What did Adam Smith outline about the dangers of capitalism?

Thanks for the question.

It’s a challenge, I think, for anyone to pick passages out of Smith’s work that apply exactly to today’s context of modern capitalism. Those who are friendly to classical liberalism and neoliberalism have made many errors doing so, and those who feel modern capitalism is problematic have also made errors picking-and-choosing from Smith’s work. With that caveat, here’s what I think might be relevant to this question:

1. The problem of business interests being at odds with public interests, and business having too much influence over both commerce and government. Smith touches on this frequently in Wealth of Nations, and uses the argument to encourage vigilant and thoughtful governmental oversight of business so that the public’s interests may be protected and business influence be reined in — Smith calls this “good government.” Without good government, Smith warns, the purveyors of commerce gain too much power. Why is this problematic? Because Smith observes that this particular breed of folks cannot be trusted with the public good; he writes of them: “The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.” (Bk 1, Ch.11) Further, Smith observes that such men often come to operate according to a disturbing principle: “All for ourselves and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.” (Bk 3, Ch.4)

2. The “absurd tax” of monopolies, and — once again — the dangers of their influence on government. Also not serving the public’s interests are monopolies that eliminate competition — which Smith warns are a natural objective of business, in order to maximize profits. “To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens.” (Wealth of Nations, Bk 1, Ch.11) In addition, monopolies can gain inordinate coercive influence over government itself: “like an overgrown standing army, they have become formidable to the government, and upon many occasions intimidate the legislature. The member of parliament who supports every proposal for strengthening this monopoly, is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary, and still more if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public services, can protect him from the most infamous abuse and destruction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists.” (Wealth of Nations, Bk 4, Ch.2)

3. The lack of representation of worker interests and needs. “In the public deliberations, therefore, [the laborer’s] voice is little heard and less regarded, except upon some particular occasions, when his clamor is animated, set on, and supported by his employers, not for his, but for their own particular purposes.” (Wealth of Nations, Bk 1, Ch.11) Smith does seem to think laborers aren’t always capable of constructive input to government — because of their lack of education, information and time — but he clearly doesn’t trust businesses to represent worker interests either.

My 2 cents.

Please note: excerpts from Smith’s Wealth of Nations in the above answer can easily be found via a full search string in quotes.


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