Donald Trump, Adam Smith, and the Wealth of America
Two hundred and fifty years after the publication of The Wealth of Nations, the public figure who most embodies Adam Smith’s ideals is not a D.C. think tank self-styled free trader, a corporate lobbyist draped in the language of trade openness, or one of the many modern commentators who invoke Smith as a patron saint of cheap imports and national passivity.
It is Donald Trump.
That will sound ridiculous to those who have reduced Smith to a single proposition: tariffs are bad, imports are good, and any nation worried about production has failed to grasp the first thing about economics. But that is not Adam Smith. It is a slogan, repeated so often that it now passes for learning.
Smith’s central insight was that a nation’s wealth lies in its productive powers. He begins The Wealth of Nations with one of the most important sentences in the history of political economy: the annual labor of every nation is the fund that supplies it with the necessaries and conveniences of life. Later he adds the companion truth that consumption is the sole end and purpose of all production. Those statements are not in tension. They complete one another. Production is not the ultimate end of economic life. But without production, there is nothing enduring to consume.
That point has been quietly lost. Many of Smith’s latter-day admirers write as if a country can become richer by producing less, so long as imported goods remain abundant and cheap. They remember that consumption is the end of production. They forget that production is what makes consumption possible. Smith’s measure of wealth was never passive access to other people’s output. It was the annual produce of land and labor — the real stream of goods and services that sustains life, raises comfort and enlarges freedom.
He was not arguing for autarky, a system in which a nation produces everything it consumes. But neither was he arguing for dependence on foreign imports paid with ever-escalating debt. Trade, properly ordered, allows a country to consume what others produce and to find markets for its own goods. That is why he admired commerce. It widened markets, deepened the division of labor, and raised productivity. Trade mattered because it enlarged the scope for production. It did not replace production as the source of wealth.
Trump Is the Great Anti-Mercantilist
This is why Smith’s attack on mercantilism has been so badly misunderstood. Smith was not arguing that we should be unconcerned with national production. The mercantilism he took aim at was specifically the doctrine that wealth consists in money, in gold and silver, in hoarded treasure, and that governments should organize commerce around the accumulation of bullion and the artificial manipulation of trade. It meant monopoly and favoritism wrapped in the language of national greatness. It meant sacrificing the consumer and the general welfare to organized special interests.
Donald Trump is plainly not trying to build that kind of system.
He is not trying to hoard bullion. He is not measuring prosperity by the contents of a vault. He is not treating treasure as wealth. He is not imagining that America can grow rich by piling up money while its productive capacity ebbs. His project is almost the opposite. He is trying to reopen markets to American production, push back against foreign mercantilist distortions, and restore the conditions under which American labor and capital can compete on more equal terms.
It should be plain to anyone paying attention that the global trading system that developed in the twenty-first century is not the world of “natural liberty” that Smith hoped commerce might become. It is a system that is everywhere distorted by state subsidy, industrial policy, managed market access, strategic protection, and persistent asymmetry. China has built an enormous manufacturing position through policies that no honest reader of Smith would confuse with free trade. Europe, in a more bureaucratic and less dramatic way, has also relied on protected arrangements, industrial favoritism, and selective barriers. In such a world, the tariffs Trump has imposed are far from an intervention encouraging inefficient production. They are the response to a world soaked with those interventions.
Smith understood that possibility perfectly well. He allowed retaliatory duties that might induce foreign governments to repeal their restrictions. He recognized that trade restrictions to protect industries vital to national defense were justified. He knew that a nation need not submit helplessly to a commercial order rigged by others and call its submission wisdom.
Once that is remembered, Trump’s tariffs look different from the cartoon version his critics offer. They are broad. They are general. They are not special favors for a single national champion or a narrow producer faction. They are not guild privileges, chartered monopolies, or the old mercantilist machinery of court-connected favoritism. They are border measures meant to alter the terms under which trade takes place.
That distinction matters. Smith’s deepest objection was not to every tariff as such. It was to the use of public power to create narrow privilege at the expense of the nation as a whole. Trump’s tariffs are better understood as instruments of reciprocity than as instruments of monopoly.
The Spirit of Adam Smith
This is especially true in a country like the United States. America is not an eighteenth-century kingdom organized around a few protected companies. It is a vast, internally competitive continental economy. A broad tariff imposed in such a country does not, by itself, create the kind of producer privilege Smith despised. It may actually lower prices by forcing foreign producers to offer better terms of trade to remain competitive. And it may encourage competition by allowing investors, say, in the domestic production of rare-earth materials, to know that they will not be wiped out by foreign mercantilism.
The decisive question is still production. Smith believed that a nation’s production was the source of its wealth because it was what enabled consumption. If foreign mercantilist practice suppresses domestic production, weakens productive powers, and closes foreign markets that might otherwise absorb a nation’s output, Smith would not have regarded that as an unqualified blessing simply because imported goods remained cheap for a while.
He would have seen it as a corruption of trade’s proper purpose.
Trade is beneficial, in Smith’s framework, when it enlarges the market for production, deepens specialization, and increases the annual produce of society. It is not beneficial by magic, regardless of circumstance. A trading order that leaves one country as the permanent consumer and another as the permanent producer through state-backed distortion is not the commercial liberty Smith hoped for. It is a deformation of it.
That is why Trump, however imperfectly and instinctively, is closer to Smith than the people who quote Smith against him. His starting point is that the current system is not free trade but managed asymmetry. His answer is to use tariffs not as a final ideal but as an instrument for rebalancing trade, opening foreign markets and restoring the productive standing of the United States.
The spirit of Adam Smith has not been waiting for a president who would tell Americans to produce less, submit to dependence on the monopolies of foreign potentates, and call it “free trade.” The spirit has been haunting us for 250 years with the message that we need leaders who understand that wealth comes from production, that trade is meant to enlarge the market for that production, and that a nation distorted by foreign mercantilism may have to act before commerce can become genuinely free.
That president is Donald Trump.
Read the full article here
