Adam Smith on markets and their potential to benefit the poorest in society

Ginny Seung Choi & Virgil Henry Storr. From the journal Constitutional Political Economy.

"Abstract

Revisiting Adam Smith can be a useful way to resurface key aspects of how markets work that are underemphasized in current scholarship. This is especially fruitful when Smith’s claims have strong support within the political economy literature. This article focuses on Smith’s various arguments about the impact of markets on the least advantaged, and whether there is support for his claims in the contemporary literature. Despite advances in the last several decades, and indeed since the Industrial Revolution, poverty remains a worrisome problem. Additionally, inequality between countries and inequality within countries remain social challenges. Adam Smith, especially in The Wealth of Nations and The Theory of Moral Sentiments, has highlighted the potential of markets to improve the material conditions of the poorest in society."

Excerpts:

"Thus far, most global efforts to address the problems of poverty and inequality (perhaps unsurprisingly) have tended to be top-down. In 2015, for instance, all the members of the United Nations adopted 17 Sustainable Development Goals. These goals meant to serve as a call to action for member states and drive an agenda aimed at eliminating poverty, reducing inequality, encouraging economic growth, and promote inclusion and sustainability. It is unclear, almost a decade later, that this top-down effort has been successful. And, although the strategies members agreed to adopt called for expanding trade and promoting markets, they instead encouraged aid, and the focus was on countries adopting certain regulations and pursuing interventions that would ensure that the “right” kind of development occurred. Arguably, markets are frequently viewed as the cause rather than the cure for inequality and poverty." 

"In this article, we argue that markets are the best way out of poverty and toward more equal societies. Despite poverty and inequality still being problems, the evidence suggests that markets are not the problem but are part of the solution. Indeed, the potential of markets to reduce poverty and inequality is a lesson that we arguably should have learned from Adam Smith. More importantly, however, Smith encourages us to focus less on inequality and more on the conditions of the poorest."