What Adam Smith Meant
Contrary to what is commonly believed, Adam Smith did not describe a natural self sustaining economic system. He actually issued a dire warning about a corrupting influence that must be guarded against. What we are experiencing is the fulfillment of Adam Smith’s worst predictions.. (Incidentally he never used the terms Capitalism or Capitalist, those were coined by Karl Marx)
Smith described an economic system based on the division of labor, in which wealth is the fruit of labor and flows in a cycle. He showed that it is necessary for someone to amass sufficient resources to foster the establishment of a mechanism of production, so as to and sustain the mechanism, until it becomes productive, and can then sustain itself. The fruits of this production are what he termed capital. He further described a class of people who deal in the distribution and trade of this capital. Those whom establish the mechanism of production of capital and those who deal in its distribution and trade are those whom Marx would later term Capitalism. The term Smith used for their activities was commerce, which Marx would later term capitalism. He showed that production was a response to demand, and demand was dependent on a population capable of purchasing what was produced.
So far this fits what we understand as capitalism, but Smith went farther. He expressed a deep mistrust of these capitalists. He warned that their motives were strictly self serving and antithetical to the welfare of society as a whole. He explicitly warned against their political and economic influence. He said that they would pervert the laws and the economy to their own benefit, at the detriment of society’s. He predicted that the capitalist were unconcerned about their detrimental effect, and would pursue their own ends to the inevitable decline of the society that enabled their existence. He showed that in an ascending society, labor was sufficiently rewarded as to enable the laborers to experience prosperity, and to provide a market for their own production. He also showed that in a descending society labor was short changed and lost its prosperity and would become essentially enslaved to the capitalist.
In essence Smith predicted the conditions that Marx would later point out. Smith prescribed that society should be wary of capitalist and should protect itself from the influence of the capitalist. What we have done, is to lionize the capitalist as heroes, and have given them the reigns of governance and the economy, and we are experiencing exactly what Smith predicted would be the result.
