250 years of Adam Smith: Why Trump should read 'Wealth of Nations'

It's not the best of times to talk about the United States of America. So, we'll enter through Adam Smith, considered both father of modern economics and capitalism, whose epochal book, 'An Inquiry into the Nature and Causes of the Wealth of Nations,' turned 250 years old last Monday. A key figure of the Scottish Enlightenment, Smith had ordered his works to be destroyed after his death, as he thought they were of little use. Well, what did he know? They continue to be of use.

And it just so happens that 'Wealth of Nations' share its birth year with the book's most devout follower: America. The 250th anniversary of American independence from Britain will be planned and executed by 'The White House Task Force on Celebrating America's 250th Birthday' a.k.a. Task Force 250 that was announced by Donald Trump in January. With Tehran still on the president's mind, one hopes planning for the big bash is still on course.

Glasgow and Princeton are among the universities worldwide commemorating the sesquicentennial birthday of 'Wealth'. There are no reports, however, of Trump commemorating the book. But can he really ignore it? For, Smith's book and the history of America's progress are delicately intertwined.


Smith began his economic revolution as the American Revolution began. He had described in 'Wealth' how prices could be determined, and economists now refer to it as 'the law of supply and demand'. The mercantilism concept of accumulating gold and silver wasn't accepted by his radical concept of 'national wealth'. His mysterious phrase, 'invisible hand' defined the concept of a 'free market' system. Smith is also considered to be a proponent of 'laissez-faire' (left alone) economics.

As it happens, Comrade Trump has been in a fierce battle with the theory of 'free trade' via his tariffs. Trump 2.0 certainly has brought about tectonic changes in American society, as evidenced by ICE-bound anti-immigration crackdowns, constraints on university freedom, open disdain against the Supreme Court, going to war without Congressional approval, and destroying West Asia.

Through his ambition to expand US territory, he hasn't spared his country's allies and friends. The US, the country of Tocqueville's 'democratic revolution' is the latest template of a rogue state - on steroids. The 'USA' brand, built over the last 250 years has morphed into something else, where 'superpower' comes across less as Superman, more as Lex Luthor. Or some hammy Bond villain.

Smith's work could have been interpreted as a tribute to the inherent and simultaneous creation of modern concepts of free market capitalism and American democratic independence. Many of America's founders read 'The Wealth of Nations'. Thomas Jefferson was a fan. 'In political economy, I think Smith's Wealth of Nations the best book extant,' he wrote in a letter to future Virginia governor Thomas Mann Randolph in 1790. In his 'Report on Manufactures', Alexander Hamilton, deeply influenced by Smith, rejected the latter's free-trade principles in favour of economic nationalism and protectionism that's all the rage today.

But Smith's logic is one of the defining characteristics of the American economy. The US has always maintained policies of permitting specialisation to increase its scope throughout regions, businesses, and occupations, from agriculture to manufacturing to services and beyond. But Book 5 of 'Wealth' describes an important and logical role for government: it has an obligation to create public works that the market wouldn't provide, enforce contracts, dispense justice, and provide national defence.

In fact, Smith was in favour of taxation, to the extent of being minimally distortive and proportionate to the ability to pay, towards these ends. This equilibrium was seen in the early economic growth of the United States. It prospered not because it avoided government, but because it avoided using government to override market signals. And it established economic institutions in ways consistent with Smith's views.

250 years later, this basic idea remains valid. So, the best way to celebrate the 250th birthday of 'The Wealth of America' is to revisit just how the decentralised, specialised, and institutionalised economy has worked so well for the country. Trump should give Adam Smith a read.