Adam Smith. How States Get Rich
Money, essentially, is a system of trust and agreement among people. It functions only because society collectively agrees to assign value to it. Constant preoccupation with money can lead to stress, anxiety, and a sense of dissatisfaction when individuals measure their happiness solely through financial metrics. Attitudes toward money reveal our internal values and fears.
Every individual, striving to improve their own position, inadvertently enhances the welfare of the entire society. Globalization and digitization of the economy have led to increased international competition and cooperation, necessitating a rethinking of the role of states and international organizations in managing economic processes.
Monopoly is the great enemy of good economy. The latter can only spread through free and universal competition, which forces everyone to engage in good economic management for self-preservation.
In the era of globalization, international cooperation and coordination in the fields of technological policy, standards, and regulation are becoming increasingly important.
Adam Smith's theory of division of labor emphasizes how specialization across different professions leads to increased efficiency and productivity.
In modern economics, the role of capital has expanded with the emergence of new types of assets, such as intellectual capital, which includes knowledge, skills, and innovations, becoming key.
The importance of physical capital, such as equipment, has significantly diminished compared to the importance of software and data. Digitization has changed investment approaches; technologies like blockchain and artificial intelligence open up new opportunities for investment and capital management. Digital platforms allow a wider range of investors to participate in financial markets.
Adam Smith divided labor into productive and unproductive, arguing that productive labor contributes to the creation of added value and is the key to economic prosperity. In contemporary economics, these concepts acquire new aspects as the boundaries between productive and unproductive labor blur with the development of services.
In information technology, intellectual labor is also gaining significance: research, software development, and data analytics become critically important, even though they do not produce tangible goods.
Free trade stimulates competition and innovation. Companies operating in the global market strive to enhance their competitiveness and efficiency, leading to continuous optimization of business processes.
Adam Smith wrote: "According to the system of natural liberty, the sovereign has only three duties to attend to. Those, indeed, of which the import is most intelligible to the meanest capacity. First, the duty of protecting the society from the violence and invasion of other independent societies. Secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice. And thirdly, the duty of erecting and maintaining certain public works and certain public institutions which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society."
Adam Smith emphasized the importance of a justice system for financial development and societal prosperity. Trade and industry can rarely thrive for long in a state that lacks proper administration of justice, where the population does not feel secure in their property ownership, where the power of contracts is not supported by law, and where there is no assurance that state power is regularly employed to enforce debt payment by all those capable of paying.
Strengthening education and the health of the workforce should be a priority for the state, as it ultimately leads to the prosperity of society.