Adam Smith About Brexit Trade Deals

Adam Smith was an economist who is known for his books which made him famous which are The Wealth of Nation and Inquiry into nature and causes. This has gained him the title of ‘Father of Capitalism.’ His believed that more money the commons make would have the real impact on the economy rather than rich. This means if everyone has money more money will be injected into the economy. He also believed that there would be more money due to self-interest of people. Through this he meant that people would be motivated by themselves to because of ‘greed’ that they would invest and take risks to bring ideas to reality in order to seek profit, and the profit made would be the consequence of the risk they took. As well as this he also believed that the market should be free of any government interventions as well as free from taxation which includes VAT, tariffs, etc. This shows that he believes if the government removes all these unnecessary restriction it would allow for free trade in which the nations would benefit as they would be able to set the prices for goods low as they don’t have to make up for the money lost in the taxation which is why firms would set high prices.

This would mean that products would be cheaper which means more people would be able to afford it which would lead to businesses making more profit which they can use to invest in technology and increase the quality of the products which would lead to consumers willing to pay higher price for the goods as they would not find such products elsewhere. One of his ideas was which was derived from Adam smith institution website, The Wealth of Nation The book’s broad theme. ‘The more that is invested in better productive processes, the more wealth will be created in future.’ Paragraph 3. This could also lead to specialist goods being produced which consumers of foreign countries would want to buy as they would not be able to find such products in their country. And if there are no restrictions for businesses then are able to charge low prices for the goods which mean more people of the foreign countries would be able to which again leads to businesses making more profit. Adam Smith institution website, The wealth of Nation, The book’s broad theme mentions ‘Nation’s wealth is really the stream of goods and services that it creates, today we call it gross national product and to maximise it is not to restrict it but to set it free.’ Paragraph 1 Adam Smith would say that countries should stick to what they are good at independently and trade with one another without any restriction which would benefit each other.

Making assumption on what Adam Smith would say about Brexit, he would suggest that Britain leaves EU and become an independent country, however he would also want to have free trade if there is Brexit. The article by (Tom Edington, 2019). What trade deals has UK done so far? States that ‘UK says it wants to replicate the EU’s trade agreement as far as possible.’ Adam Smith would consider this to be beneficial as he believes that if mentioned Adam Smith Institution website, The book’s broad theme The Wealth of Nation. ‘taxes have to be raised … it should be raised in proportion to people’s ability to pay’ This shows that to some extent Britain has been successful in securing the free trade deals covering 48 countries. Tom Edgington, 2019 Brexit: What trade deals has the UK done so far? Which means businesses trading with these countries would not have to pay tariffs. Adam Smith would say that even if it takes time it would still be beneficial to decrease the trade barriers as much as possible by negotiating with EU even if the agreement is not done all at once. Adam Smith Institution, The Wealth of Nation The book’s broad theme he also believed that ‘countries that prosper are those that grow their capital, manage it well and protect it.’ Paragraph 3.This shows that he would have said that Brexit happening would allow businesses of Britain to retain their own capital which they would gain from the consumers of its own country would be used well for Britain and would grow Britain. Adam Smith believed in nations seeking to maximise their own in its own economy and capital. Adam Smith says that countries should stick to what they are specialised in and freely trade with one another which would help each other and having restriction would not help but worsen each other’s economy and countries would become poorer. To law makers he would say that putting restrictions does not direct better production then the market. So let the markets figure themselves out.

Adam Smith may also say that just like with other countries how UK have come to agreement on free trade or came to agreement he would believe that UK should encourage and persuade EU to still have free trade, it would still be beneficial if the trade barriers are reduced gradually. As EU consumers of Britain goods would not benefit from restrictions such as tariffs on products that they cannot find in their countries or can find it for cheaper in Britain but the consumers would have to pay high prices for the products they would want from Britain as UK businesses would increase the price in order to make up for the lost profit. Same goes with UK consumers they would have to pay high price on EU goods due to tariffs. Richard M. Ebeling, 2016. Economic Ideas: Adam Smith on Free Trade Crony Capitalism and the Benefits from Commercial society Paragraph 9 ‘….never to attempt to make at home what it will cost him more to make than to buy.’ This shows that Adam Smith would say when it comes to EU not wanting to trade for free that too will cost them more money to produce goods of Britain which they can easily trade for cheap without restrictions.

References

• Tom Edgington, T. (2019). What trade deals has the UK done so far?. BBC News. Available at: https://www.bbc.co.uk/news/uk-47213842 .
• Ebeling, R. (2019). Economic Ideas: Adam Smith on Free Trade, Crony Capitalism, and the Benefits from Commercial Society – The Future of Freedom Foundation. [online] The Future of Freedom Foundation. Available at: https://www.fff.org/explore-freedom/article/economic-ideas-adam-smith-free-trade-crony-capitalism-benefits-commercial-society/ .
• Adam Smith Institute. (n.d.). The Wealth of Nations — Adam Smith Institute. [online] Available at: https://www.adamsmith.org/the-wealth-of-nations .