by Mitch Kokai
Senior Political Analyst, John Locke Foundation
This year is the 240th anniversary of the publication of Adam Smith’s An Inquiry Into the Nature and Causes of the Wealth of Nations, the crown jewel of the Scottish Enlightenment and perhaps the single most influential book of the modern era. This work helped form our modern idea of practical progress and provided confidence that it could reliably be achieved.
Smith confronted a longstanding paradox: Despite centuries of intellectual achievement, culminating in Europe’s scientific revolution, the economic achievement of Europe was comparatively low, because the nature and causes of wealth were largely misunderstood.
In pre-industrial Europe, as much as half of the working-age population was chronically impoverished. These people were unemployed or underemployed. And average longevity was less than 40 years, as it had been for centuries and not much improved from classical Greece and Rome. How had Europe’s great potential economic wealth been wasted for centuries, and why?
Smith argued that man was an economic animal who, by his bargaining and exchanging in the marketplace, could benefit from the diverse talents and genius of all his fellow men. This led to his seminal theory that the most important source of wealth of a nation is not gold, silver, money currency, or even its land or natural resources, but “the skill, dexterity, and judgment” of its labor force.
We see this illustrated today by wealthy nations, such as Switzerland and Singapore, that possess modest amounts of land or natural resources but have grown rich by having educated, trained, productive labor forces.