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Adam Smith came to be known as the modern father of economics with the writing of the Wealth of Nations or also know as An Inquiry into the Nature and Causes of the Wealth of Nations. Threw this work the dominant image of Adam Smith is as an advocate of unhampered self-interest, an opponent of government, and an icon of individualism, rugged or not. Such distorted interpretations as a result of reading him through a retrospective ideological lense transform Smith into a proto-libertarian, an avatar of “lassiez-faire”. The ideology of Neo-Liberalism places emphases on corporate rites, laissez-faire economics, little government, and globalization (corporate globalization) through the elimination of time and space. Neo-liberalism claims to justify these characteristics in the works of the classical Liberal theorist Adam Smith. In this essay the argument will find that neo-liberalism falsely builds itself foundations on the theories and believes of Scottish Enlightenment philosopher Adam Smith to legitimize its morality and legitimacy of Neo-liberalism.

Neo-liberalism advocates the free flow of the market unhindered by damaging government policies. Smith does agree on the fact that most governments are incompetent and corrupted having negative affects on the market and the greater good of society as a whole. In Smiths view mercantilism represented the successful attempts of rapacious and monopolizing merchants to exploit the machinery of government for their own purposes. Smith goes on to say that mercantilism was a collection of government measures that made it possible for businessmen to achieve their own selfish goals without at the same time advancing the public interest. As a result of the dispensation of monopoly grants, of the arbitrary bestowal of extraordinary privileges the individual merchant was provided with innumerable opportunities to enrich him self without enriching the nation. How ever, Smith believed that the pretenses that corporations are necessary for the better government of trade is without foundations. Smith believed that corporations did not fit into the “natural justice” of the economic market. Smith would have the contempt for modern day corporatism found in neo-liberalism, he could find the organization of such disciplines as Doctors as a social benefit, but as for the vertical and horizontal integrations and operations of Transnational Corporations were unacceptable. Where powerful corporations gain through the intervention or lack there of policies given more power and privileges to the corporations. Transnational Corporations in present day gain privileges from the government organizing industries becoming semi-independent and self-governing “estates” for their own selfish interest at the loss of society. Smith was very clear in his writings of his mistrust in the new emerging class he states that, Man has a strong propensity to monopolize, to connive with others to enhance his own income. People of the same trade Smith cautions his readers, seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. Smith believes that merchants or capitalist in modern society are conspiring together in cooperation instead of competition to drain the nation of wealth. One difficulty in following his account of self-interest is that he had discussed the matter thoroughly in the Theory of Moral Sentiments; and assumed that the reader of the Wealth of Nations would not think that he, Smith, considered self-interest the only or even the main motive, or virtue, of humanity. This goes against the idea of the “natural” free market competition will allocate common good for the interest of the public through selfish interests, as Smith believes. Without a positive result for the whole capitalism cannot stand up as a morally legitimate system.

Another argument put forth by neo-liberalist is that with the increase division of labour comes greater social good. Smith said in the “natural course of things,” he said, improvement comes from agriculture, for an expanding agriculture accumulates a surplus, which leads to a greater division of labor, and so forth. Neo-liberalism requires ever expanding market and increased developments in technology leading to a greater increasing division of labour, which would be argued leads to greater good. Neo-liberalist take from Smith that, “In any event, it is from the willingness of people to help each other in exchange for help that a exchange leads to a division of labour which then generates people with different skills and characters. Smith describes here how market expansion helps develop individuals personal talents through the partnership and cooperation, thus will increase the extent of the market through specialization and eventually increase the society’s wealth through its effect upon the extent of the society’s division of labour. This position by Smith spins a positive stance of the effect of the division of labour in a society give the merit to the use of Smith by neo-liberals. Yet, in the same book The Wealth of Nations, Smith argues that the division of labour can destroy the very qualities of humankind that, earlier, he celebrates as fundamental and unique the capacity for reason, and the exercise of sympathetic concern for others.

“In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations, frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operation, of which the effect are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become.”

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Wealth of Nations, Vol. II, pp. 6-64

Neo-liberalist only look at the economic stance that Smith takes on the division of labour excluding the morality of the effects on society with the ever expanding market and technological innovations. When citizens lose the ability to act as competent individual in the willingness of individuals to help each other in exchange, it is hard to justify that the trade is not one of a despotic end. Where the ‘lower class’ becomes enslaved in limbo unable to improve his or her situation. Smith believe that the out come of position was a cultural question and that anyone could rise to any position, while modern neo-liberalist view good position occupied by individuals selectively of good character.

Economists adopt Smith’s principle concerning the role of the state in relation to the market almost universally. Neo-Liberalist hails Adam Smith to be the founder of open market or laissez-faire markets. Meaning that the market mechanism is a universal and flawless mode of economic organization that should be free to function of any government control or intervention having faith that the market is capable of producing greater good for society as a whole. This greater good by-product created by the competition of selfish individuals striving towards their own interests is referred to Pareto-Optimal. Pareto-Optimal is created when you have perfectly competitive and complete market with allocates good and services to their most efficient level (lowest cost) making consumer able to consume more products and by making no person worse off then the originally were. But in actuality, Smith demonstrates in many passages in the Wealth of Nations where the necessity of state intervention in the economy is acknowledge and, indeed, some where the state is urged to undertake responsibilities that it had not yet adopted as demonstrated in the quote, On the contrary, Smith did not regard it as possible for an economy to work without the exercise of governmental powers by the state, not only to provide a legal framework for private activities but to furnish numerous services that are beyond the capacity of the market system. Hence, in Smith’s work of the Wealth of Nations goes against the policies dictated by Neo-liberalism and the neo-classical model of economics. The Neo-Classical model is an economic branch of neo-liberalism, dictating that with the creation of greater competition “lassiez-faire”, everything (goods/services) should be brought into the market (complete markets), hence this would justify the privatization of such public institutions such as schools. But, as demonstrated in the above reference, Smith believed that the market was incapable of furnishing education to the masses and that is was the job of the Government to intervene and take care of the public needs in that area. Without some intervention both to secure those public goods necessary to the functioning of the market itself like education, the market its self would fall into disorder. Smith had made another exception to his theory of laissez faire. This was where the necessities of military defense demanded it, he allowed the government aid and interference. This again relates to the greater good of the public protecting the citizens of that government. Even though Adam Smith was deeply suspicious of government, Adam Smith did not explicitly state the principle of laissez-faire does, though it could be found implicitly to a much softer degree in his thinking. In chapter three of book two of the Wealth of Nations, ‘Of the Accumulation of Capital, or of Productive and Unproductive Labour’, Smith states how both person and country can become unprofitable if more money is spent on consumption then they receive in revenue. Theoretically, the wealth of a country as a whole could decline if many private individuals spent more than they received in revenues. This has already been seen as an effect of Neo-liberalism and its corporate globalization, with third world countries being trapped in a vicious cycle of poverty where government spending dwarf the total net gross that it produces. Also, there is a problem with Western governments that do this. According to Smith, most government spending is unproductive. Smith writes in the Wealth of Nations, There is a constant danger that governments will spend too much money on war and the preparation for war; this can reduce the wealth of nations. With that been identified this is a Smithian argument against the neo-liberal policies of past and present in the US. Such as, Reaganism, to the extent that the Reagan Administration increased defence spending, is an increased unproductive spending that is seen as unproductive to Smith. Hence military spending decreases the potential aggregate supply in the United States, thus hindering the growth of its wealth. This goes against the need to expand military growth and communication required by the elimination of time and space necessary in Neo-liberalism.

Neo-liberalism has promoted itself on the grounds of such liberal political theorist as Adam Smith. Smith is seen as a proto-libertarian, an avatar of “lassiez-faire” promoting the banners of Neo-liberalism. Yet instead of promoting such view in Smith’s writings can be found contradictions to the characters of Neo-liberalism. Such as, the emphases on corporate rites, Smith was always distrustful of the ‘new men’ at the time merchants presently capitalist for being shifty immoral individuals always trying to gain personally at the loss of the public whole. Smith did not believe that self-interest was the mode of virtue. Instead of being an advocate of ‘laissez-faire’ economics and little government Smith believe that without the state that the market could not exist and function. Stating that such public goods as education were out of the control of the market mechanism and were necessary in producing competent individuals for the market. Neo-liberalism tendency towards Globalization (corporate globalization) through the elimination of time and space would be seen by Smith as a hindrance for the greater good of society through the increase of wages and decrease of prices, not promoted. Through comparison and analyses on these grounds it is false and improper to invoke Adam Smith as a proto-libertarian banner raiser of Neo-liberalism.

O’Driscoll, Gerald P. (17). Adam Smith and Modern Political Economy Bicentennial Essays on The Wealth of Nation (nd ed.) Iowa The Iowa State University Press / Ames, pp.

Hayek, Friedrich A. (144). The Road To Serfdom. Routledge and Kegan Paul, London The University of Chicago Press, pp. 185

O’Driscoll, Gerald P. (17). Adam Smith and Modern Political Economy Bicentennial Essays on The Wealth of Nation (nd ed.) Iowa The Iowa State University Press / Ames, pp.

Bronowski, J. (16). The Western Intellectual Tradition from Leonardo to Hegel. New York Harper & Row, Publishers, Incorporated, pp. 86

Bronowski, J. (16). The Western Intellectual Tradition from Leonardo to Hegel. New York Harper & Row, Publishers, Incorporated, pp. 86

Pack, Spencer J. (11). Capitalism As A Moral System Adam Smith’s Critique of the Free Market Economy. Vermont Edward Elgar Publishing Company, pp. 1



Gordon, Scott (11). The History and Philosophy of Social Science. London Routledge, pp. 1

Gordon, Scott (11). The History and Philosophy of Social Science. London Routledge, pp. 5

Bronowski, J. (16). The Western Intellectual Tradition from Leonardo to Hegel. New York Harper & Row, Publishers, Incorporated, pp. 8

Pack, Spencer J. (11). Capitalism As A Moral System Adam Smith’s Critique of the Free Market Economy. Vermont Edward Elgar Publishing Company, pp.

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