Home > Uncategorized > Adam Smith Wealth of Nations, Book 3

Adam Smith Wealth of Nations, Book 3

Book 3:

Chapter 1:

Source of wealth is exchange between town and country where country provides raw material and town develops that material and returns some of it to the country-side. It is a mutually beneficial relation. The more the two are close to each other the better. Note how countryside close to towns are much better off than those farther off. Division of labnour is necessary and natural order of things.

Subsistence is prior to luxury, so in the chain of things the making of raw and basic material comes before the more advanced. The country must be improved before the town or for the town to be improved. Towns can only survive on  surplus labour of the country.

Those who gain surplus prefer to invest it back into Land because it is safer, more stable, and under their eyes, whereas trade is dangerous and risky. But farmers need assistance from blacksmiths, tanners, etc.. and that class of people needs assistance to procure material and from each other, so they live together and are joined by butcher baker to create a town. These people are entirely dependent on the country surplus and if human institutions had not disrupted this it would have continued like so for a long time.

Artisan is servant to land owner, and he is only master of himself who is master of his farming land, when there is available farmland all surplus is invested in land. When there is unavailable land, artisans aim to export their products to gain money and they better their methods and techniques. The capital of the merchant is preferred to be exported domestically for it is more secure than foreign trader;s capital. The natural order in any nation then is any capital is invested ifrst in land then manufactury then foreign trade.

In Europe we find this natural order of things inverted. Foreign trade accounts for much of local income and capital investment. This is because by the actions of their government.

Chapter 2:

Roman empire was destroyed by Barbarians, link between country and town was disrupted. Towns were abandoned and country uncultivated. The land fell into the hands of a few who kept them by law of primogeniture. This prevented land from being parceled out between children. Great tracts of land were therefore left uncultivated and in the hands of one man. Owners of the land were born into wealth and didn’t know how to cultivate the land profitably. They would rather invest money into more land than improve the old. they work slaves (kind slaves) to work the land, they are owned by the land. They too cannot be expected to improve the land mcuh for they have no right to private ownership.

Because a freeman worlks the land better and because his work material have to be purchased and not provided, there came a movement of economic motivation in freeing the slaved serfs to more productively work the land. Laws in UK protected the farmer from ejection by land owner. Smith goes on on how great Britain is and how it was the only country in the 14th century to institute laws protecting property and profits of land worker vis a vis land owner. This political arrangement helps the peasant to respect the land owner. More on how UK doesnt force peasant to do extra work, house the army …Policies of Europe were unfavourable for the production of wealth.

Chapter 3:

Change in social order from Roman empire where merchants and workers coexisted to feudal where lord lived in tower separated from productive classes. In time king granted tax exemptions and arrangements of a single yearly tax to some traders, they became called free-traders. In time this group grew from personal with king to institutionalization of tax payments to king directly while they had liberty with land and produce as much as they wished. This group became free from Kings’ officers. These free traders formed communes and towns and they dealt with their own affairs so that in a short time they erected republics in the hearts of monarchies. Town voting, town self sufficiency, and town paid taxes to king. They were more productive because they were free. Sovereign lords and people all existed, and it seemd free traders got most freedom first.

Lords hated the freed Burghers, they attacked them at every chance, Burghers hated the lords. The King hated the lords so he allied with the Burghers. He gave them their own farms as payment for their defense against lords. Some of these cities in Italy grew so great as to become autonomous. This is the origin of the Burgher class in Europe.

Some cities could also isolate from the country. Those cities by the sea could by foreign trade prosper while their countrysides would languish. They used the lords and monarchs to trade for raw resources for their processed products and they therefore became opulent. Taste for luxuries spreead and merhcants found in cheaper to produce luxuries domestically. Local manufacturing can emerge as enforced directly planted or naturally to meet local demand out of agricultural farmers who expand into new areas of manufacture.

Chapter 4:

Towns then contributed to countries again after domestic manufacturing in three ways. Towns now were markets for country produce. Merchants bought land in the country which with their risk taking attitude they cultivated to produce much better output. Finally commerce introduced order and good government and the free life that came with them.

Barons grew out when the countryside depended on them for their subsistence because of their success as proprietors. They came to provide with their surplus for the survival and opulence of those who lived around them. This was before feudal law which was intended to limit the powers of the barons. This was solved better by foreign trade. The proprietors spent their surplus abroad and did not make thei subjects dependent and this liberated the subjects and fed the proprietors. Proprietor indirectly transfers support from local family to obey him, to merchants and artisans in purchasing their produce, Though he alone cannot guarantee their survival they sell to more than one that is how the economy is sustained. As he did so he fired more and more of his tenant or slaves until he needed some to keep surpus going to which the slaces agreed if they had guarantees and were given property. They become independant and resistant to proprietor.

A social revolution was undertaken by merchants and artisans with their new independence. The revolution is through their work Europe improved in economy status and value.

The capital which a country obtains by foreign trade is easily lost until some of it has been invested in the land. Therefore wealth ought to be invested in the land as much as possible.

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