Know Thy Economist: Adam Smith


Adam Smith is our guide to perhaps the most pressing dilemma of our time: how to make a capitalist economy more humane and more meaningful. He was born in Scotland in Kirkcaldy near Edinburgh in 1723. A hardworking student, he became an academic philosopher and wrote a major contribution on the importance of sympathy and logic. But perhaps how we know him today is towards his major contributions in the field of economics.

Smith wanted to understand the money system because his underlying ambition was to make nations and people happier. Smith remains an invaluable guide to four ideas: When one considers the modern world of work, two facts stand out:
– modern economies produce unprecedented amounts of wealth.
– many ordinary people find work rather boring and (a key complaint): meaning-less.

The two phenomena are in fact intimately related, as Adam Smith was the first to understand through his theory of specialisation. He observed that in modern businesses, tasks formerly done by one person in a single day could far more profitably be split into many tasks carried out by multiple people over whole careers. Smith hailed this as a momentous development: he predicted that national economies would become hugely richer the more specialised their workforces became. One sign our world is now so rich, Smith could tell us, is that every time we meet a stranger, we’re unlikely to understand what they do.

The mania for incomprehensible job titles – Logistics Supply Manager, Packaging Coordinator,
Communications and Learning Officer – prove the economic logic of Smith’s insight. But there is one huge problem with specialisation: meaning. When businesses are small and their processes contained, a sense of helping others is readily available. But when everything is industrialised, one ends up as a tiny cog in a gigantic machine whose overall logic is liable to be absent from the minds of people lower down in the organisation. A company with 150,000 employees
distributed across four continents, making things that take five years from conception
to delivery, will struggle to maintain any sense of purpose and cohesion. So Smith discerned that bosses of the specialised corporations of modernity therefore have an extra responsibility to their workers: to remind them of the purpose, role and ultimate dignity of their labour.

Smith’s age saw the development of what we’d now call consumer capitalism. Manufacturers began turning out luxury goods for a broadening middle class. Some commentators were appalled. The philosopher Jean-Jacques Rousseau wished to ban ‘luxury’ from his native Geneva. He was a particular fan of ancient Sparta and argued that his city should copy its austere, martial lifestyle. Disagreeing violently, Smith pointed out to the Swiss philosopher that luxury consumerism in fact had a very serious role to play in a good society – it generated the surplus wealth that allowed societies to look after their weakest members. Consumer societies, despite their frivolity, didn’t let young children and the old starve, for they could afford hospitals and poor relief. So Smith defended consumer capitalism on the basis that it did more good for the poor than societies devoted to high ideals. That said, Smith held out some fascinating hopes for the future of capitalism. He didn’t want it to stay stuck at the frivolous level forever. He observed that humans have many ‘higher’ needs that currently lie outside of capitalist enterprise: among these, our need for education, for self-understanding, for beautiful cities and for rewarding social lives.

The hope for the future is that we’ll learn to generate sizeable profits from helping people in truly important, ambitious way

Jai Venaik

Jai Venaik

Jai comes from a liberal arts background majoring in Economics, Political Science and International Relations from the Symbiosis International University and the London School. At Samriddhi, he works as a Researcher, chiefly on projects on Constitutional and Legislative Studies.