Study Guide

The Wealth of Nations Competition

By Adam Smith

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The exclusive privilege of an incorporated trade necessarily restrains the competition, in the town where it is established, to those who are free of the trade. (1.10.60)

All government regulations do in Smith's mind is prevent good competition. As a result, people get monopolies and don't feel the same pressure to make better, cheaper products. The whole society suffers as a result because it stops building wealth.

Were the Americans […] to stop the importation of European manufactures, and, by thus giving a monopoly to such of their countrymen as could manufacture the like goods […] they would retard instead of accelerating the further increase in the value of their annual produce. (2.5.21)

One of the reasons America has done so well (in Smith's mind) is that it has left its borders completely open to importing foreign goods. That means that they can have the best products from all over the world at the cheapest possible prices. So hooray for that.

This free competition obliges all bankers to be more liberal in their dealings with their customers, lest their rivals should carry them away. (2.2.52)

When there's lots of competition, people have to do their best to satisfy their customers. That means that the public gets the best possible deal on every type of product and service. This means that their money will buy them much nicer things for cheaper prices, and everyone will apparently be much happier.

In general, if any branch of trade, or any division of labour, be advantageous to the publick, the freer and more general the competition, it will always be the more so. (2.2.52)

Smith makes no bones about it. More competition equals a better world and a wealthier nation. Period. He's told you why, and now it's time for you to nod and smile.

[By] directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. (4.2.9)

When everyone acts according to their self-interest, they'll produce whatever stuff the public wants the most. And if they do this, then the public's demands are always being addressed and satisfied to the best possible extent. That's why Smith believes there's an "invisible hand" that makes the market good for both buyers and sellers.

By discouraging improvement, the monopoly necessarily retards the natural increase of another great original source of revenue, the rent of land. (4.7.37)

Smith is worried that if some people control too much of a country's land, they won't be motivated to improve the land and make it more productive. That's why he wants there to be a lot of competition in the marketplace. People need to feel pressured to make their land more productive and profitable if the nation is going to become wealthier.

But as [the monopoly] obstructs the natural increase of capital, it tends rather to diminish than to increase the sum total of the revenue which the inhabitants of the country derive from the profits of stock. (4.7.38)

One of the greatest threats to a productive and competitive market is a monopoly. The problem is that sometimes monopolies happen even if the government keeps its hand off the economy. So what then? Do you just let the monopoly ruin the economy or do you intervene and provide support to competitors?

It is unnecessary, I imagine, to observe, how contrary such regulations are to the boasted liberty of the subject, of which we affect to be so very jealous; but which, in this case, is so plainly sacrificed to the futile interests of our merchants and manufacturers. (4.8.6)

Smith believes that government interference with the economy usually benefits a small group of private people while messing things up for everyone else.

It is altogether for the benefit of the producer that bounties are granted upon the exportation of some of his productions. (4.8.10)

It is the surplus produce of the land, or what remains after deducting the maintenance, first, of the cultivators, and afterwards, of the proprietors, that maintains and employs the unproductive class. (4.9.15)

In any given country, there will always be a class of productive people that has to support the unproductive people. One of the biggest differences between civilization and the jungle is that people in a civilization aren't left to die on the street even if they can't fend for themselves. It's assumed that the society will take care of them whether they're productive or not.

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