certain public works. Free of government intervention, the market would maintain sole responsibility for production (land, labor, and capital) and distribution (channels through which goods move from the producer to the market) among different groups and people, and would flourish as a result. In addition, Smith viewed the labor involved in government jobs are “unproductive” because the work did not generate wealth.

Society would be better served if merchants and business people could be free to seek their own interests. When this freedom was granted, Smith proposed, the economy would be guided “as if by an invisible hand . . . without knowing it, without intending it, [to] advance the interest of the society.” Smith viewed merchants and business people primarily as selfish, their motives suspect. People who participate in the same type of trade, he wrote, never socialize together or conspire against each other or constantly attempt to raise prices. With the marketplace as the center of a capitalist system, Smith explained, the market itself would determine prices, what products would be produced, who would produce them, and even to whom to distribute the resultant profits.

This free-market commercial type of system, historians and economist argue, far outweighed the benefits of mercantilism because capitalism’s circular and diffuse nature assured that no one individual or group could ever control the marketplace. Rewards in the form of fortune and profit would naturally come to those who worked hard and, most important, efficiently; but punishment in the form of financial losses, or ruin, would be the consequence for inefficient work methods.

Further, Smith criticized the supporters of mercantilism who advocated state intervention in international trade. Using the Law of Comparative Advantage, Smith asserted that nations should export goods that they were most efficient at producing and import only goods that they were less efficient in producing. If there were no international barriers to the exchange of goods, a market guided by the forces of supply and demand increased the wealth of nations, while government intervention and restrictions only decreased the nation’s wealth.

In addition, competition promoted the best interests of society. Monopolies, private or state-controlled were evil, Smith believed. The natural trend of economic development is upward, and a framework of an “obvious and simple system of liberty,” or perfect competition, is vital to this movement. Competition in the marketplace, he stated, would automatically result in the availability of goods that consumers desired. More firms producing the same product would result in increased efficiency and ultimately lower costs to the consumer: in other words, spur economic growth.

Economic growth depended upon the accumulation of capital, distinguished by Smith from land and labor, the two other major factors of production. His primary concern focused on a system of “natural liberty” that would result in “maximizing general welfare.” He emphasized that it was not nature but human effort that produced commodities and strongly suggested that people possessed a desire to advance socially: “a desire that comes with us from the womb, and never leaves us until we go into the grave.” To advance upward, people needed to accumulate capital by saving and investing for the future. This innate desire at “self-betterment,” Smith viewed as a direct outcome of people’s natural competitive nature.

Taking the idea of innate competition one step further, Smith argued that this constant internalized competitive struggle not only forced the prices of commodities down to their “natural” level but also regulated the distribution of income among workers in the form of wages, in the form of rents to landlords, and to manufacturers in profits. In addition, he pointed out that the impetus behind this acquisitive drive would guarantee the steady increase of national wealth.

However, Smith did not foresee the tendency of individual businesses to increase dramatically in size. Industrial plants grew ever larger to gain the advantage of lower unit costs from mass production. Businesses expanded from small shops to large corporations employing thousands of workers, and corporations ultimately merged together forming enormous trusts, which in fact threatened a competitive economy.

The Wealth of Nations has to be considered one of the most influential studies of Western civilization. It provides a comprehensive view of political and social evolution. Indeed, economists and historians maintain that Smith’s theory of a laissez-faire or free-market economy transformed society. Certainly Smith, often called the founder of modern economics, played a major role in the development of the Industrial Revolution first in Britain, France, and Germany and later in the United States. As a result of a free-market economy, large corporations and industrial cities developed. Such business innovations as the ability of the public to purchase stocks and bonds enabled corporations to accumulate wealth. Under the watchful eyes of stockholders anxious for profitable returns on investments, more qualified managers and workers were hired. Naturally, attacks on capitalism ensued, particularly the writings of Karl Marx and Friedrich Engels, which ultimately acted as the foundation of socialism and communism.