Political economists study the making, exchanging, and consumption of goods, and the human causes and consequences. Two figures stand out in the field: Adam Smith and Karl Marx. Each brilliantly observed and analysed the development of the modern world in which we still live.

1776 was a good year: The Declaration of Independence, The Decline and Fall of the Roman Empire, The Wealth of Nations. All were influential; Smith’s Wealth perhaps most of all.

Smith confronts a changing world. He analyses the increasing division of labor in the growing manufactories: famously in the pin factory where ten men, each doing a specific part of the job, can together manufacture 48 thousand pins in a day, where a lone man could perhaps make ten or twenty.

He studies domestic and international trade, including that with colonies. He’s fascinated by the Atlantic colonies (revolting though they are), where cheap land and few regulations seem to be encouraging a tremendous growth in wealth and population. He’s appalled by the effects of monopoly companies in India and elsewhere.

He thinks carefully, at great length, about agriculture: it’s the essential industry (people must eat) and it employs the majority of a nation’s population. Even in wealthy European countries dearth, if not famine, is still common; Smith can’t foresee a time when small numbers of people produce vast surpluses of grain and cattle and ship them around the world.

Smith concludes that de-regulated trade and unrestricted exchange (no tariffs, no subsidies, no guilds, no chartered company monopolies) will benefit farmers and traders and manufacturers, and that their individual self-serving behavior will collectively enrich the state and all its inhabitants (via the “invisible hand”).

Laissez-faire, progressively enacted by governments that often quoted Smith, turned out messier than that. Smith might not have been all that surprised. The capitalists who still quote him presumably hope that other people won’t read him. He assumed they would cheat and conspire, and be endlessly greedy. They would seek to rig markets and monopolize manufacturing and trade. (That’s why Smith foresaw a need for some regulation.)

And, of course, the benefits didn’t seem to be trickling down. Marx’s colleague, Friedrich Engels, depicted some of the immediate results in The Condition of the Working Classes in England (1845).

Next week, Marx’s Capital.

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