with David Hume, a fellow philosopher who profoundly influenced his thinking. Smith’s travels in Europe, including a three-year tour where he met leading French intellectuals like Voltaire, further broadened his horizons.
The economic discourse of the time was dominated by mercantilism, a system that emphasised national wealth through the accumulation of gold and silver, protectionist trade policies, and government regulation. Mercantilists viewed trade as a zero-sum game, believing that one nation’s gain came at the expense of another. Smith, however, was a staunch critic of mercantilism. He saw its restrictive policies as hindering economic growth and fostering conflict between nations.
“The Wealth of Nations” was born out of Smith’s desire to understand and justify the rise of commercial society. He recognised that commerce had existed throughout history, but the European model, characterised by its longevity and dynamism, was unique. He sought to explain why Europe had achieved this state and to analyse the nature of wealth itself.
Smith defined commercial society as one “in which every man becomes in some measure a merchant.” This did not mean that everyone was literally a shopkeeper, but rather that individuals were no longer self-sufficient and relied on a complex network of transactions and markets to meet their needs. This interconnectedness was a defining feature of commercial society.
“The Wealth of Nations” is divided into five books. Book One focuses on labour, famously introducing the concept of the division of labour through the example of a pin factory. Smith argued that specialisation, achieved through dividing tasks, dramatically increased productivity. He illustrated this with the pin factory example, where the division of labour into 18 distinct tasks resulted in a massive increase in pin production compared to individuals working independently. He acknowledged the pin factory example was taken from the French encyclopaedia, demonstrating the intellectual cross-currents of the time.
Book Two explores capital accumulation. Smith recognised that the division of labour required capital investment to equip workers and facilitate production. He also discussed the role of self-interest in driving economic activity. He argued that individuals motivated to improve their situation would naturally save and invest, contributing to capital accumulation and economic growth. This, he suggested, was a key driver of prosperity. He acknowledged that this drive for self-improvement could be perceived as greed but argued that this drive fuelled economic progress.
Book Three delves into economic history, examining the historical development of commercial society. Smith believed that understanding the past was essential for addressing the present challenges. He meticulously traced the evolution of law and government in Europe, seeking to understand the conditions that enabled commercial society’s rise.
Book Four offers a comprehensive critique of the mercantile system. Smith attacked the regulatory policies that restricted trade and hampered economic growth. He argued that these policies served the interests of particular groups rather than the nation as a whole. He used the example of the American colonies’ revolt to illustrate the flaws of a mercantile empire, arguing that such systems were ultimately unsustainable.
Book Five addresses the role of government in a commercial society. Smith advocated for a limited government that focused on providing essential public goods, such as national defence, justice, and infrastructure. He also famously introduced the concept of the “invisible hand,” suggesting that individuals acting in their own self-interest could unintentionally contribute to the greater good. This idea, however, was not a blanket endorsement of laissez-faire. Smith recognised the potential for market failures and the need for some government intervention. He used the term “invisible hand” sparingly to illustrate how individual actions could lead to unintended, positive social outcomes.
Smith’s “Wealth of Nations” was a revolutionary work that transformed economic thinking. It provided a powerful defence of free markets, emphasising the importance of individual initiative, competition, and limited government intervention. While his ideas have been debated and refined over time, they continue to shape our understanding of economics and inform economic policy. Smith’s legacy lies not only in his theoretical contributions but also in his vision of a prosperous and free society driven by the ingenuity and enterprise of its citizens.
You can listen to the full BBC Radio 4 In Our Time episode on Adam Smith here.
