Adam Smith on the Rise and Fall of Wealthy Societies

There were two great works published in the year 1776, 'The American Declaration of Independence' by Thomas Jefferson, and 'The Wealth of Nations' by Adam Smith. Humans are naturally poor. Think about the most natural state of humanity that you can think of, people with pointy sticks and huts made out of sticks and mud. So, the first question is, "How does a society become wealthy?"

Smith is clear on the answer to this. In Book 1 of 'The Wealth of Nations' he says: "The greatest improvements in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed or applied, seem to have been the effects of the division of labour.”

He has multiple chapters on the division of labor. Here's another quote from Book 1 that expands on the idea: "It is the great multiplication of the productions of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people. Every workman has a great quantity of his own work to dispose of beyond what he himself has occasion for; and every other workman being exactly in the same situation, he is enabled to exchange a great quantity of his own goods for a great quantity or, what comes to the same thing, for the price of a great quantity of theirs. He supplies them abundantly with what they have occasion for, and they accommodate him as amply with what he has occasion for, and a general plenty diffuses itself through all the different ranks of the society."

Once a society has some wealth, it is possible for another society to plunder it. But, that is difficult to do against a wealthier society, and it's difficult to continually plunder. So, at some level wealth must be generated from free exchange of a division of labor. The next question is, "How does a wealthy society fall?"

In Book 5 Smith has a very interesting answer: "In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations; frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects, too, are perhaps always the same, or very nearly the same, has no occasion to exert his understanding, or to exercise his invention, in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning any even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging; and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war. The uniformity of his stationary life naturally corrupts the courage of his mind, and makes him regard, with abhorrence, the irregular, uncertain, and adventurous life of a soldier. It corrupts even the activity of his body, and renders him incapable of exerting his strength with vigour and perseverance in any other employment, than that to which he has been bred. His dexterity at his own particular trade seems, in this manner, to be acquired at the expense of his intellectual, social, and martial virtues. But in every improved and civilized society, this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it."

The division of labor, which requires certain things like free exchange, leads to wealth creation. The division of labor also leads to a decline in intellectual, social, and martial virtue, which naturally leads to the fall of that society. Here we can see that because these things, both the good and the bad, come from the same cause, they will lead to a natural cycle of the rising and falling of wealthy societies. We see this in history, and we see this now.

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