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Supplementary Reading
Excerpts from The Wealth of Nations by Adam Smith
Introduction
An Inquiry into the Nature and Causes of the Wealth of Nations
Introduction and Plan of the Work
 The
annual labour of every nation is the fund which originally supplies
it with all the necessaries and conveniences of life which it annually
consumes, and which consist always either in the immediate produce
of that labour, or in what is purchased with that produce from other
nations.
According
therefore as this produce, or what is purchased with it, bears a
greater or smaller proportion to the number of those who are to
consume it, the nation will be better or worse supplied with all
the necessaries and conveniences for which it has occasion.
But
this proportion must in every nation be regulated by two different
circumstances; first, by the skill, dexterity, and judgment with
which its labour is generally applied; and, secondly, by the proportion
between the number of those who are employed in useful labour, and
that of those who are not so employed. Whatever be the soil, climate,
or extent of territory of any particular nation, the abundance or
scantiness of its annual supply must, in that particular situation,
depend upon those two circumstances.
The
abundance or scantiness of this supply, too, seems to depend more
upon the former of those two circumstances than upon the latter.
Among the savage nations of hunters and fishers, every individual
who is able to work, is more or less employed in useful labour,
and endeavours to provide, as well as he can, the necessaries and
conveniences of life, for himself, or such of his family or tribe
as are either too old, or too young, or too infirm to go a hunting
and fishing. Such nations, however, are so miserably poor that,
from mere want, they are frequently reduced, or, at least, think
themselves reduced, to the necessity sometimes of directly destroying,
and sometimes of abandoning their infants, their old people, and
those afflicted with lingering diseases, to perish with hunger,
or to be devoured by wild beasts. Among civilised and thriving nations,
on the contrary, though a great number of people do not labour at
all, many of whom consume the produce of ten times, frequently of
a hundred times more labour than the greater part of those who work;
yet the produce of the whole labour of the society is so great that
all are often abundantly supplied, and a workman, even of the lowest
and poorest order, if he is frugal and industrious, may enjoy a
greater share of the necessaries and conveniences of life than it
is possible for any savage to acquire.
The
causes of this improvement, in the productive powers of labour,
and the order, according to which its produce is naturally distributed
among the different ranks and conditions of men in the society,
make the subject of the first book of this Inquiry.
Whatever
be the actual state of the skill, dexterity, and judgment with which
labour is applied in any nation, the abundance or scantiness of
its annual supply must depend, during the continuance of that state,
upon the proportion between the number of those who are annually
employed in useful labour, and that of those who are not so employed.
The number of useful and productive labourers, it will hereafter
appear, is everywhere in proportion to the quantity of capital stock
which is employed in setting them to work, and to the particular
way in which it is so employed. The second book, therefore, treats
of the nature of capital stock, of the manner in which it is gradually
accumulated, and of the different quantities of labour which it
puts into motion, according to the different ways in which it is
employed.
Nations
tolerably well advanced as to skill, dexterity, and judgment, in
the application of labour, have followed very different plans in
the general conduct or direction of it; those plans have not all
been equally favourable to the greatness of its produce. The policy
of some nations has given extraordinary encouragement to the industry
of the country; that of others to the industry of towns. Scarce
any nation has dealt equally and impartially with every sort of
industry. Since the downfall of the Roman empire, the policy of
Europe has been more favourable to arts, manufactures, and commerce,
the industry of towns, than to agriculture, the industry of the
country. The circumstances which seem to have introduced and established
this policy are explained in the third book.
Thomas Jefferson
In
the thick of party conflict in 1800, Thomas Jefferson wrote in a
private letter, "I have sworn upon the altar of God eternal
hostility against every form of tyranny over the mind of man."
This
powerful advocate of liberty was born in 1743 in Albermarle County,
Virginia, inheriting from his father, a planter and surveyor, some
5,000 acres of land, and from his mother, a Randolph, high social
standing. He studied at the College of William and Mary, then read
law. In 1772 he married Martha Wayles Skelton, a widow, and took
her to live in his partly constructed mountaintop home, Monticello.
Freckled
and sandy-haired, rather tall and awkward, Jefferson was eloquent
as a correspondent, but he was no public speaker. In the Virginia
House of Burgesses and the Continental Congress, he contributed
his pen rather than his voice to the patriot cause. As the "silent
member" of the Congress, Jefferson, at 33, drafted the Declaration
of Independence. In years following he labored to make its words
a reality in Virginia. Most notably, he wrote a bill establishing
religious freedom, enacted in 1786.
Jefferson
succeeded Benjamin Franklin as minister to France in 1785. His sympathy
for the French Revolution led him into conflict with Alexander Hamilton
when Jefferson was Secretary of State in President Washington's
Cabinet. He resigned in 1793.
Sharp
political conflict developed, and two separate parties, the Federalists
and the Democratic-Republicans, began to form. Jefferson gradually
assumed leadership of the Republicans, who sympathized with the
revolutionary cause in France. Attacking Federalist policies, he
opposed a strong centralized Government and championed the rights
of states.
As
a reluctant candidate for President in 1796, Jefferson came within
three votes of election. Through a flaw in the Constitution, he
became Vice President, although an opponent of President Adams.
In 1800 the defect caused a more serious problem. Republican electors,
attempting to name both a President and a Vice President from their
own party, cast a tie vote between Jefferson and Aaron Burr. The
House of Representatives settled the tie. Hamilton, disliking both
Jefferson and Burr, nevertheless urged Jefferson's election.
When
Jefferson assumed the Presidency, the crisis in France had passed.
He slashed Army and Navy expenditures, cut the budget, eliminated
the tax on whiskey so unpopular in the West, yet reduced the national
debt by a third. He also sent a naval squadron to fight the Barbary
pirates, who were harassing American commerce in the Mediterranean.
Further, although the Constitution made no provision for the acquisition
of new land, Jefferson suppressed his qualms over constitutionality
when he had the opportunity to acquire the Louisiana Territory from
Napoleon in 1803.
During
Jefferson's second term, he was increasingly preoccupied with keeping
the Nation from involvement in the Napoleonic wars, though both
England and France interfered with the neutral rights of American
merchantmen. Jefferson's attempted solution, an embargo upon American
shipping, worked badly and was unpopular.
Jefferson
retired to Monticello to ponder such projects as his grand designs
for the University of Virginia. A French nobleman observed that
he had placed his house and his mind "on an elevated situation,
from which he might contemplate the universe."
He
died on July 4, 1826.
How Much Growth?
One
of the major issues facing the American public in the late 20th
century had to do with growth. Economic growth has been at the core
of American success: despite periodic depressions or recessions,
the U.S. economy over time has continued to grow. The economic "pie"
was always getting large enough for new generations of immigrants
to carve themselves a slice.
Still,
the voices of those who argue that a high rate of economic growth
cannot be maintained, or perhaps might have to be forcibly constrained,
had become increasingly loud. While no one accepted all the positions
taken by nogrowth or slow-growth advocates, there clearly had been
a weakening
of belief in the idea that unconstrained, uninhibited growth
was automatically good in itself.
For
example, the development of land was being questioned as never before.
In the 1990s, developers were required to file environmental impact
reports with various levels of government. Local planning commissions
and a number of federal agencies, such as the Environmental
Protection Agency, were conducting research and administering
programs in the name of safe, well-planned, economic development.
How
much pollution is too much? How much open space are Americans willing
to abandon in the drive to create new jobs? How many jobs should
be sacrificed in order to protect endangered wildlife? (Some Americans
were delighted！and others enraged！by a decision in 1991 to
curtail timber cutting in certain federal forests in order to preserve
the existence of an endangered species of owl.) How will decisions
on these and other questions affect the overall quality of life?
These are hard issues that generate almost as many opinions as there
are interested parties.
Similar
concerns on a global level were making their way to the forefront
of U.S. policymakers' agendas (as well as those of other nations):
How to deal with environmental challenges such as climate change,
ozone depletion, deforestation and marine pollution. Will coal-burning
power plants and gasoline-powered automobiles have to be constrained
to limit emissions of carbon dioxide and other "greenhouse"
gases, so-called because they are believed to contribute to a phenomenon
known as global
warming? If global warming occurs, will it lead to devastating
changes, such as the destruction of rich agriculture-producing areas
like the American heartland? Because of the huge size of its economy,
the United States has necessarily become a major actor in such matters.
These
questions and others like them go to the crux of the debate about
future economic growth. What is an acceptable level of economic
inequality in a nation as affluent as the United States? Would
a prolonged period of slow or no growth, coupled with declining
real incomes bring with it a host of new and possibly explosive
social, political and economic problems！problems that can barely
be discerned from today's perspective?
Given
the continuing existence of budget deficits, not just at the federal
level, but also at the state and local levels, public funds seem
sure to be limited. Will government maintain its role of watchdog
and regulator? What will become of the services provided by the
various forms of government? Will they be increasingly turned over
to the private sector? Should such services continue to be provided
at all?
As
in the past, the decisions made in the future will substantially
affect the shape and character of the U.S. economy.
Thus,
more than two centuries after the birth of their nation, Americans
continue to face many challenges. But as they had done 200 years
earlier, immigrants continued to flood into the United States. In
the 1990s, they were no longer coming in such great numbers from
Europe, but from Asia and Latin America. For them, America was still
what it had always been: the land of opportunity.
The Global Knowledge Economy:
and Its Implications for Business
Various
observers describe today's global economy as one in transition to
a 'knowledge economy', or an 'information society'. But the rules
and practices that determined success in the industrial economy
of the 20th century need rewriting in an interconnected world where
resources such as know-how are more critical than other economic
resources. This briefing highlights recent thinking and developments
and offers guidance on developing appropriate organizational strategies
to succeed into the new millennium. It summarizes key conclusions
from our trends database and research analysis.
Growing interest
Various
management writers have for several years highlighted the role of
knowledge or intellectual capital in business. The value of high-tech
companies such as software and biotechnology companies, is not in
physical assets as measured by accountants, but in their intangibles
such as knowledge and patents. The last few years have a growing
recognition by accounting bodies and international agencies that
knowledge is a crucial factor of production. For example, the OECD
has groups investigating 'human capital' and also the role of knowledge
in international competitiveness. Several conferences in 1997, including
one sponsored by the World Bank, have placed knowledge firmly at
the heart of the economic agenda.
Driving forces
Our
analysis suggests three interlocking driving forces are changing
the rules of business and national competitiveness:
， Globalization！markets and
products are more global. Products by Nike and Virgin are known
the world over. Today, even resourcing is becoming global. Thus
many companies outsource manufacturing and software development
to distant locations.
， Information/Knowledge Intensity！efficient
production relies on information and know-how; over 70 per cent
of workers in developed economies are information workers; many
factory workers use their heads more than their hands.
， Networking and Connectivity！developments
such as the Internet bring the 'global village' ever nearer.
The
net result is that goods and services can be developed, bought,
sold, and in many cases even delivered over electronic networks.
Electronic commerce offers many advantages in terms of costs savings,
efficiencies and market reach over traditional physical methods.
Related Websites
http://usinfo.state.gov/usa/infousa/trade/ameconom/pt10.htm
http://www.bernstein.com/research/investmentplanning/
ip_summers_future.htm
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