Study Guide

The Wealth of Nations Three-Act Plot Analysis

By Adam Smith

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Three-Act Plot Analysis

Act I

The first third of this book focuses on the clear division that exists between the rich developed countries of the world and the poor undeveloped ones. Some people might think that the rich countries are rich because the people living in them are smarter and more motivated. But Adam Smith says this is all just hogwash.

The most important difference is the fact that the rich countries have markets that are competitive and free. This means that the people in them are constantly working to create better products and to sell them more cheaply. Any society that has access to awesome cheap goods makes even the poorest people look rich compared to other countries.

Act II

Despite the fact that Britain is a wealthy country, Smith thinks it could be doing even better if its government followed some commonsense advice for making its economy better. For starters, it should get rid of any laws that make it difficult to import cheap foreign goods.

Second, it should get rid of all its overseas colonies and allow them to become independent countries. If they could just do these things, Britain would become way richer and its people would see their lives get more comfortable.


Once he has finished laying out his arguments, Smith backtracks and admits that the British government is unlikely to follow his advice, because human pride will get in its way. Like a slave master, the British government will take a financial hit in the long run in exchange for the pride it feels in owning overseas colonies.

Once he's covered this, Smith also admits that there are some cases where it is good for the government to tax the public in order to support certain government institutions. And that's about it. The book kind of ends on a soft note.

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