Texas Border Business
In a few months, we will celebrate the 250th birthday of the United States and the signing of the Declaration of Independence. The importance of that monumental event to the world as we know it today was heightened by something else that occurred a few months earlier. March 9, 1776, saw the original publication of Scottish philosopher Adam Smith’s seminal work, An Inquiry into the Nature and Causes of the Wealth of Nations.
This treatise was a weighty tome, difficult to slog through and inclusive of digressions that seemed interminable. It was not greeted with any particular fanfare, yet it provided a framework for the notion of organizing an entire economy around markets. Drawing heavily on the tenets of Natural Law that dominated thinking at the time, it described the market as an “Invisible Hand” acting as a guiding force in the decisions of producers, workers, and other economic actors through basic incentives. The idea is that by acting in their own self interest and informed by signals such as prices and wages, individuals simultaneously promote the good of society. There have been myriad refinements over time, but the basic precepts remain intact.
Although markets as places of commerce date back to ancient civilizations, this book was one of the first explanations of how they could also function as the organizing mechanism for economies. It also set forth frameworks for new ways of thinking about key topics such as the division of labor, where production is broken down into specific tasks to increase productivity.
As you may remember from Hamilton, Thomas Jefferson “missed the eighties,” having lived in France between 1784 and 1789. While there, he became engrossed in the notions of The Enlightenment and acquired a three-volume set of The Wealth of Nations, which he later described as the best book about money and commerce that existed. (He later acquired a second set, and I have been fortunate enough to hold both of his copies in my hands.) Jefferson often quoted from the book, and it clearly influenced his ideas surrounding the structure of the new United States.
As the government was being formed in the late 1780s, that influence resulted in the formation of not only a republic, but one based on the notions of markets and capitalism being the driving force in the fledgling economy. It was a unique structure at the time, and it has made all the difference.
The combination of those two things—an independent republic and a market-based economy—and the freedoms that they brought have allowed the United States to become the most prosperous country in the history of the world. Dr. Smith’s epistle deserves its own moment of celebration! Stay safe!
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Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of over 3,000 clients over the past four decades.
