When one dives into The Wealth of Nations (original title: An Inquiry into the Nature and Causes of the Wealth of Nations) by Smith, published in 1776, it is striking how an economics text from over two centuries ago still resonates in the contemporary world. I must admit it took me nearly a year to finish reading it, but it was worth it...
It’s no coincidence that Smith is recognized as the father of modern economics; in the book, he laid out a profoundly insightful vision of how societies prosper through labor, trade, and individual freedom. In this brief article, I present my modest analysis with some notes on his work.
From the outset, Smith focuses his analysis on the division of labor. In Book I, he writes: “The greatest improvement in the productive powers of labor, and the greater part of the skill, dexterity, and judgment with which it is applied, seem to have been the effects of the division of labor.” This concept conjures images of a modern factory: each worker specialized in a task, from assembling a device to programming its software. Of course, Smith illustrated this with a different example: a pin factory, where a lone worker might produce just one pin a day, but ten coordinated individuals could generate thousands. The words cooperation and specialization fit here like a glove.
Another pillar is the “invisible hand,” described in Book IV: “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.” Here, Smith doesn’t exalt pure selfishness, as some have misrepresented it, but suggests that self-interest, channeled through the market, benefits society. We see this today in companies like Tesla or Amazon: their leaders pursue profits, yet they generate jobs and significant innovation. However, a question arises: What happens when this “hand” fails, as in cases of large monopolies or environmental harm? Are these “market failures”? Smith didn’t delve that far...
Smith championed free markets, but contrary to what many might believe, he didn’t do so absolutely. In Book V, he notes: “The sovereign has the duty of erecting and maintaining certain public works and institutions which could never be maintained by individuals.” This statement reveals a balance in his thinking: he prioritizes private initiative but acknowledges the need for state intervention in key areas. It’s worth noting that throughout history, it has often been the excess of this “intervention” that has restricted the very freedom Smith defended...
Smith’s ideas remain relevant today. A clear example is globalization, which aligns with his support for barrier-free trade. In Book IV, he critiques mercantilism: “Consumption is the sole end and purpose of all production.” We see this in the global supply chain: an iPhone designed in California, assembled in China with components from Korea, reaches consumers thanks to commercial freedom. Yet, vast inequality—a topic Smith scarcely addressed—challenges his somewhat optimistic vision.
Entrepreneurship is also present in his ideas. Smith emphasized how individual freedom drives wealth, a principle we’ve seen in recent years with companies like SpaceX, where Elon Musk is transforming space exploration.
But the power of tech giants like Google and Meta raises questions: What would Smith say about the concentration of data (information) and wealth in so few hands?
Smith placed great trust in human nature, viewing the desire to improve as “a universal passion” that drives the economy, which clearly aligns with our constant pursuit of better jobs and quality of life. However, his optimism has limits because he didn’t foresee how greed or lack of regulation could derail that drive. The 2008 global crisis, for instance, showed us how the “invisible hand” sometimes needs guidance... and by guidance, I’m not suggesting the interventionism of Keynesian regulated capitalism, which ultimately brought more problems than benefits, but rather the need for very clear rules (and their enforcement) in the vast socioeconomic ecosystem.
Smith’s thought (though imperfect) is a living legacy brimming with wisdom. His assertion that “The wealth of a nation is measured by the abundance of its inhabitants” underscores that true economic success must benefit people (not just amass wealth).
In 2025, in a hyper-unequal world, his ideas invite us not only to ask the question that titles this brief article but also: Are we on the right path?
