This website uses cookies to ensure you get the best experience on our website. Learn more

Politics Notes International Political Economy Notes

Adam Smith Notes

Updated Adam Smith Notes

International Political Economy Notes

International Political Economy

Approximately 13 pages

Adam Smith; anti-mercantilism; the Invisible Hand; non-interventionism; Das Adam Smith Problem; The Theory of Moral Sentiments; anti-colonial liberalism; the marketization of higher education; Brexit David Ricardo; labor theory of value; absolute advantage; comparative advantage; the Ricardian Vice; unequal exchange; exploitation & Empire; global value chains; the containerization of supply chains Thorstein Veblen; conspicuous consumption; leisure class; business vs. industry; Adam Smith; environ...

The following is a more accessible plain text extract of the PDF sample above, taken from our International Political Economy Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

ADAM SMITH

QUESTIONS

  1. Is Smith’s market ‘natural’ or ‘socially constructed’?

  2. What is the myth of Smith and why does it prevail?

‘Is Adam Smith best understood as a champion of free market capitalism or as a critic of its moral consequences’ [2017, 2015]

Is Smith’s account of sympathy convincing? Answer in relation to his account of self-interest. [2016]

Does Smith’s political economy successfully reconcile the self-interested and other-directed instincts?

‘Adam Smith argues that self-interest leads to social benefit’. Discuss. [2013]

  1. Assess the significance of the ‘Impartial Spectator’ to Adam Smith’s thought. [2013]

Evaluate the significance of Adam Smith’s concept of the ‘Invisible Hand’ within his thought and/or for contemporary IPE. [2014]

Are Adam Smith’s ideas important for understanding the contemporary world?

  1. Is Adam Smith’s liberal political economy euro-centric?

Does Adam Smith’s work provide a foundation for anti-colonial thought?

What, if anything, is gained by situating IPE analysis in the context of a broader disciplinary history of political economy? [2015]

CONTEXT

  • Mercantilism was the dominant school of economic thought in Europe from the 16th-18th century. It asserts that wealth is finite and proposes a policy aimed at amassing stores of precious metals (gold, silver) by manipulating the balance of trade through protectionist policies and punitive tariffs. Wealth is accumulated for the sole purpose of augmenting state power at the expense of rival nations*. Economic actors perceived personal grandeur through national grandeur and thus felt obligated to endorse Empire (e.g. British East India Company).

  • The prevailing anxieties of 19th century Europe include:

  1. Where does ‘value’ come from?

  2. How does a society with no overarching ruler maintain some semblance of order? How can people, predisposed to egocentricity, nonetheless consider the good of others and cooperate in orderly, mutually productive ways?

MYTH VS. REALITY [Sagar]

  • If you’ve heard of one economist, it’s likely to be Adam Smith. In fact, few have been more maligned than the Scottish Enlightenment figure. In life, a somewhat reclusive professor of moral philosophy (encompassing ethics, politics, law and rhetoric) at the University of Glasgow. In death, the ‘Father of Modern Economics’ and ideologue for the political Right. ‘Adam Smith ties’ were flaunted as a badge of honor in the upper echelons of the Regan and Thatcher Administrations, and by global financial institutions like the Lehman Brothers.

  • If we dig below the surface, what unfolds most strikingly are the differences between Smith’s subtle, skeptical view of market processes and modern ‘Greed is Good’ caricatures depicting him as an early champion of private capitalist endeavor. Indeed, one suspects that those quickest to sing his praises have failed to understand the crux of his arguments.

  • Hence, it is imperative that one reclaims Smith’s legacy from selective quoting, glorification and assertions of clairvoyance – ‘Not only did Smith fail to predict the Industrial Revolution, but he did so while being friends with James Watt, the inventor of the steam engine’ [O’Rourke]

The Wealth of Nations, 1776

Anti-mercantilist stance

(see: CONTEXT)

  • WoN is a 900-page assault on mercantilism; a fault system predicated on the ‘popular folly of confusing wealth with money’ [WoN]. While mercantilists believed that national wealth was linked to the accumulation of precious metals, Smith located national wealth in individual economic activity (esp. commodity manufacturing and exchange) under conditions of free trade.

  • For Smith, mercantilism was characterized by an insidious network of monopolies. Private companies lobbied governments for the right to operate exclusive trade routes, or to become primary importers/exports of goods, while closed guilds controlled the flow of products and employment within domestic markets.

  • ‘People of the same trade 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’ [WoN]

  • Merchants encouraged what David Hume called, ‘jealousy of trade’, whereby commerce was transformed into an instrument of war/domination, as opposed to a bond of ‘union and friendship’ between states as it ought to be. By playing on jingoistic sentiments, the merchants inflamed aggressive nationalism, blinding domestic populations to the fact that their true interests law in peaceful economic interdependence.

  • The ‘invisible hand’, then, was aimed not at drawing attention to the problem of state intervention, but of state capture by merchant elites seeking to promote their own sectional advantage.

The ‘Invisible Hand’
  • Smith claims that the human propensity to engage in self-interested transactions, exchange and respond innovatively to market signals had culminated into a spontaneous order which provided a more efficient allocation of resources for maximal national prosperity than any deliberate design could achieve. Smith attributes this to the mechanism of the ‘invisible hand’, which produces socially beneficial results from the unintended consequences of interactions between profit-driven actors.

  • Selfishness was not a vice like greed or gluttony, to be condemned for dissolving moral/civic virtue. On the contrary, Smith argued that self-interest would contain its own excesses in a free market system and promote public welfare without intending to do so. (see: SYMPATHY)

Non-interventionism
  • Politicians, according to Smith, were much poorer judges of resource allocation than the aggregated outcome of individuals spontaneously undertaking free exchange. As such, merchants (or merchant ‘mentality’) were a pernicious but necessary component of large-scale economies

  • Political actors were liable to being swept up by a ‘spirit of system’ which infects policy-makers with a messianic moral certainty in the...

Buy the full version of these notes or essay plans and more in our International Political Economy Notes.

More International Political Economy Samples