When God was preparing Israel for the Promised Land, He told them, “You may say to yourself ‘ My power and the strength of my hands have produce this wealth for me.’ But remember the LORD your God, for it is he who gives you the ability to produce wealth, and so confirms his covenant, which he swore to your forefathers, as it is today” Deuteronomy 8:17-18. He was preparing them to prosper and one way this happened was by teaching them about capital. When we read in the Bible the lessons that formed the early Jewish economic system and helped the Hebrews to identify a sense of “capital” which was separate from the individual, we do not automatically associate this with the economic system called capitalism.
It was up to a Scottish economist in the 1770’s by the name of Adam Smith to pick up on these Biblical principles and form the ideas for the economic system of capitalism. He wrote a monumental book called The Wealth of the Nations and today he is called the father of capitalism. Adam Smith was a Christian and he was brilliant. The Wealth of Nations is not an easy read; it reads like an old-fashioned college textbook and many today would struggle to finish reading it.
The book Smith published was originally called, An Inquiry into the Nature and Causes of the Wealth of Nations (usually shortened to The Wealth of Nations). Economics of the time were dominated by the idea that a country’s wealth was best measured by its store of gold and silver. Smith proposed that a nation’s wealth should be judged not by this metric but by the total of its production and commerce (the activity of people)—today known as gross domestic product (GDP). GDP is still the standard measure of economies today. Smith thought rational self-interest (a motive for a reasonable profit) and competition would lead to economic prosperity.
Alan Greenspan writes that The Wealth of Nations was “one of the great achievements in human intellectual history.” Adam Smith wrote about ideas of economic freedom that no nation of any consequence was using at the time. After England, America became the first nation to begin to systematically apply these principles and eventually became the most prosperous economy on earth. In future blogs we will be looking at the three pillars of capitalism that Adam Smith identified…incentive, property rights and freedom.
But isn’t capitalism too easily corrupted by greed you might ask? This is an important question we will examine in upcoming blogs as well.