Today, June 5, 2023, is the 300th birthday of Adam Smith.

He is one of the greatest figures of the Enlightenment. As the founder of free-market capitalism he did more for the prosperity of humankind than anyone else in history.

In 1776 he published his famous book, An Enquiry into the Nature  and Causes of the Wealth of Nations. It taught that when people are free to pursue their own ends (under the rule of law), they and their society will prosper.

His name stands forever for Liberty and Prosperity, the two greatest aids to the pursuit of happiness.

What a year 1776 was for Liberty! Adam Smith’s book taught the benefits of it for the thriving of nations and individuals, and the American Declaration of Independence  established it as the political condition of a new nation coming into being – a nation that was to prove him right. 

Economics professor Mark Skousen writes at the New York Post:

Adam Smith (1723-1790) put together the classical model of economics, consisting of free trade, limited government, the virtue of thrift, balanced budgets and sound money.

Smith called it “the system of natural liberty”.

He made an outlandish prediction in his famous book The Wealth of Nations, declaring in 1776 that his model would result in “universal opulence which extends to the lowest ranks of the people”.

It was a tall order.

Indeed, at that time life was “nasty, brutish and short” for most people, to quote Thomas Hobbes. There was very little progress.

But as the world gradually adopted Adam Smith’s model of free trade, low taxes, deregulation, patent law and sound money (supply-side economics), we witnessed the Industrial Revolution in the West, then in the East, and a 100-fold increase in our standard of living.

Adam Smith’s incredible forecast had come true.

The outcome was a hat trick: maximum liberty, individual improvement and public benefit, all at the same time.

So, how much of the Adam Smith model still exists today?

At the top of the list, free trade and globalization have been a big success. The Soviet central-planning model has been abandoned.

Capitalism delivers the quantity, quality and variety of goods and services that the centrally planned economy never could.

The Economic Freedom Index — based on the Smithian measures of laissez faire, balanced budgets, sound money, free trade and rule of law — shows a marked increase from the mid-1970s to the early 2000s.

However, for most of the new century, the Adam Smith model has come under attack by Keynesians, Marxists and interventionists who want a return to top-down policies of authoritarian government, deficit spending, tax hikes, fair trade and over-regulation, all in the name of fairness, equity and saving the planet.

If Adam Smith were alive today, he’d be appalled by the never-ending federal deficits and out-of-control national debt.

He would not approve the overgrown welfare state and military-industrial complex.

He’d be shocked to see the US tax code at over 7,000 pages, and the federal tax regulations exceeding 75,000 pages.

The bloated bureaucracy would be a reminder of the mercantilist policies of his age.

Perhaps there’s a white knight out there coming to put America back on a sound fiscal and monetary basis, but I fear Humpty Dumpty has fallen and can’t be put together again.

I don’t see America becoming another Venezuela, but neither do I see it as another Singapore.

It’s easy to become pessimistic. But perhaps we can learn something from Smith, the ultimate optimist.

Nearly 250 years ago, he wrote, “The uniform, constant, and uninterrupted effort of every man to better his condition . . . is frequently powerful enough to maintain the natural progress of things toward improvement, in spite both of the extravagance of government, and of the greatest errors of administration.”

This well-known and much quoted passage from The Wealth of Nations is a beautifully phrased  explanation and defense of a free market economy:

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. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

Enlightened self-interest, not philanthropy, not altruism, not the impossible agenda of trying to love our neighbors as ourselves, is the key not only to each our own benefit, but inevitably also to the benefit of our society, our nation, and potentially our world.

Provide something – goods or services – that others want and will pay for, and the result is personal and general prosperity.

An “invisible hand” – as Adam Smith wrote –  works the trick.

The day of his birth was a great day for mankind.

We celebrate it.