HIST363: Global Perspectives on Industrialization

The Wealth of Nations, and to a lesser extent The Theory of Moral Sentiments, have become the starting point for any defense or critique of forms of capitalism, most influentially in the writings of Marx and Humanist economists. Because capitalism is so often associated with unbridled selfishness, there is a recent movement to emphasize the moral philosophy of Smith, with its focus on sympathy with one's fellows. Smith's economic theory helped to decouple the economic sector from government control, leading to greater incentives for economic development based on the protection of private property and division of labor.

In a market economy where there are many competing players of similar size and economic power, for example when all businesses and farms are family owned and run, the "invisible hand" theory functioned as an approximate truth. However, Smith did not see the rise of large corporations with the legal rights of persons, which could accumulate capital, merge with other large companies, acquire smaller companies, and destroy competitors through hostile takeovers, and trump the power of individuals in democracies.

These developments, which were made possible by freeing the market from government restrictions, reduce competitiveness of the market and thus the accuracy of the "invisible hand" theory. In a world in which the most powerful in the economic sphere selfishly exert control of the political sphere, a different set of injustices arise than were evident in the days of Smith, when those with the most political power selfishly interfered with the economic sector.