Question

Adam Smith argued that all business is local. Explain what this means, including the evolution of the concept.

Answer 1

There are following points worth a mention:

• Smith argued that the control of business processes and complainces in a region should reserve with the local administrative bodies rather than with the central government or ministry.
• Smith strongly advocated the idea of free-market economy. This could be achieved only by way of minimum but necessary interference by the central govrnment in the business operations of private sector.
• Smith cited an example of his time prevailing. He said in his book - (Wealth of Nations), that, even those public works (such as public utilities like transportation) which are of such a nature that they cannot collect enough revenue for maintaining themselves, are better be maintained by a local and/or provincial revenue authority - well under the management of a local and/or provincial administration, instead of by the general revenue of the central government

Evolution of the concept:

• Smith supported the idea of 'Natural Liberty' for business
• Adam smith strongly advocated 'FREE MARKETS' where let the market itself decide its own course with forces of demand and supply.
• He also advocated the concept of LIMITED GOVERNMENT, so as to ensure that business can operate freely in response to the market forces (demand and supply), and not be restricted by varying trade and tariff policies forced upon them by government.
• Smith's strongly advocated the laissez-faire economics, which means "leave alone" (literally, "let the businesses do the way they find good for them"),
• Central government must be less involved in the economy. It should rather focus on the adminsitrative and defese, etc.
• If some regulation was needed upon businesses, let it be steered by the local business associations or the local administrative authority of the region.