LAISSEZ-FAIRE
Overview of Smith's beliefs:
- The market's invisible hand would lead to proper growth in economy
- Opposition to Mercantilism
- Strong opposition to any government intervention into business affairs. For example, trade restrictions, minimum wage laws, and product regulation are all viewed as detrimental to a nation's economic health
- Government's core functions are maintaining defence, keeping order, building infrastructure and promoting education. These practices will BENEFIT market economy by opening trade. Other forms of intervention may distort it.
- Government should follow free-market principles by keeping taxes low and allowing free trade across borders by eliminating tariffs. Tariffs and other high taxes only succeed in making life more expensive for the people.
- People should be free to exploit in their self-interests to aid the free market forward. Such a competition will benefit the society as a whole
- NOTE: This laissez-faire policy of government non-intervention remained popular throughout the Victorian Era and still plays an important part in present-day economic policy. Capitalists, in particular, support my policies.
- As long as markets grew, an increased demand for labor would prevent owners from exploiting their workers
- Specialization and division in labor
QUOTES
On the division of labour…
"It is the great multiplication of the productions of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people."
On competition…
"In general, if any branch of trade, or any division of labour, be advantageous to the public, the freer and more general the competition, it will always be the more so."
On government…
"It is the highest impertinence and presumption… in kings and ministers, to pretend to watch over the economy of private people, and to restrain their expense... They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will."
"It is the great multiplication of the productions of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people."
On competition…
"In general, if any branch of trade, or any division of labour, be advantageous to the public, the freer and more general the competition, it will always be the more so."
On government…
"It is the highest impertinence and presumption… in kings and ministers, to pretend to watch over the economy of private people, and to restrain their expense... They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will."