wealth results in depression

1^st Comment:

Nice job in putting together all the questions. I agree that concentration of wealth results in depression and Smith wants rich people to invest their wealth which result in benefiting poor people. All the multinational companies have their factories in third world countries and they hire people on very low wages and bring all the profit to their headquarters and leave little for those poor people. What is your opinion on this? Do you think that his theory is working well considering today’s situation?

Reply:

In the ‘Wealth of Nations’ theory, Adam Smith asserted that competition in the commercial society would average manufacturers’ prices hence controlling their self-interest. In ‘Moral Sentiments’ theory, he implicated that commercial interactions would shape manufacturers behavior. Considering that multinational companies have their factories in third world countries and hire people on low wages taking profits home and leaving little for those poor people, both theories would need to be combined if capitalism is to be realized in the third world countries. Evidently, application of one theory would make the multinational companies control the markets but their combination will consider both the workers and consumers.

2^nd comment:

The circulation of money in a reciprocal way (providing service and receive money for it) as Adam thought of where the nation by itself is a market that people could exchange their money and other things in. The logic behind his ideology is that he calls for equity and he believes that all people should have the same thing. So he thought about excluding the government from being the role player at this level but he suggested that the wealthiest would be the one that do this.

Reply:

Adam Smith thought about excluding the government from controlling the markets but then suggested that the wealthiest people would do the same. He however realized that the government control was better since exploitation and draining of wealth by the rich would rule the markets if free markets were allowed. Government could control exports and import but the wealthy traders would be led by self-interest.

3^rd comment:

What do you think Adam Smith would think of the state of things today? Does his theory of laissez faire economics really work in today’s world?

Reply:

The theory of laissez faire economics considered the exemption of all government controls in the markets, which can never be applicable in the world today as most crucial sectors held by the government cannot be managed by private sector. Security and other public essentials are not affordable to the common citizens hence the theory is not applicable today.

4^th comment:

You know what? This really was surprise for me that Adam Smith introduced and explained the (GNP) theory in eighteenth century which is fundamental Economic concept in world these days. From (Reading 6-3 page 8) I found that “He did not observe that, say, maintenance work such as cleaning saves future expense and, on the manufactured goods side, that products are not always saleable. These are the kinds of objections to which Smith consciously and deliberately exposed his ideas in the interests of empirical testing. As already mentioned, The Wealth of Nations rarely strays from observable experience.”

Reading this part of our reading was very interested and it looks like you are reading a book wrote sometime in 1990 or so. Smith was one of those geniuses in Humanities history who built some basic commerce and economic rules are valuable till today. In (Reading 6-3 page 8) “What Smith is doing here is explaining what is now called the gross national product (GNP): how it might be calculated and how it is employed to fund national social needs”. Which makes his theory relevant in today’s economy.

Reply:

Smith made a conscious and deliberate exposure of his ideas in the interests of empirical testing to object as he introduced and explained the idea of Gross national product. His ‘Wealth of Nations’ theory emphasized on a nation’s production of necessities, comfort and conveniences of life such that when importing products, the nation would be giving out its wealth in exchange, but when exporting products, it would be adding wealth to the country. In relevance to today’s economy, the implication were not only on the precious metals used in exchange but all commercial items to be profited through investment in labor which would lead to progress of opulence.

5^th Comment:

Please correct me if you disagree but I was under the assumption when they were referring to the wealthy investing they weren’t referring to investments in financial instruments but that of manufacturing plants and industries that would gain them wealth on their investment. Also I believe not all wealthy people hold or save there are a great deal of them that use “self-interest” to gain more wealth. Consider the likes of Donald Trump, Bill Gates, and other entrepreneurs that have achieved wealth and could retire but they keep building their empire and creating jobs for the masses.

Reply:

When Smith referred to wealthy investing, he never referred to investments in financial instruments but of manufacturing plants and industries which would be profitable through division of labor. Therefore, this would result to maximum output of food and other life necessities which directly translated to national population growth and hence increased labor force. This was better implicated in Smith’s market theory where he indicated that not only the beneficiaries had a role to play but also the businessmen who were free to pursue their own goal of gain under the existing conditions. These would at last benefit the country’s economy just as it is currently with some rich people like Donald Trump, Bill Gates, and other entrepreneurs who keep pursuing their self-interest goals as well as creating jobs for the public.