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Culture Documents
Thomas S. Johnson
Liberty University
ADAM SMITH ON WEALTH INEQUALITY 2
Adam Smith would respond to the question of income inequality and social unrest by
discussing the importance of quality of living and what constitutes wealth production. Adam
Smiths response to the hypothesis that wealth inequality leads to social unrest would likely
require defining the terms wealth and wealth inequality. Even then, Smith would likely
dismiss or clarify the necessity of some income inequality as a natural byproduct of improving
living standards.
Adam Smith would likely write at length on the issue of unequal distribution of wealth
and whether it lead to social unrest, however, he would also in all likelihood disagree with the
concept that unequal distribution of wealth leads to social unrest because of how he defined
wealth and because of the methods he advocated for remedying poverty. Adam Smiths views
and writings must be understood in context to his time. As Adam Smith was writing at a time
when mercantilism was a pervading economic view, Smiths writings were often times in
reference to these views (Sowell, 2005). Because of this, Smiths choice of words, terminology,
and concepts can mislead readers about what Smith was writing.
Adam Smith's response would also include his specific remedies for improving the
quality of living. Namely, that a system that benefits all members of society would not entail
Adam Smith, like most of the classical economists who followed him, advocated for a
free market, or laissez-faire, economy for its efficiency in producing wealth for a nation.
Classical economic theory treated wealth as arising from mutually beneficial trade and use of
Smith meanwhile defined this wealth not only as that of the wealthy elites of society but
as defined by the total population (Sowell, 2005). Sowell (2005, p.6) evidences this when he
quotes Smith, no society can be flourishing and happy, of which the far greater part of the
members are poor and miserable. By broadening the scope of wealth to refer to all members of
a society, Smith forced the issue of wealth to be more than just about gold and currency.
Smith saw the free market economy as the most efficient system for producing wealth as
the free market allowed each individual to work towards their own benefit in as efficient a
manner as possible (Sowell, 2005). As each individual worked towards their own benefit by
trading with others, their collective work allowed the market to communicate information
meaningful both to the buyer as well as to the seller (Genetski, 2011). The free market was
As opposed to the free market, Mercantilism operated by aggregating wealth for the
social elite of a nation with little to no concern for the poor (Sowell, 2005). In the Mercantilist
view, wealth was a fixed value that could be bartered, stolen, or taxed (Sowell, 2005). The
obvious result of the mercantilist economy was one of massive income disparities and a poor
Adam Smith was primarily concerned with mitigating and addressing extreme poverty
rather than in establishing equality of income and wealth (Sowell, 2005). Adam Smith
It is but equity, besides, that they who feed, clothe, and lodge the whole body of the
people, should have such a share of the produce of their own labour as to be themselves
By this Adam Smith did not mean that wealth equality was necessary but that an
increasing standard of living was desirable for a nation (Smith, 1776/1975; Sowell, 2006).
This is not to say that inequality could not lead to civil unrest, as indeed research by Dutt
and Mitra (2008) show. Adam Smith, in fact, said that vast differences in wealth could lead the
poor to envy and even attack the wealthy (Smith, 1776/1975). "Wherever there is great property,
there is great inequality. For one very rich man there must be at least five hundred poor, and the
affluence of the few supposes the indigence of the many" (Smith, 1776/1975, p.550). However,
Adam Smith also believed that a civil governments role was to protect the property of the rich
It is only under the shelter of the civil magistrate that the owner of that valuable property can
sleep a single night in security (Smith, 1776/1975, p.550). The unfortunate consequence of
Smiths proposition was that wealth inequality was in some ways inevitable if society as a whole
Smith held to the standard that individuals should be motivated to pursue their own
interest (Rasmussen, 2016). Speaking on capitalists, Smith said, By pursuing his own interest he
frequently promotes that of the society more effectually than when he really intends to promote
it. I have never known much good done by those who affected to trade for the public good
ADAM SMITH ON WEALTH INEQUALITY 5
Smith hoped that economies would benefit the many and not just the few.
This seeming contradiction of concepts, that Smith was both in favor of practices that
produced inequality while also being critical of extreme wealth inequality is one of the factors
often overlooked when discussing Smiths theories. However, Smiths sentiments are not enough
to gauge his works. His theories and propositions must also be examined for their rational
outcomes.
Deborah Boucayannis suggested in her 2013 article that while Adam Smith did not
explicitly decry wealth income inequality, Smith's focus on increasing competition implicitly
leads to decreased concentrations of wealth. "If wealth cannot become concentrated, economic
inequality is necessarily lessened" (Boucoyannis, 2013, p.1051). In this context, Smith can
inequality in particular.
The reason Smith was skeptical of income inequality was because Smith desired markets
less plagued by the crony capitalist practices which empower powerful individuals to appropriate
wealth at the expense of the general populace (Boucoyannis, 2013; Sowell, 2005). An underlying
principle of this argument is that Smith is correct in asserting that free markets lead to increased
Instead of supporting rampant wealth aggregation, Smith hoped for an economy where
any and all individuals could benefit without fear of corrupt individuals bending the law to steal.
Smith wrote against special interests buying political favor (Boucoyannis, 2013; Genetski, 2011)
Conclusion
Adam Smiths take on wealth inequality and social unrest is neither simple nor
straightforward. The contexts of his time and the changes in terminology make knowing exactly
how Smith would respond to modern issues of inequality difficult to know at best and at worst
impossible. What can be said is that Smith deplored avarice and hoped for an orderly
improvement of society. Smiths objective for society in his lifetime had been to increase
prosperity for all people and to curtail the degradations of greedy men.
Although beyond the scope of this piece, it is worthwhile to explore the ways in which
later writers like Marx and Keynes altered the terminology and interpretations of classical
economists like Adam Smith. What is more, there is a lingering question as to how modern
issues have returned to an 18th century, mercantile interpretation of wealth as a zero sum. As the
Apostle Paul noted, For the love of money is a root of all kinds of evil. Some people, eager for
money, have wandered from the faith and pierced themselves with many griefs (1 Timothy 6:10,
New International Version). Society would do well to reconsider both its values and premises
References
Boucoyannis, D. (2013). The equalizing hand: Why Adam Smith thought the market should
http://dx.doi.org/10.1017/s153759271300282x
Dutt, P., & Mitra, D. (2008). Inequality and the instability of polity and policy. The Economic
Genetski, R. (2011). Classical economic principles & the wealth of nations, book I: Classical
RASMUSSEN, D. (2016). Adam Smith on what is wrong with economic inequality. American
http://dx.doi.org/10.1017/s0003055416000113
Smith, A. (1975). An inquiry into the nature and causes of the wealth of nations. In W. B. Todd
(Ed.), The Glasgow Edition of the Works and Correspondence of Adam Smith. (Vol. 2),
pp. 97-550. Oxford: Oxford University Press. Oxford Scholarly Editions Online (2014).
Sowell, T. (2007). On classical economics. New Haven, CT: Yale University Press. ISBN:
9780300126068.