Adam Smith is regarded as one of the first scholars who considered the physiocratic system in detail. He criticized the old mercantilist system and stressed that only new principles could help nations prosper. Thus, Adam Smith believes that the mercantilist system cannot fit in the society of the 18th century. According to the mercantilist system, the major way to accumulate wealth is to accumulate gold and ensure balanced trade.
Another principle of this system is exporting. The mercantilist system heavily relies on exporting goods and products to other countries. Mercantilists think that this can contribute to the development of industries and other sectors of the economy as gold is accumulated.
However, Adam Smith claims that these principles will lead to deterioration of economy as gold does not mean much if people do not produce goods (Kucukaksoy 110). The philosopher also emphasizes that export hurts the development of the country as people within the country do not get the goods they produce (Smith 166).
Moreover, the philosopher notes that the country needs materials and goods to produce other products. For instance, if the country produces cotton, there should be factories producing clothes. Hence, people will have jobs and have money to buy the products they produce.
It is also necessary to add that the mercantilist system is based on significant governmental control. It is believed that there should be centralized power that can allocate funds and distribute goods. However, Adam Smith stresses that the economy should be uncontrolled as it is governed by natural laws.
It is possible to state that the physiocratic system can be regarded as a complete contrast to the mercantilist system. Adam Smith is a devout supporter of the physiocratic system. He thinks that this economic system can help countries achieve real wealth. First of all, it is important to add that, according to Adam Smith, real wealth is the country’s land and people who produce goods (Smith 168).
The philosopher believes that natural resources are the greatest wealth of any country, and it is crucial to manage them properly. As has been mentioned above, Smith opposed the idea of export. According to the physiocratic system, it is necessary to invest in and develop the economy of the country rather than export goods (Smith 170). Development of the economy leads to an increase in jobs and wealth of people.
Finally, according to the physiocratic system, governmental control cannot be applied to the development of the economy. Adam Smith stresses that there is natural law, and the economy follows this law. Any control can interfere in the natural course of development of the economy, and it will have negative effects (Smith 171). One of the principles of natural law can illustrate the effectiveness of the system.
Thus, it is natural that a person will grow plants if he/she knows that he/she will get the crop. Otherwise, people will not work hard and will not try to get better results as they will not get the results of their labor. However, governmental control often means that the country takes all the results, and people have almost nothing.
Of course, this situation leads to deterioration of the economy as people do not work hard enough, do not produce goods, and do not benefit from the country’s wealth (natural resources). In conclusion, it is possible to note that Adam Smith supported the physiocratic system, which he associated with progress and prosperity.
Works Cited
Kucukaksoy, Ismail. “Adam Smith’s Conceptual Contributions to International Economics: Based on the Wealth of Nations.” Business and Economic Horizons 4.1 (2011): 108-119. Print.
Smith, Adam. “An Inquiry into the Nature and Causes of the Wealth of Nations (1776).” The History of Economic Thought. Ed. Steven G. Medema and Warren Samuels. New York, NY: Routledge, 2012. 153-180. Print.