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In The Wealth of Nations, how does Smith view businessmen's ability to serve the public good?
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Adam Smith, in The Wealth of Nations, views businessmen as rational actors driven by self-interest rather than civic virtue. While they foster the public good by enhancing the nation's economy through free enterprise and competition, Smith warns that they may also collude to avoid competition and raise prices. He believes that a free market, rather than regulatory mandates, better serves the public interest, despite businessmen's profit-driven motives.
Smith does not exactly praise the abilities of businessmen to foster the public good; he just thinks that, given the ability to make their own decisions, these men will make rational ones that make economic sense. They will thus do more to foster the public good (in the sense that they will better the nation's economy) than if their decisions were mandated by a central authority that may not know or maintain their best interests.
Smith has no illusions that businessmen are motivated to make economic decisions based on their conception of civic virtue. They are motivated by profit, and the "invisible hand" that guides them to make decisions is essentially self-interest personified. Smith addresses this in various places throughout the book, including his discussion of "conspiracies" mentioned in the previous response. He also points out that almost every economic, wage-related regulation passed by Parliament bears the influence of businessmen:
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Smith has no illusions that businessmen are motivated to make economic decisions based on their conception of civic virtue. They are motivated by profit, and the "invisible hand" that guides them to make decisions is essentially self-interest personified. Smith addresses this in various places throughout the book, including his discussion of "conspiracies" mentioned in the previous response. He also points out that almost every economic, wage-related regulation passed by Parliament bears the influence of businessmen:
Whenever the legislature attempts to regulate the differences between masters and their workmen, its counsellors are always the masters.
Here Smith is writing specifically about laws passed due to the influence of guilds and other, similar organizations. He is arguing, essentially, that wages, like prices, are best left to the market. He has no illusions about the virtues of businessmen and is simply saying that they will behave as rational actors in a free market.
While most people think that Adam Smith’s book, The Wealth of Nations is wholly pro-business, it really is not. It is in favor of free enterprise and of competition between businesses, but it does not argue that businessmen themselves will want to do what is best for society.
To Smith, businesspeople do benefit society in important ways. Most importantly, they make society wealthier. They do this by accumulating capital and putting it to use in the economy. It is the capital that businesspeople accumulate that allows them to create places of work like the famous pin factory that Smith discusses. If it were not for businesspeople, this might not be possible.
However, Smith also worries about businesspeople. He knows that it is good for society when businesses have to compete with one another. However, he also knows that competition is not really good for business and that businesspeople will try to avoid it when possible. Therefore, he warns us that businesspeople will always try to collude and to otherwise find ways in which to avoid competition and to increase (or at least maintain) their own profits. As he says,
People of the same trade seldom meet together,… but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
Thus, businesspeople can be bad for society. They are good for society in that they bring greater wealth, but they can be bad for society because they will try to do things that will increase the prices that the public must pay.
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