Throughout history there are examples of individual people who, whether through word or deed, changed the world.
The Foundation for Economic Freedom (FEE) published an article by FEE President Lawrence Reed recently highlighting one of these people. The article titled “Adam Smith Proved Ideas Matter,” discusses the economic ideas and impact of Adam Smith.
His ideas mattered; in fact, they changed the world.
Among many other things, Adam Smith is the man who debunked Mercantilism. Mercantilists believed there are X number of resources in the world for which everyone must compete. The usual analogy is that of a fixed pie. Everyone in the world competes for a piece of the pie. If one group owns more of the pie that necessarily means another group owns less. Mercantilists also viewed wealth in terms of gold and silver, rather than in terms of goods and services. As a result, governments considered trade to be of great national importance, and strongly protected their own merchants, promoting exports and restricting imports—creating a situation in which they could hoard as much gold and silver as possible. Mercantilists did not support an open market and often the king of a country would grant a monopoly over a good or service resulting in increased prices, and decreased innovation.
Adam Smith studied the causes of wealth creation, and in 1776 he published,
“An Inquiry into the Nature and Causes of the Wealth of Nations, better known ever since as simply The Wealth of Nations.
Smith’s choice of the longer title is revealing in itself. Note that he didn’t set out to explore the nature and causes of the poverty of nations. Poverty, in his mind, was what happened when nothing happens, when people are idle by choice or force, or when production is prevented or destroyed. He wanted to know what brings the things we call material wealth into being, and why. It was a searching examination that would make him a withering critic of the mercantilist order.”
This is an incredibly important point for anyone interested in development, the plight of the poor, or the current social justice trend. It is worth repeating Mr. Reed’s words:
“Note that he didn’t set out to explore the nature and causes of the poverty of nations. Poverty, in his mind, was what happened when nothing happens, when people are idle by choice or force, or when production is prevented or destroyed. He wanted to know what brings the things we call material wealth into being, and why.”
Adam Smith believed the pie could multiply. Countries, groups, and individuals didn’t have to fight over a piece of the pie; they could make their own pie.
What a revolutionary idea!
Unfortunately the notion of limited resources has resurged, and many social justice warriors, lay people, and pastors subscribe to this idea.
As Christians we want to help the poor, but we have to do it in a way that is effective. And we cannot be effective if we have the wrong ideas.
There are resources that are finite, but human innovation has proven to be up to that challenge. Once upon a time, humans used wood to provide for their energy needs, then water began to be used, and then coal; now we utilize natural gas, oil, wind, solar, and nuclear energy. Who knows, in 50 years we might be using technologies completely unimaginable to us today.
For a 30 second description of Mercantilism, watch this video:
For those who really want to understand Mercantilism and it’s historical context, watch this video:
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