In the face of the recent global financial crisis, the views of Adam Smith on the concept of a commercial society have come in full force to face the modern economists. In his exposition and defense of a commercial society, Smith has argued that the spread of the market in the society was capable of making life better. In his views he opposed direct involvement of the government in regulating economic activities in the society, arguing that this was an evidence of self-interest within the government at the detriment of the public. On the other hand, Smith believed that the state had great influence on a commercial society with the help of which the function and size of the state would grow with more independent commercial society. However, with the liberalization of markets and the formation of trade blocks in several regions across the world, it is important to review the views as expounded by Smith on free market. This paper aims at discussing the views of Adam Smith on commercial society, highlighting its advantages and disadvantages in the modern day marketing.
Adam Smith was an 18th century philosopher who pioneered the philosophy of economics in his views. According to Fleischacker (2005), one of his notable works is found in his arguments concerning the involvement of the state in the regulation of economic life. He observes that Smith held varied views on the involvement of the state in setting wage rates and tariffs, while at the same time proposing that the state was bound to grow in size and development due to its involvement in the commercial activities of the society. Fleischacker (2005) observes that Smith’s major argument against the government, being involved in the regulation of the commercial activities in the society was that the government represented its self-interests.
Alvey (2003) further notes that Adam Smith was of the view that the benefits accrued in a commercial society was going to directly benefit the bigger state. In this case, Smith indicates in his lectures on Jurisprudence that the generated wealth will create benefits for a well functioning economy, and thus help in relieving the economic burden from the state. Surprisingly, Smith observes, in these lectures, that states in civilized countries were much more expensive than those in barbaric ones.
However, Goçmen (2007) notes that Smith’s views on a commercial society seems to contradict his belief. For instance, he proposes that commercial societies should be left to thrive in a free market without regulation. Yet, on the other hand, he notes that the involvement of the state in the regulation of commercial activities actually helps in advancing these societies. In this regard Smith spends a good amount of time in his Wealth of Nations analyzing how the state can benefit from commercial activities within the context of regulation and imposition of rates and levies. Goçmen (2007) also argues that it is not surprising that Adam Smith spent the rest of his life after publishing the ‘Wealth of Nations’ working for the government and practically collecting customs in line with his views of state and commercial society.
The Concept of a Commercial Society
According to Goçmen (2007), Adam Smith viewed a commercial society as a way of attaining development for a civilized state. In his suggestion, he observed that every person has the responsibility of contributing to the general welfare of the society while pursuing personal interest. Smith believed that every individual contributes to the welfare of the society regardless of whether he intends to promote the interest of the public or not. Smith (2010) asserts that while people endeavor to support their domestic lives in pursuit of their own security, they are directed by the invisible hand in their promotion of an end which was not their intention. Similarly, he observes that people’s unwillingness to support the society is seen by their attempt to ensure that the greatest value for their produce is not part of the concern of the society.
Smith (2010) further indicated that the act of people pursuing their commercial interest in the society frequently promotes the interest of the society in an effective manner better, than if they had actually intended to do so. In fact, he concluded that those people who choose to trade for themselves deliver a lot of benefits for the society. In this regard, Smith (2010) observes that people, who choose to be engaged in the commercial activity in a society, commit themselves to contribute the much needed funds for the state. The impediment, however, is how to bring these people to contribute without being oppressed.
Smith (2010) also analyzed the functions of the state and concluded that these functions emanated from the expected consequences of the state that act within a commercial society. An example of these consequences is the inevitable establishment of the markets which force people to pay taxes to the state. He saw the spread of the markets and the division of labor as a precondition for modernizing civilized societies. Smith(2010) observed that through the spread of markets, wealth is created and hence distribution of income not only among people but also including state.
Smith observed that one of the major evils which the public has to deal with in a commercial society is the issue of national defense. He argued that a commercial society was continually in need of defense in the course of economic development. This is because as a society continues to grow, the richer it becomes the object of attack from poor neighbors. On the other hand, Smith(2010) notes that the division of labor contributes to a lifestyle in which only a few people are willing to contribute in the defense of the society.
McKenna (2006) points to the fact that defense in a commercial society is intertwined with the economic development of the society and that one could not be attained without the other. Smith further developed a four stage model in the development of commercial societies. It includes the stage of hunters and fishers, the stage of nomadic shepherds, the stage of settled agriculture, and the stage of commercial society. He noted that all these stages are characterized by unique features which are distinct from the other stages. For instance, McKenna (2006) observes that Smith had noted that the stage of commercial society was characterized by a market economy, increasing urbanization, and an intensive division of labor.
Smith’s View on the Importance of a Commercial Society
According to Goçmen (2007), Smith observed that a commercial society ensures provision of services and infrastructures which individuals could not provide. For instance, it is the duty of the state to provide defense to the people even though Smith argued that this defense was reinforced by the fact that the rich required protection from the poor and, therefore, governments exist to protect the rich against the poor. This is why Smith views security as preceding economic development in a commercial society.
Another important feature of a commercial society is that it enables the provision of infrastructures such as roads and bridges which facilitate transportation and delivery of goods within that society. Smith described them as the “institutions for facilitating the commerce of society”. Goçmen (2007) argues that these infrastructures, despite their numerous advantages for society, cannot be provided by individuals or groups of investors because they are expensive. It is therefore of great advantage that the government provides security, justice, and infrastructure through a commercial society. The market economy, created in this society, ensures that the poor are taken care of through what Smith referred to as the universal opulence. This is because such kinds of economy normally extend itself to reach even the poorest people.
Problems Associated with a Commercial Society
According to Alvey (2003), Smith stated that a commercial society also comes with problems which are brought about by the increasing wealth from the commercial activities. For instance, a commercial society should always be worried about war with its poor neighbor. Therefore, a good amount of revenue from trade is dedicated to the purchase of weapons of war. Similarly, the rise in the cost of maintaining security comes with the rise in the cost of administering the same justice. This provision of the property protection by the state in a commercial society has also led to the emergence of private property which necessitates the grabbing of public properties.
Another problem associated with commercial societies is that the government normally shifts its attention to the provision of security to the rich in that society while the poor are ignored. Similarly, Alvey (2003) noted that commercial societies bring ownership of great properties by a few individuals which propounds the existing inequality within societies in terms of ownership and wealth. Even though the rich are supposed to be taxed at a higher rate than the poor in such a society, Alvey (2003) observes that this is not the case as the poor and the rich are taxed at the same rate. In fact, McKenna (2006) noted that most governments in commercial societies exist because they want to protect the interest of the rich against the poor which makes the conditions of the poor worse. In other words, commercial societies are avenues to promote the gap that already exist between the rich and the poor.
Similarly, Alvey (2003) notes that the division of labor in commercial society has a negative effect of people who work manually. In commercial societies, he further notes that most people who do routine work have become ignorant and, therefore, cannot agitate for their rights. In such situation, the division of labor brings injustice to people who cannot protect themselves against the rich.
The above discussion has addressed the views of Adam Smith concerning a commercial society. It is clear that commercial society is the last stage in the development of civilized society which saw the organization of people into societies with full government. The government, in this case, is charged with several roles including the provision of defense, justice, and infrastructure to the people. It is noted that these activities are carried out using the taxes and rates that people pay from their trade activities. However, commercial society has been an avenue for many evils in the societies as the government attempts to protect its people against external aggression from the poor neighbor and also protect the rich against the poor in the same society.