The astonishing reduction in global poverty in the past 50 years owes a great deal to Smith’s insights about the power of individual choice and free will.
The astonishing reduction in global poverty in the past 50 years owes a great deal to Smith’s insights about the power of individual choice and free will.
London — These are tough times for those who support free-market capitalism. Everywhere we look, Keynesians, Marxists, and welfare-state addicts are calling for deficit spending, tax hikes, fair trade, and overregulation in the name of equality and environmental purity. While the spending blowout known as Bidenomics is losing its luster with voters overall, those between the ages of 18 and 34 are increasingly supportive of government intervention. A Fraser Institute poll finds that 43 percent of those under age 35 believe that socialism — i.e., big government and the redistribution of wealth — is the best system, versus 40 percent who disagree.
All the more reason for us to celebrate the 300th birthday of Adam Smith this Friday, June 16. In 1776, the year of our Declaration of Independence, the Scottish Enlightenment figure buttressed the Declaration’s arguments for freedom by publishing The Wealth of Nations. His book laid the intellectual foundation of capitalism, free markets, and individual choice. It’s this foundation that has helped the U.S. and many other nations that have followed it achieve prosperity, marked by the creation of a vibrant middle class and in almost all cases a full spectrum of political freedoms.
Since the decline of Communism, there has been a reduction in poverty that is unmatched in any previous period of human history. In 1981, the absolute poverty rate worldwide was 42.7 percent; by 2000, it had fallen to 27.8 percent. Today, it is less than 9 percent. Even in China, which retains a Communist Party that monopolizes power, economist Weiying Zhang of Peking University told German economist Rainer Zittlemann that “China’s rapid growth of the past four decades has been driven by the power of the market and the non-state sectors, rather than the power of the government and the state-sector as claimed by the China model theorists.” Zittleman told me that Zhang has called China’s vitality “a victory of Adam Smith’s concept of the market.”
Smith’s thesis, which still resonates today, 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 (and society’s) far better than any government can. Finally, Smith was the first great exponent of free trade. He felt that allowing people and countries to specialize and to trade freely would produce enormous wealth, because freeing people and nations to do what they do best will produce vastly more wealth than a system of autarky in which a country tries to produce everything itself. In short, 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.”
As the home of Adam Smith, Britain was chock-full of Adam Smith commemorations this week leading up to his 300th birthday. I attended several of them.
At an Institute of Economic Affairs luncheon in London, Chapman University economist Mark Skousen told his audience that it was hard to overstate Smith’s contribution to modern economics: “Adam Smith did for economics what Sir Isaac Newton did for physics, Charles Darwin did for biology, and Thomas Jefferson did for politics.”
Despite such accolades, Smith is often accused of ignoring the poor and unfortunate in his explanation of how an economy works. But as Nobel Prize–winning economist Vernon Smith pointed out in National Review, The Wealth of Nations discussed not only how people are driven by self-interest to maximize their own advantages but also 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.
Even as we celebrate Smith’s gift to the world on the occasion of his 300th birthday, we’d be foolish to ignore the many attacks against him and attempts to undermine his ideas. But Smith himself was an optimist when it came to human progress: “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 entire world, let us hope he is right.