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A great book of economic development - the first one!
on February 24, 2003
For a third world citizen, like me, this book seems to be written a couple years ago. Their topics are present in the political agenda of our governments right today, and after all other reviewers have written, better than I would do so, i should add four key points:
- With no proper political institutions there is no possibility of creating wealth (it reminds me sad examples from today...Argentina?). Smith thinks it is very important having economic liberties, besides independent magistrates, and a national state committed to enforce the contracts privates sign up to make transactions when some party doesn't want to comply them.
- Under the right framework of political institutions is posible to have private interests and public interest converging on the same "bargain zone". Under Smith's point of view is the mercantilism, as a policy of state, policy that picks up the winners since the desk of politicians instead of from the shops of every-day industry and parsimony of workers and entrepreuners what creates the conflict (even though he makes some exceptions, like the Navigation Act, but he regards the need of this monopoly of english navy by national security reasons only).
- After the short-run adjustments, the income distribution matters, that are so important for politicians, should be resolved by the market and the entrepreuners whom, by searching opportunities to make more profits, will make converging the prices of land, labour and goods.
- The accumulation of capital is the process that lowers interest rates, expands the supply of loans and suports higher degrees of division of labour in the economy. This process should let people have cheaper goods along the time and improve the wages of workers. The tax system should not stop this process, by "punishing" profits and the letting the remaining sources of rent free (wages, and rent of land).
Under Smith's point of view scarcity and poverty are historical and social problems, and their solutions are in history and in social interaction too.There are not worlds beyond every-day reality, as socialists made us to believe some time ago...just trade and division of labour and accumulation of capital, and so on. Let history and people surprise us. They will make the wealth, not the governments. The Smith system is open to history and change, and learnship, and only requires good foundations to secure an historical outcome of wealth.
The world of today has institutions that were not in XVIIIth century: global financial institutions and spread trade agreements, that create barriers at some places and open gates at anothers. And now we have new constraints (the environment,..) and new key players (global corporations, ..). But this new scene only makes smaller the room of economic policy choices for latin american governments. At the core of the room which is remaining for them, the Smith's suggestions still have urgent and actual importance.
Sad thing to recognize that in XXIst century latin america, we need to read a great book from XVIIIst century to find out solutions.