the habit of vanity and expense upon all other occasions." Such distorted values in turn distort industry. The "enormous" sums spent on a reception for a new viceroy in Peru served "to introduce. Smith made judgments about values, which he saw mercantilism as distorting. Rather than agricultural produce, then that is their system of values. Modern economists do not admit this sort of argument: if poor people buy traded merchandise "of the finer kind" Smith's argument is ultimately about values - not surprising given that before serving as commissioner of customs in Edinburgh, he was a professor of moral philosophy. Powerful merchants who had led the way from feudalism were able to secure a system that put trade first, domestic manufacturing second, and agriculture last. Only last did this commerce erode inefficient feudal estates, so that yeomen farmed their own plots, thereby raising yields and better feeding the populace. Gradually, urban artisans learned to manufacture local goods to replace traded articles. Merchants in cities, relatively free from the repressive grip of feudal lords, began trading to secure luxuries from the Muslim empire and Byzantium. Unfortunately, Europe emerged from the Middle Ages in an "unnatural and retrograde" manner. Smith held that a nation's wealth lies first in agriculture, to supply its people with ample food second in domestic industry, to furnish everyday needs and distinctly third in securing merchandise "of the finer kind" through trade. Lured by monopolistic profits, "private persons frequently find it more for their advantage to employ their capitals in the most distant carrying trades of Asia and America, than in the improvement and cultivation of the most fertile fields in their own neighbourhood." Smith likewise railed against fighting colonial wars "for the sole purpose of raising up a nation of customers." He raised a point that we might at least consider: is our globalization just a new mercantilism? Smith attacked the way British mercantilism divvied up the world into parcels, granting merchants corporate monopolies to trade with each: the Russia Company, the Hamburgh Company, the African Company, the South Sea Company, and that great bed of waste and corruption the East India Company. The Wealth of Nations is an extended polemic against mercantilism. Smith was concerned with a third category: mercantilism, a system and ideology, fostered by merchants, that both promotes and manages trade. We tend to lump trade policies into either of two categories: free trade or protectionism. Was Adam Smith not a free-trader after all? That is the wrong question. The invisible hand promotes the good of society by leading entrepreneurs to invest at home rather than abroad. Smith's passage on the invisible hand says only that it operates "in this as in many other cases" - not always, not even mostly.īy preferring the support of domestic to that of foreign industry, he intends only his own security and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. In another example the famous division of labor increases factory output but erodes the intelligence, enterprise, and character of workers. He saw the interests of large capitalists as conflicting with those of the public: capitalists seek high profits, which corrupt and impoverish society. This makes Smith sound as if he thought that the invisible hand always leads individuals who are pursuing their own interests to promote the good of society. By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to promote it. And he is in this led by an invisible hand to promote an end which was no part of his intention. He intends only his own security, only his own gain. He generally neither intends to promote the public interest, nor knows how much he is promoting it. Every individual endeavors to employ his capital so that its produce may be of greatest value.
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