ADAM SMITH AND THE NEW ORDER OF INDUSTRIAL CAPITALISM
The Classical Liberals, of whom the most well known is undoubtedly Adam Smith, author of The Wealth of Nations, supported the new economic order of industrial capitalism. Smith, whose definitive work was published in 1776- well before the industrial revolution hit its stride- made common the notion that governments should assume a more hands-off approach to governance. Recognizing that industrial technology would allow for capitalism to create, not just redistribute wealth, Smith thought it natural that capitalism be free to function of its own accord.
Indeed, a laissez-faire approach to economics was, in Smith's view, the essential way to ensure prosperity for the nation as a whole. In this, Smith rejects mercantilism (government supervision of the economy) as the best means by which a country may prosper. On the contrary: at the fore of Smith's concern was the creation of wealth, a process that he believed would be most efficiently rendered when free trade and free markets were allowed to allocate resources. Ultimately, when capitalism is allowed to run its course, the greed and self-interest of the capitalists would produce results in the economy that benefit not only the individual, but society as well.
Smith's ideas certainly fit in with the new economic order of industrial capitalism. Smith, in The Wealth of Nations, claims that the "greatest improvement in the productive powers of labor" seems to "àhave been the effects of the division of labor"(p. 196). This is so, Smith feels, because once labor has been divided and specialized, wealth is created in abundance.
Similarly, competition is also a wealth-creating force. Smith has faith in competition, explaining that when the market is allowed to regulate itself, competition can provide an overall boost in wealth. In intending to promote his own security and his own self-interest, an individual actually...