Semiquincentennial? Sestercentennial? Quarter-millenial?
How about 250th anniversary instead? Any one is a mouthful, but whatever, it’s worth noting, and even celebrating.
Naturally there has been made a lot of news, and some hype, about our Declaration of Independence that was adopted on July 4, 1776, 250 years ago. Those of us over the age of 50 recall the hoopla of the bicentennial in 1976: fireplugs painted red white and blue, tall ships sailing into New York Harbor, fireworks on the Mall in Washington DC, and many other events.
Declaring American colonies independent states caused a sea change in the world order. But it took an eight-year-long war between the newly declared states and Great Britain, at the time the preeminent military power in the world, to ratify that status.
We refer to the event as the American Revolution. But for the former colonies it was not a revolution in the sense that it upturned their government and body politic, it was not a “regime change” as were the 1989 French Revolution and the 1917 and 1990 Russian Revolutions. The American acts were designed to gain independence from a remote monarchy and to affirm their status of self-governance. Each new state kept its colonial government and body politic, though without a remote parliament and king.
It is significant that in that same year, four months prior to the Declaration’s adoption by the Continental Congress, another, perhaps the second most important document of the century, was published: An Inquiry into the Nature and Causes of the Wealth of Nations, by Scottish philosopher and economist Adam Smith. In shorthand, Wealth of Nations.
In his lengthy book, Smith challenged the widespread economic theory termed mercantilism. Mercantilism held that wealth was static and it consisted of the amount of gold and silver in a nation’s treasury; trade was a zero-sum game. The amount of gold and silver could be increased by two long-established principles (1) restraints upon the importation of foreign goods for home consumption that could be produced at home, from whatever country they were imported; and (2) restraints upon the importation of goods almost all kinds from those particular countries with which the balance of trade was supposed to be disadvantageous. These restraints, or regulations, tended to stifle production.
Smith, on the other hand, contended that wealth was potentially unlimited and was measured by production of goods and services. He articulated three basic principles for the production of wealth: individual self-interest, the division of labor, and freedom of trade.
Self interest: the most quoted passage from Wealth of Nations is “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” The self-interest Smith describes is rational self-interest. “Give me that which I want, and you shall have this which you want” appeals to the self-interests of both sides of a transaction. He further opines that “nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow citizens,” and even a beggar does not depend upon it entirely.
Division of labor: Specialization increases economic value. It makes a small quantity of labor produce a greater quantity of work. As an example, Smith points out that the making of a pin could be divided in about eighteen distinct operations from the mining of the ore containing the metal, to the sharpening of the point. Even if the raw materials were available at hand, one person could scarcely make more than a few in a day. But when the functions were divided amongst, say 10 individuals, perhaps they could make thousands of pins in the same time. But Smith was not an absolutist in this regard. He was concerned about the ill-effects of excess in the division of labor. “The man whose whole life is spent in performing a few simple operations, of which the effects, too, are perhaps always the same, or very nearly the same, has no occasion to exert his understanding, or to exercise his invention . . . [t]he torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life.” Polymaths can take comfort.
Free-trade: Smith observed that all trades, freely made, are mutually beneficial. One side obtained what he wanted more than a certain sum of his money, e.g., a widget; the other side got what he wanted more than his widget, that money. In this example, the cost of production of the widget, or distribution thereof, would be impaired by taxation or regulation at some level that artificially reduces its utility or desirability. That restraint of trade inhibits growth and thus the creation of wealth by imposing on comparative advantage. (The notion of “comparative advantage” was articulated by David Ricardo a few years after Smith’s death.) Smith was opposed to most economic constraints by authority such as tariffs, bounties, price controls, monopolies, cartels, et cetera. Freedom of trade, he maintained, enhances individual freedom.
His solution was that Great Britain should voluntarily give up all authority over the colonies and the Americans would become friends and allies rather than factious subjects. That friendly relationship was ultimately formed, and with some exceptions over the two and one-half centuries, endured.
Even more enduring has been the United States as the most successful capitalist nation the world has known. Celebrate what happened 250 years ago on July 4. And commemorate what was published on March 9 of that same year.
NOTES
Wealth of Nations is quite a tome — in some editions over 1000 pages. This author used the one in Volume 39 of the Great Books of the Western World series (University of Chicago Press 1952). P. J. O’Rourke’s On The Wealth of Nations (Atlantic Monthly Press 2007) is an entertaining explication and commentary in 242 pages including notes and index. O’Rourke explains “Why is the Wealth of Nations So Damn Long” in a chapter so titled. Also available is Jesse Norman’s Adam Smith: Father of Economics (2018). Works of other economists such as F. A. Hayek and Milton Friedman are influenced by Wealth of Nations.
