Wealth of Nations : What if Adam Smith was wrong
The wealth of Nations : the most important book on economics explains the wealth of the nation by the concept of “invisible hand”. The invisible hand is the Newtonian liquid which keeps on powering the world trade and results in some economies getting richer while some remain poor as always. The concept which came out in the year 1776 has remained the most powerful argument driving global trade and pushing for globalisation as the reason for creating more wealth.
What if Adam Smith was wrong !!!
The wealth of any system be it a nation, company, tribe or people is always created by arbitrage. There are three arbitrages at play when it comes to wealth creation which is 1.Knowledge 2. Asset and 3. Labour
Knowledge: Knowledge is being touted as the latest tool to create wealth in the 21st century but it was always a powerful tool to create wealth from ancient times. Today it is knowledge and earlier it was pick and shovels. There were always people/tribes/nations who focused on wealth creation by focussing on the knowledge which could be related to tool making/accounting/banking services etc. Majority of Nordic countries have built their wealth by being the machine tool provider or being a banker to the world rather than focus on capturing assets or labour. Knowledge creates an arbitrage which helps in creating a premium for the people having knowledge and build wealth.
An asset is a quite obvious arbitrage for the creation of wealth. Mines / Oil / natural resources all lead to wealth creation and have been the primary source of wealth creation. The asset is also probably the only reason behind so many wars where invading nation/tribes try to take over assets of others to gain wealth. The Arab world, Norway, Australia India in pre-medieval times all became rich through trading assets which ranged from gold, oil, minerals to spices. Asset owners have a huge arbitrage against non-asset owners. An asset is double-edged and can even bring huge misfortune to the owners if asset owners do not have military might or proper negotiations rights. Ask Africa for its wounds when you make a list of assets exported from the continent.
The third arbitrage “ labour" is least understood of all arbitrage. Incidentally, wealth is not created for the person who is providing labour but for the person who builds an arbitrage using other labour. Majority of the wealth creation in the 20th century can be traced back to labour arbitrage. Some of the industries which drive wealth creation in 19th and 20th century ie Sugar industry / Cotton / Plantation industry etc were driven by labour arbitrage. Labour arbitrage forced by a nation on another nation is also known as slavery. Majority of the wealth created by colonisation which in turn made the UK, USA and Western Europe rich was driven by slavery. Africa / India / Asia faced the wrath of colonisers who pushed societies into slavery through organised and institutionalised slavery. While slave stories of Africa are well documented, very little is talked about the salvery forced upon people in eastern India who were adducted and pushed into slavery in faraway places. Today nations like Mauritius / Fiji etc have the whole generation build from the misfortune which struck their ancestors.
And it is this slavery and not industrial revolution, that has been the driving force and created wealth for the majority of anglo Saxon world. So it is not the invisible hand, the nice economy theory that created a wealth of nations but slavery which did the systematic transfer of wealth from poor to affluent / mercenaries.
Interestingly, there has been no talk of apology or repatriation from the colonisers to the victim as a form of justice but at the same time so-called champion of justice still keep on imposing war on other nation in the name of democracy and justice. So probably the bigger crime is not rule of despots / tyrants but rather whitewashing and hiding all crimes behind some mumbo jumbo economic ideas.
It's high time policymakers and thinkers understand the reasons behind wealth creation and have a relook at the tools of modern trade build on false economic ideas.
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