Some time ago I stumbled upon the best known book of Adam Smith “The Wealth of Nations”, with some time to spare. Well, there is nothing like reading the classics yourself instead of relying on second-hand (or worse) interpretations, if only to see what all the fuss is about.
This time it was a pleasant surprise. The “moral philosopher” Adam Smith stated something which is still of great value today. Not so much the often abused “invisible hand” metaphor as the war he was waging against the stifling effects of oligarchies and monopolies on the growth of our collective wealth.
His book depicts a society in the late 1700’s that is locked up in commercially controlled sections. Professions (guilds), land use (hereditary) and markets (mercantilism, colonies) are monopolized or guarded by an oligarchy.
Adam Smith makes a strong and eloquent argument why these silo’s are erroneously seen as a profitable system (by those in control) yet limit the growth of the wealth for all. A more liberal economy would open the door for more specialization and therefore a way higher productivity, for more competition and therefore the push to innovate. More specialization requires a larger “ecosystem” to sell to and to source from in order to get what you need to thrive, aka a large geography/economy to trade with without hindrance. ( The key enabler is trust: without trust the edifice collapses, something we painfully are reminded of these days).
The enormous benefit is a much larger wealth for everyone, lifting the boat to unforeseen heights: the title is “The Wealth of Nations”, not “The Wealth of Individuals” and for a very good reason.
This “liberal” (relatively to what was practice in the 1700’s) view is nowadays something like the 11th Commandment, yet in his day and age it must have been revolutionary. Scary for the powers that be: how can anyone believe that relinquishing power and embracing uncertainty will turn out to be a good thing? More precisely, turn out to be a good thing for you yourself? The more amazing it is that this book has been so influential, that it marks a turning point where this more open economic structure became accepted as a generator of wealth for everyone.
We need a new Adam Smith nowadays, one that explains these old maxims again but now framed for the information economy. In my opinion we are still in the 1700’s of the information economy : copyright laws, intellectual property laws and patent laws take us where no law has gone before, only to carve out copyright guilds, create absolute IP monopolies and sustain patent oligarchies that wage ridiculous battles. A mistaken belief that information has monetizeable value and therefore needs to be locked up.
The historic lesson seems forgotten that oligarchies and monopolies stifle growth, that we only can grow by building upon each others efforts. Sharing and trading of (in this case) information will lead to an explosion of productivity and wealth for everyone.
Scary? Yes, if you are on top of the guild and have no clue what will be the new business model. No, if you observe the escalating costs (direct costs and opportunity costs) of the enforcement of the monopolies on information against the growing undercurrent. Just study the ACTA trade agreement, see the vicious attitude against individuals sharing files and imagine the costs to society of trying to enforce the agreement.
Hopefully it is only a generational thing, hopefully soon the generation will fade away that is scared by this newfangled Internet. Hopefully a new moral philosopher, 250 years after Adam Smith will write an eBook that is as influential as the Wealth of Nations. Can’t wait.