INT 200: Global Capitalism and its Discontents Adam Smith & the Industrial Revolution

Adam Smith The Wealth of Nations (1776) – free trade between nations, and between individuals left both sides better off – when governments interfered with that freedom with controls, tariffs or taxes, they made their people poorer rather than richer A nation’s wealth is its per capita national product – real wealth is what money buys; GNP/GDP Key to economic efficiency: specialization – Division of labor Mutual gains from exchange Money and value – Labor remains the real price

Adam Smith Self-regulating Markets – Supply and demand: the quantity of the product that sellers bring to market, and the size of the demand from potential buyers – In their natural pursuit of profit, sellers steer their resources to where the demand, and therefore price, is highest, thereby helping to satisfy that demand. – Resources are drawn to their most valued application, without the need for any central direction Money vs. Wealth – Money is a tool of exchange – Real wealth resides in what that money can buy – Mercantilism wrong

Adam Smith Role of Government – Defense – Justice – Public Works – Taxes Tenets of Capitalism – Private Property – Self Interest – Competition – Supply and Demand (invisible hand) – laissez-faire