The Wealth Of The Nation - Adam Smith (Essay Sample)
Wealth of Nations - Adam Smith
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• How were Adam Smith principles applied to the current economy in the United States?
• How did Adam Smith principles influence the current economy in the United States?
Wealth of nations - Adam Smith
With the rapid economic development in the modern world, scholars have recommended various approaches to economic growth. Adam Smith's Wealth of Nations emphasizes on the power of labor. This paper analyzes Adam Smith's economical approach is based on the assumption of self-interest. The wealth of the nation viewed the regulations in commerce as derailing economics. Gold and silver were considered as wealth and countries were urged to major in exports and cut on imports (Robinson 101). Smith view was that a nation's economy really depends on the volume of goods and services it creates. Smith advocated for setting the nation's productive capacity free.
Smith also was of the idea that division of labor increased the production capacity. According to Smith, breaking down of huge tasks into small ones made it possible to work faster and produce higher quality goods. This method of production would leave the producers with a surplus to exchange with the others or acquire a labor-saving machine (Robinson 149). Smith also puts it that for a country's future income to increase capital accumulation and investment would lead to more wealth in the future. But he also cautioned that for people to do so, they must have confidence on the security of their wealth. Smith said that growing capital and protecting it was key for the development of a country (Robinson 143).
He was of the idea that the market was automatically being controlled by the chain of supply and demand. Scarcity led to increase in demand and thus rise in price when there is glut the demand goes down and prices go down too hence the producers venture elsewhere(Van den Berg 66). However, the system ceases being automatic if the government interfered with the free market through granting subsidies or in cases of monopoly where the producer controls both the production and supply hence has the ability to interfere with the demand (Van den Berg 83).
This could lead to exploitation of the poor, especially in cases where basic necessities price goes up. Smith also thought that competition and free exchange would be affected by the privileges that producers were getting from the government. Arguing on this Smith was of the idea that the government ceases from interfering with the market and only gets involved in building the economy through keeping orders, building and maintaining infrastructure (Friedman 205). This would help in facilitating the free market.
The wealth of a nation is boosted when production and exchange are high. Smith uses a pin factory as an example to show how the division of labor and specialization boost production hugely. This method of production made it possible for people to majorly use their skills where they are best in, it leads to the production of high-quality goods and use of labor-saving machines (Friedman 211). Specialization also facilitated commerce as people would exchange what they produced with what they did not have. The benefits of this type of production could be felt as efficient and as wide as the market was.
Smith advocates for saving part of the produce as economic progress requires building capital. He proposes that we invest our capital and increase our production efficiency by incorporating the use of labor-saving equipment. An increase in our investment translates to increase production efficiency (Robinson 51). The growth of capital impacts positively on people. However, capital runs the risk of getting lost through theft, misappropriation or government profligate spending. To build confidence...
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