Modern capitalism as a concept may not even have come into being, or at the least may have been delayed by decades, had it not been for Adam Smith and his theories in The Wealth of Nations. The book not only formed the “basis for theories of classical economics”1 , but also earned Smith his deserved recognition as the Father of Modern Economics. Smith, therefore, had a crucial role in the Industrial Revolution and the Scottish Enlightenment, two events that changed the course of history. Thus, Adam Smith’s impact can be analyzed from the perspective of him as a leading economist of his times and indeed, from his contribution (even as a philosopher) to revolutionary events, both of which went hand in hand. In an era when primordial ideas like mercantilism existed, Smith established the basics of capitalism. He explained how markets would work better when left alone (laissez-faire) by the government.
This was due to, what he referred to as, the concept of the invisible hand, which talked about how self - interest often led to delivering “the best possible social and economic outcomes”.
This philosophy helped humankind to have a better understanding of themselves, principally themselves in the role of entrepreneurs. Smith brought to light novel concepts like free trade which were remarkable in terms of their efficiency and effectiveness. It ensured that resources were not wasted, especially public funds3 due to “competitive advantage”, which simply put, meant a nation was thus able to produce at cheaper rates as compared to other nations. Countries now had a better chance of flourishing as the understanding of the market changed and trade became cheap and more accessible.
The Industrial Revolution had just begun in 1760, after which Smith published The Wealth of Nations in 1776. He contributed to the Revolution by putting forward the idea of division of labour. The simple objective was to split the work between workers and let one employee solely focus on one task. This method, as per Smith, was to increase productivity. Not only this, division of labour also “functioned to keep societies from breaking apart”.
Adam Smith had questioned the traditional, and then produced works on economics, which made him a pivotal part of the Enlightenment . Countries soon started implementing his policies shaping the world into how it is today. In conclusion, Adam Smith was a revolutionary figure of his times and is probably one, even today. His ideologies, his works on economics and even his philosophical thoughts transformed human existence and brought about massive changes.
His role in the Industrial Revolution and the Scottish Enlightenment brought about societal impact as the society's manner of thinking changed and hence the lifestyle of the common man. It is difficult to imagine living in the world of today, without Adam Smith, because without him, concepts such as capitalism, free trade, invisible hand and division of labor would probably have been delayed or might not have even come into existence.