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-1CHY4U1 – The West & the World Unit 2 – Lesson #07 Adam Smith Seminar – Supplementary Readings Each paragraph

should have at least 2 different annotations. Please read the following article and using the space on the right hand side of the page please annotate the text by adding the following elements:     Identification of Main Ideas Questions about supporting details Words to Define or look up Key Points & understandings  Inferences (reading between the lines)  Prior Knowledge (is there something you have read that you already know something about).  Key Passages for answering quiz or discussion questions.

Political Economists In France, somewhat apart from the philosophes, were the Physiocrats, whom their critics called "economists," a word originally thought to be mildly insulting. Many of the Physiocrats, unlike the philosophes, were close to the government as administrators or advisers. Quesnay was physician to Louis XV, Turgot was an experienced official who became minister to Louis XVI, and Dupont de Nemours, an associate of Turgot's, became the founder of the industrial family of the Du Ponts in the United States. Such men concerned themselves with fiscal and tax reform, and with measures to increase the national wealth of France. They opposed guild regulations and price controls as impediments to the production and circulation of goods, and so were the first to use the term laissez faire ("let them do as they see fit") as a principle of economic activity. They favoured strong government, however, relying on it to overcome traditional obstructions and to provide inducements for the establishment of new industries. Economics, or what was long called political economy, arose from these activities of the Physiocrats, from the somewhat similar work of "cameralists" in the German states, and from the collection and analysis of quantitative data, that is, the birth of statistics. A good example of the latter was Sir William Petty's Political Arithmetic, published in 1690. Economic thinking flourished especially in Great Britain, where Adam Smith's Enquiry into the nature and causes of the wealth of nations appeared in 1776. By 1800 the Wealth of Nations had been translated into every West European language except Portuguese. Adam Smith's purpose, like that of the French Physiocrats, was to increase the national wealth by the reduction of barriers that hindered its growth. He undercut the premises of what we have called "the struggle for wealth and empire" in Chapter VI, since he argued that to build up a nation's wealth it was unnecessary to have an empire. He attacked most of the program of mercantilism that had obtained since the sixteenth century, and he expected that Britain's American colonies would soon become independent without loss to British trade. Where others looked to planning by an enlightened government, Adam Smith preferred to limit the functions of government to defence, internal security, and the provision of reasonable laws and fair law courts by which private differences could be adjudicated. For innovation and enterprise he

-2counted more on private persons than on the state. He became the philosopher of the free market, the prophet of free trade. If there was a shortage of a given commodity its price would rise, and so stimulate producers to produce more, while also attracting new persons into that line of production. If there was an excess, if more was produced than purchasers would buy, both capital and labour would withdraw and gradually move into another area where demand was stronger. Demand would increase with lower prices, which depended on lower costs, which in turn depended on the specialization of labour. His most famous example was that of the pin factory of his time, where each of a dozen workers engaged in only one part of the process of manufacture, so that together they produced far more pins than if each man produced whole pins; the price of pins then fell, and more pins could be used by more people. The same principle held in international trade; some countries or climates could produce an article more cheaply than others, so that if each specialized and then exchanged with the others, all would have more. The motivation for all such production and exchange was to be the self-interest of the participants. As he said, we rely for our meat not on the good will of the butcher but on his concern for his own income. To those who might object that this was a system of selfishness Adam Smith would reply (being a professor of moral philosophy at the University of Glasgow) that it was at least realistic, describing how people really behaved, and that it was morally justified since it ultimately produced a maximum both of freedom and of abundance. The mutual interaction of the enlightened self-interest of millions of persons would in the end, as if by an "invisible hand," he said, result in the highest welfare of all. Among problems that Smith minimized, or accepted as lesser evils, were the insecurity of individuals and the dangers of excessive dependency of a whole country on imports of essentials, such as food; and if the visible hand of government continued to regulate the price of bread it was not for economic reasons, but to prevent rioting and obtain social peace. Text Citation: Palmer & Colton. A History of the Modern World. pp. 324-325.