The Wealth of Nations

I recently read a selection from Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations which is often known by its abbreviated name, The Wealth of Nations. This document was the inspiration of our market system today and was one of the documents studied by our founding fathers during the establishment of our country. Smith was a radical who revolutionized the way in which we think about our economies and market systems in general.

Before Adam Smith wrote The Wealth of Nations, the economies of most nations were based on a mercantilism system. This system described how wealthy nations were by how much treasure or gold the country had. The wealth was accumulated through trade regulation and encouraging exports. This system benefited the kings and rulers greatly. While the population as a whole remained poor and without a good quality of life the upper ruling class lived in luxury.

In his book Adam Smith questions this great disparity of wealth. He argued that wealth of a nation was determined by the lifestyle of the people. He believed that the wealth of a nation was determined by the quality of life that its citizens enjoyed. His idea greatly changed the ideas of how a market system functions. He believed that nations should encourage production and consumption of goods. Under the old mercantile system citizens had very few choices of what they could buy. Under Smith’s system their was a great expansion of liberty. People were allowed to choose between goods. This choice was very beneficial in a number of ways, it encourages price competition and increased quality as groups compete for buyers. The mercantilism system does not encourage efficiency, quality, and profits for investors. However it did depend on personal relationships with high ranking government officials. This system was unfair to the consumers as they were often forced to purchase over priced goods, as no other options were available. Smith’s market system is not perfect, as we are currently experiencing. There are expected ups and downs of the economy, but under this system citizens experience more liberty that they otherwise could under any other system. The market system is also beneficial in another way. Under the mercantilism system usually one party won while the other lost. Under Smith’s market system both parties benefit. Although one party may benefit more than the other the consumer has the right to decide whether a decision, such as the purchasing of a product, is beneficial. This was not the case under the mercantilism system.

Adam Smith’s The Wealth of Nations contributed to the overall freedom and liberty of Americans. The constitution provides that Americans will enjoy freedoms and liberties but outlines no economic system. It is Adam Smith’s book that is the basis for our capitalistic system today. His free market system increases quality and decreases price. It is under this system that the founding fathers established our nation. It is under this system by which we have become one of the most powerful nations in the world. An Inquiry into the Nature and Causes of the Wealth of Nations should be considered one of the most influential books concerning the founding of our nation including Common Sense, and the writings of Voltaire, John Locke and others.