Question

Adam Smith (1723-1790), widely known as the father of modern economics, placed markets at the center of the political economy (i.e., the study of how a country is managed or governed, taking into account both political and economic factors). Drawing on Smith’s 1776 book, An Inquiry into the Nature and Causes of the Wealth of Nations, construct an detailed viewpoint explaining multiple points that takes Smith’s thoughts and extrapolates them to a current or recent episode in history, OR a current Canadian policy issue.

Essay Question: Would Smith agree or disagree with the recent rise of protectionism?

Answer 1

As a modern day thought or topic, we can say Adam Smith had introduced the concept of GDP and free exchange.

Before this, every country measured their wealth on the basis of amount of gold they have. However, Adam Smith introduced that GDP can be calculated on the basis of production and consumption. Thus trades have to be liberalised so that efficient products are introduced in the market at worthy rates.

Smith would have disagreed on the current policy of protectionism. This protectionism states to avoid imported goods in the country in order to protect the domestic sellers. The domestic sellers could be protected. However, in order to do this the consumers pay a higher price for the inefficient products sold at the domestic country. This is because when we avoid trade with other countries, the efficient goods are not introduced in the market. Hence, the market gets all the inefficient goods for which the consumers have to pay a higher price. As imported goods are not allowed in the market, then there is no competition as well, so the prices of the goods cannot be checked if they are sold at a higher or a lower price. Hence, Smith would not be supporting this protectionism. Moreover, Smith spoke about less government intervention, but protectionism is caused by government only. So, Smith would not at all have agreed with this protectionism.