Adam Smith is the founder of the science of economics and the free market economy. His two best known works are “The Wealth of Nations,” which refers to economic action, and “The Theory of Moral Sentiments,” which deals with moral and social action. The first one, focusing on economic behavior, turned out to be the bible of capitalism and its theorists. But they overlooked the other one, which refers to social behavior, the core of human attitude to life, with the economic behavior being one of its dimensions. In general they overlooked the overall worldview of Adam Smith. His theory, which inextricably links economic activity with social behavior, was also overlooked. In addition, “The Wealth of Nations” was distorted and used in a self-centered and paraphrased approach, ignoring the ultimate goal for the good of society. Smith himself seems to have considered “The Theory of Moral Sentiments” a superior work. His work “The Wealth of Nations” was one of the first attempts to study the historical development of industry and trade in Europe. This work created the modern academic discipline of economics, forming the basis and the theoretical foundation of the free market economy and capitalism.
Smith argued that rational self-interest and competition can lead to economic prosperity by creating a market-based balance for the benefit of all, which in many cases is contradictory. Self-interest can get selfish. In capitalism today it is also evident that the maximization of profit is in many cases at the expense rather than the benefit of others. Social reality has also shown that in the face of self-interest, rationality is often lost, leading to the irrationality of profit and pushing people to extreme situations. In “The Wealth of Nations,” moral philosophy is defined as the science of human nature and the connecting principles of social life, particularly with the goals of happiness and fulfillment of the human being, perceived not only as an individual, but as the member of a family, of a country, and of the great society of humanity.
In “The Theory of Moral Sentiments,” that seems to have been considered by Adam Smith himself a superior work of his to “The Wealth of Nations”, he spoke about human moral and social action, not specifically about economic action; he set the values he believed should govern society but also economy. Central to Smith’s ethics are the public good and virtuous behavior, which are also associated with happiness, the social nature of the human being, and their attitude within society. The issue for the virtuous person is to surpass their individuality, act with morality and do what is best for others. The human being is a social being, and their individual happiness is possible only when they are in harmony with the social community of which they are a member. He also refers to the priority of the collective over the individual and to the fact that nature teaches the human being that the well-being of the two is better than that of the one. At the core of Smith’s interpretation of moral judgment and the motives for moral action lies the principle of sympathy. Smith defines sympathy also as “fellow feeling.” He speaks about understanding the feelings of others and the concept of being introduced to another person’s state. Essentially through sympathy he refers to what today is called empathy: the capacity to place oneself in position of another, to sympathize, to show compassion and understanding. Human beings can by nature identify and put themselves in the place of others, other people’s shoes, as also shown by scientific research. Empathy is a natural disposition of the human being, which reveals their deep collective nature. In another part of his work he points out that “acting in accordance with the dictates of our moral functions, we must necessarily seek the most effective way to promote the happiness of mankind.” His theoretical quest ends with the vision of an ideal state of the world, with complete harmony and tranquility. He believed that human nature could be shaped for such a world by appropriate education. This shows the way he perceived human nature and that he believed in it. Elsewhere he states that “humanity does not desire to be great, but to be beloved”, deconstructing the values of capitalism.
All of these considerations in the “Theory of Moral Sentiments” were overlooked by the theorists of capitalism, who merely adopted the “Wealth of Nations,” and they did so in a selfish approach, keeping only the self-interest. What Smith did not take into account, however, is that the self-interest in economic activity could overrun and abolish the morality that he regarded as primary. The same way logic and ethics can be trampled on by the uncontrolled tendency of self-interest and profit-seeking, which is made obvious by the social reality. This is how it is today with the plight that the irrationality of profit brings to humanity and the planet. Self-interest can become selfish and mercenary interest and in many cases self-destructive to humankind. It is obvious that profit-seeking in society without control becomes in many cases profiteering and can be destructive and dangerous. Selfish, mercenary interests and profiteering are in direct conflict with morality and logic. The morality and logic on which Smith based social and economic action and regarded them necessary for society and the economy, must be defended by the institutions, as should be the pursuit of the common good that his economy was aimed at. Society ought to be protected from the profiting tendency and especially its uncontrolled diversion. Even Smith himself, the theoretical founder of the free market, who has been considered to have created the gospel of free market, believed that in some cases state interventions in the market are necessary. He also outlined the responsibilities of the state that, in addition to protecting rights and justice, must provide a system of justice, public education, provision of public goods and general benefit to society. He also supported the taxation of imported goods as compensation for internal taxes on the same good. Among other things, it was a responsibility of the state to regulate the banking system, which is imperative for today, as the banking system defines the economy and the economy propels politics and society. In addition, Smith had also supported legislation against profiteers working against the well-functioning economy and society. The economic freedom is something that corresponds to a free society but with human and society-centered terms for the common good, which is also the purpose of a human society. In addition, society, humans and the planet must be protected institutionally against the uncontrolled profiting tendency of human self-interest, which has now taken on self-destructive propensities for humanity and the planet. The economy should be under democratic control following democratic terms. There is a need for a modern, effective institutional framework and structures tailored to the needs of the era, for the protection of society against profit-seeking and profiteering.
Smith elsewhere argued that under dynamic competition, a growth machine secures “The Wealth of Nations.” He again creates a contradiction, as this irrational competition for economic domination among countries subsequently brought, and still brings, so much suffering to humankind. In general, countries’ economies are not in accordance with the happiness of the people, which is their real purpose, but with the business and financial interests that run in many cases against social and human well-being. The interests of manufacturers and traders, according to Smith, “is always different or even opposite to that of the public” and is capable of threatening public well-being. Competition in Smith’s view did neither bring down the monopolies, nor did it create a market balance, but led in many cases to an over-accumulation of capital that would further strengthen the monopolies. Modern multinational companies are also in many cases a monopoly type. Smith spoke of “oppressive monopolies,” he did not want monopolies: they were contrary to his standpoint. He also repeatedly proclaimed the unfair nature of business interests that can form cabals or monopolies. He was cautious of businessmen and warned of their “conspiracy against the public.” He also warned that a political system dominated by entrepreneurs allows business and industry conspiracy against consumers, through machinations aimed at gaining influence in politics and the law. In his view of the economy he warned and abhorred what today characterizes the functioning of the economic system, of corporate and financial interests at the expense of society. In his critique of commercialism, he demonstrates that the interest itself of the merchant class is harmful when greed prevails. Greed is yet another scourge of the economy and society, and society should be protected against it. Smith himself said that “avarice and injustice are always shortsighted.” Both of these concepts are characteristic of modern capitalism: injustice through social inequality and greed is so shortsighted that in the face of profit it leads humankind and the planet to a self-destructive path. Smith wanted to fight poverty and social inequality. He was in favor of a minimum wage that would support the poor and he even spoke about the need for better wages for the poor, believing in general that the state should support them. He pointed out that “wherever there is great property there is great inequality. For one very rich man there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many.” He also said that “civil government, so far as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor, or of those who have some property against those who have none at all.” Also, the “Wealth of Nations”, the bible of capitalism, includes the following statement, which is an urgent need in our time in terms of paying taxes and combating social inequality and injustice: “The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.” He set out the taxes he believed the state should require, including luxury taxes and rental tax. In general, it is imperative that taxation is fair and ultra-progressive, adjusted to combat social inequality and injustice.
Smith believed in justice and rights, and in fact presented justice as a virtue and as a statute of civil society of paramount importance to the economy. He was opposed to hierarchy and beliefs of inequality, as well as slavery, colonialism and imperialism, whose aspects appear also in modern powerful economic countries and modern multinational companies. Smith was also opposed to the domination of the market and the domination of business and financial interests in politics and society, things that characterize neoliberal capitalism. Things that occur repeatedly today at the expense of democracy, rights and citizens are those that Smith denounced in his theory.
Smith, though with some contradictions, wanted the economy to serve the common good, to work in favor of humans and the well-being of society. He set the profit motive only for economic transactions morally and rationally, not for social human relations – as implied in capitalism – to which he set the contribution to the happiness of people. Social consciousness should get into the economy, not profiting consciousness into society. The profit motive, as a driving force and social archetype, established a profiting tendency in society. The profiting tendency should be restricted, deconstructed and should not prevail in society. Smith’s view of humanity and society becomes really obvious in what he seems to have considered a more important work of his than “The Wealth of Nations”, “The Theory of Moral Sentiments”, which was continuously and extensively revised until his death, and is at the core of his worldview.
Although one of his books, ”The Wealth of Nations”, which he seems not to have considered his most important work, distorted and abused, is the bible of capitalism today, and even though he is regarded as and mentioned as its theoretician and founder, his ideas are in conflict with modern capitalism, and he would be completely opposed to today’s neoliberal capitalism. Adam Smith, himself the theoretical founder of the economic system, the background of capitalism, would be in conflict with what today we call capitalism.