Essay on Adam Smith’s contribution to capitalism

Essay on Adam Smith’s contribution to capitalism

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Adam Smith is considered as one of the most influential economists in the 18th century. Although his theories have been criticized by several socialist economists, however, his idea of capitalism still has great impact to the rest of the economists during classical, neo classical periods and the structure of today’s economy. Even the former Prime Minister of Britain, Margaret Thatcher had praised on Smith’s contribution on today’s capitalism market. She commented “Adam Smith, in fact, heralded the end of the strait-jacket of feudalism and released all the innate energy of private initiative and enterprise which enable wealth to be created on a scale never before contemplated” (Copley and Sutherland 1995, 2). Smith is also being recognized as the father of classical political economy and he has two famous published works that laid out the reasons to support his ultimate idea of capitalism.
The first work of Smith is called The Theory of Moral Sentiments. This work suggested that human beings were driven by the nature of morality and motive of morality. The concept of nature of morality was actually inspired by the teacher of Smith, Francis Hutcheson. Hutcheson’s view on the nature of morality stated that “man was moved to make moral judgment by particular “sentiment and feelings,” not by reason and self-love” (Teichgraeber III 1986, 129), which means that in the view of nature of morality, the decision made by individuals were not motivated by rational reasoning nor self-interest but feelings and emotional attachment toward the target when they tried to fit into their situation; and it is called sympathy. Due to the restriction of nature of morality, human beings tend to control their behaviors on conducting outrageous behaviors ...

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...would also trigger an unintentional effect that would eventually benefited the society as a whole by maximizing the total profit if individuals all follow their self-interest to behave. Newbert explained “For, only capitalism allows individuals to automously choose their own course of action, provided that in so doing, they do not violate the rights of others by forcing them to buy or sell a given product or service” (Newbert 2003, 253). From here, we can realize Smith’s insight towards the early form of capitalism. Finally, Smith’s suggested that free trade is the only way that helps a nation to sustain stable economic growth. He thinks that mercantilism is a barrier of the growth of a nation. He claimed that a nation will be able to maximize the wealth only if they use their competitive advantage on production and trade the surplus under the free trade economy.

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