Smith in 60 Minutes E-Book

Walther Ziegler

• Herausgeber: Books on Demand
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2016

Seitenzahl: 61

Beschreibung

It was, of all people, to a Scottish philosopher of morality that there fell the role of intellectual forefather of capitalism. It was Adam Smith who was the first to recognize and describe, in 1776, the basic principle of the market economy. His magnum opus, “The Wealth of Nations”, is still looked on today as “the Bible of capitalism”. And indeed, for a period of ten years it was, after the Bible itself, the most-translated book on earth. Smith created the “magic formula” of the free play of supply and demand and his theory of “the invisible hand” spread like wildfire around the world, remaining still today the core of the capitalist market model. What is more, Smith provided a philosophical justification for capitalism in the form of a theory of human nature: Man, he argued, is by nature egoistic and self-interested. And nothing suits such a being so well as a market economy, because it gives everyone the chance to increase their wealth. But this, in the end, benefits all, since each of us, working at improving his or her own quality of life, is led willy-nilly, as if by an “invisible hand”, to promote also the welfare of society as a whole. Do egoistic energies really tend to be transformed into social prosperity in this way? Is capitalism “natural”? The book “Smith in 60 Minutes” explains the incisive theories of this philosopher and economist in a clear and comprehensible way, using over 50 key passages from Smith’s own works. The final chapter on “what use Smith’s discovery is for us today” discusses both the triumphal progress of Smith’s market model and the catastrophic crises that capitalism’s triumph has brought with it. The mechanism of the “invisible hand” and the free play of supply and demand are more than just theories. They form the very heart of the capitalist world and it is indispensable to know the economic and philosophical foundations of the social order in which we live. The book forms part of the popular series Great Thinkers in 60 Minutes.

Leseprobe

My thanks go to Rudolf Aichner for his tireless critical editing; Silke Ruthenberg for the fine graphics; Lydia Pointvogl, Eva Amberger, Christiane Hüttner, and Dr. Martin Engler for their excellent work as manuscript readers and sub-editors; Prof. Guntram Knapp, who first inspired me with enthusiasm for philosophy; and Angela Schumitz, who handled in the most professional manner, as chief editorial reader, the production of both the German and the English editions of this series of books.

My special thanks go to my translator

Dr Alexander Reynolds.

Himself a philosopher, he not only translated the original German text into English with great care and precision but also, in passages where this was required in order to ensure clear understanding, supplemented this text with certain formulations adapted specifically to the needs of English-language readers.

Inhalt

Smith’s Great Discovery

Smith’s Central Idea

The Four Stages of History

The Division of Labour

Free Trade

The Free Play of Supply and Demand

The Invisible Hand

The Duties of the State

Taxes as an Instrument for Redistributing Wealth

Of What Use is Smith’s Discovery for Us Today?

Smith’s Great Vision – Prosperity for All!

The System of Natural Liberty – Smith’s Warning Against the Planned Economy

Global Economic Crises – the End of the ‘Invisible Hand’?

From “Night-Watchman State” to “Welfare State” – The Legacy of Adam Smith

Bibliographical References:

Smith’s Great Discovery

It was, of all people, a Scottish philosopher of morality that became the intellectual forefather of capitalism. Adam Smith was the first to recognize and describe, in 1776, the basic principle of the market economy. His magnum opus, The Wealth of Nations, is still spoken of today as “the Bible of capitalism”. And indeed, for a period of ten years it was, after the Bible itself, the most-translated book on earth.

Overnight, this nine-hundred-page work made Smith (1723-1790) the founder of a whole new science: “political economy”, nowadays usually referred to just as “economics”. In it he described for the first time the central mechanism of capitalism and created the “magic formula” of the free play of supply and demand. His theory of “the invisible hand” spread like wildfire around the world and remains still today the core of the capitalist market model.

But Smith did much more than just exactly describe the functioning of capitalism. He also provided philosophical reasons why the free-market economy is the best of all possible economic systems. His explanation is as simple as it is astounding. Each human being, he argues, is egoistic by nature; everybody aims, in the first instance, to achieve his or her own interests. The free-market economy concords with this all-too-human disposition – one might even say: this natural human drive – by giving everyone the chance to increase their wealth. But whoever, Smith goes on, works industriously to improve the quality of his own life in fact promotes, indirectly and without intending to, the good of society as a whole:

Thus, argues Smith, the capitalist production process transforms, as if it were a process guided by an “invisible hand”, the entrepreneur’s egoistic concern for personal profit into something that benefits all. The many competing producers think, indeed, only of their own profit; but the sum of their actions ensures that there are always enough reasonably-priced goods on supermarket shelves. One achieves this simply by allowing economically active people a free hand. Smith thus called for the abolition of customs duties and guild restrictions, preparing the way for the economic liberalism that characterizes the global economy today:

This championing of unlimited free competition is all the more astonishing given that Smith was born in Scotland as the son of a customs comptroller. But we see no trace in him either of the proverbial illiberality of the Scots or his father’s profession. On the contrary, he was far ahead of his time in hoping that, once customs duties had been abolished, global free trade and unrestricted capitalist production would eventually ensure prosperity for all:

Smith was the first to recognize the explosive power of industrialization. With his description and legitimation of capitalism he created a body of ideas that form the economic basis of the whole Western world. Even his critics recognize Smith’s achievement here. Thus, the economist Joseph Schumpeter calls The Wealth of Nations “the most successful not only of all books on economics but, with the possible exception of Darwin’s Origin of Species, of all scientific books that have appeared to this day.” 5

Corporate bosses, high-level managers and top politicians usually know the book very well. Margaret Thatcher is said to have made reading all of it compulsory for all her cabinet ministers and to have checked in personal interviews that each minister had “done their homework”. But, though economic policy-makers generally know Smith, everyone living in the market economy – and that, today, means almost everyone alive – really ought to be familiar with his basic ideas. The “invisible hand” mechanism and the “free play of supply and demand” are in fact more than just theories; they are the very heart of the capitalist world. Understanding them, then, is an imperative, since they form the economic and philosophical basis of the world in which we live and, in all probability, will continue to live all our lives.

Does the “invisible hand” really work? Does egoistic economic energy really tend to be transformed into social prosperity? May one, then, really leave the economy to take its course? Adam Smith gives convincing answers to these questions.

Smith’s Central Idea

The Four Stages of History

Already in the introduction to The Wealth of Nations Smith makes implicit reference to his own ambitious idea of dividing the whole of human history into four succeeding ages: the age of hunters; that of shepherds; that of agriculture; and his own age of commerce and industry. But Smith understands the motor driving all these stages of history to be self-interest or, as he puts it, the striving for personal prosperity. This, he claims, is innate in Man and is Man’s essential distinguishing feature: we are constantly driven by “the desire of bettering our condition”:

Smith, then, clearly states his basic belief that Man is essentially and entirely an egoist. But for Smith this is no bad thing but rather the source of all progress. Because, as he argues, “the pleasures of wealth and greatness [...] strike the imagination as something grand and beautiful and noble, of which the attainment is well worth all the toil and anxiety which we are so apt to bestow upon it.”7 Man thus runs great risks and makes great efforts with a view to gaining prosperity. And even if the pleasure of personal profit proves, in the end, not to be so great, the years of committed industriousness will have served, indirectly, to improve conditions of life for all: