Please mark this date on your calendar. Why? Because it’s Adam Smith’s birthday. Who’s Adam Smith? He’s the founder of free-market capitalism. Baptized on June 16, 1723, 300 years ago, at Glasgow, Scotland. Our Founding Fathers thought he was a rock star.
Adam Smith’s thoughts are littered throughout the Declaration of Independence written by Thomas Jefferson and Benjamin Franklin and some others. No, I wasn’t there, but they talked about life, liberty, and the pursuit of happiness, and that that depends on economic growth.
That’s really the message of Adam Smith, who wrote two super famous books. The first, “The Theory of Moral Sentiments,” in 1759, and maybe the most famous, “An Inquiry into the Nature and Causes of the Wealth of Nations,” in 1776. Ring a bell?
Smith points out again and again that only economic growth can raise living standards and wages. Only economic growth can generate happiness throughout society, and capitalism was the answer to poverty and unemployment. The best welfare program was a job. Ever heard of that?
The spread of capitalism in the last 40 years has been miraculous. According to the World Bank, people living in absolute poverty — defined as earning less than $2 a day — made up 42.7 percent of the world population in 1980. By the year 2000, it had fallen to 27.8 percent, and today it is less than 9 percent. Isn’t that something? That’s capitalism.
Smith argued that only an expansion of free markets and free trade could lead to increased prosperity. This is all what happened with the fall of Soviet Communism in Russia and Eastern Europe. Even in China in its better moments, they introduced some private property and market reforms — though I must say, President Xi appears to be moving in the wrong direction, away from free markets and private property.
In any case, according to an article in today’s Wall Street Journal by historian Rainer Zitelmann, “Adam Smith’s Solution to Poverty,” Smith was not concerned about the rich people. Instead, he believed his theories would improve a lot of the non-rich — and again, their happiness depended on expanding free markets and free trade.
The late Jack Kemp — my dear friend and mentor, a Reagan supporter, and a former congressman — used to always say the trick is to make the non-rich rich. That was Smith’s vision: to lift people out of poverty.
Smith was opposed to redistribution by the state, and in his earlier book, “The Theory of Moral Sentiments,” he said that as a churchman, he believed people had a responsibility to act ethically and morally in their everyday behavior and in their market transactions.
Now look, as much as ever, we should be thinking about Adam Smith, because we are far, far away from maximizing economic growth.
For more than 70 years, the American economy after World War II, between 1947 and the year 2000, grew at 3.5 percent per year after inflation. Over the last nearly three decades, though, we have slumped to barely a little more than 1 percent.
Take a look at long-term economic projections from places like the Federal Reserve or the Congressional Budget Office, and you see a kind of gloomy 1.8 percent expected future growth. That is not going to ameliorate poverty. That is not going to satisfy the middle class. That is not going to promote happiness throughout society. This all has to be changed.
That’s why supply siders and free-market advocates have long preached a return to a simple economic model, one that was revived by Ronald Reagan 40 years ago. Lower tax rates, deregulation, limited government, a sound reliable dollar, and reciprocal free trade: It’s very simple and it worked.
The Biden administration has done exactly the opposite, with huge spending, higher taxes, a massive volume of new regulations, and a war against energy. Growth in the last five quarters is barely 1 percent. Real wages have fallen 26 straight months.
Every poll shows people are unhappy with their lot in life, and they are very unhappy with Bidenomics. We need growth of 4 percent, or 5 percent or 6 percent, to catch up to the long-term trend of the post-war period. I will bet you that the presidential candidate who convinces voters that he or she has a strong, economic prosperity agenda is going to win the White House.
I’m not here right now to pick winners or losers. I just want to say it is high time to follow in Adam Smith’s footprint.
So I will conclude: Save America, please mark Adam Smith’s birthday.
From Mr. Kudlow’s broadcast on Fox Business News.
Larry Kudlow was the Director of the National Economic Council under President Trump from 2018-2021. His Fox Business show "Kudlow" airs at 4 p.m &. and his radio show airs on 770 ABC from 10:00 a.m. to 1:00 p.m.