Adam Smith, the Prophet of Profit
O ne morning in January 1778, 54-year-old Adam Smith left his home in Edinburgh’s Canongate and walked up the Royal Mile to the Customs House in Exchange Square. It was his first week at work as a commissioner of customs. Inside he was confronted with a large board listing all the contraband goods it was now his duty to track down and destroy. For centuries men of business, struggling in the face of foreign competition, had lobbied their rulers to introduce such restrictions on foreign imports. They argued that, without such import bans, tariffs and ‘bounties’ (state subsidies), the economies of other nations would prosper at the expense of their own. The commissioners of customs not only collected these tariffs, they prosecuted those who attempted to import goods in defiance of such bans.
There is something strange about the idea of Smith, the renowned father of free market economics, joining the customs service. Smith opposed protectionism, as well as guilds and other institutions which, he believed, restricted the movement of workers from one trade to another. If these barriers were removed, Smith insisted, the ‘invisible hand’ of the market would lead each to specialise in the trade they were best suited for, improving quality, encouraging innovation, lowering prices and raising living standards for all. The power to direct how humans invested their time, effort and money was a despotic infringement of ‘natural liberty’ and no ruler could be trusted to use that power wisely.
