a capitalist economy more humane and more meaningful.

He was born in Scotland in Kirkcaldy – a small manufacturing town – near Edinburgh

in 1723.

He was a hard working student and very close to his mother.

He then became an academic philosopher, wrote a major book about the importance of sympathy

and lectured on logic and aesthetics.

He was also one of the greatest thinkers in the history of economics – in part because

his concerns went far beyond the economic. He wanted to understand the money system because

his underlying ambition was to make nations and people happier. Smith remains an invaluable

guide to four ideas:

When one considers the modern world of work,

two facts stand out: - modern economies produce unprecedented amounts

of wealth. - many ordinary people find work rather boring

and (a key complaint): meaning-less.

The two phenomena are in fact intimately related, as Adam Smith was the first to understand

through his theory of specialisation.

He observed that in modern businesses, tasks formerly done by one person in a single day

could far more profitably be split into many tasks carried out by multiple people over

whole careers. Smith hailed this as a momentous development: he predicted that national economies

would become hugely richer the more specialised their workforces became.

One sign our world is now so rich, Smith could tell us, is that every time we meet a stranger,

we’re unlikely to understand what they do. The mania for incomprehensible job titles

– Logistics Supply Manager, Packaging Coordinator, Communications and Learning Officer – prove

the economic logic of Smith’s insight.

But there is one huge problem with specialisation: meaning. When businesses are small and their

processes contained, a sense of helping others is readily available.

But when everything is industrialised, one ends up as a tiny cog in a gigantic machine

whose overall logic is liable to be absent from the minds of people lower down in the

organisation. A company with 150,000 employees distributed across four continents, making

things that take five years from conception to delivery, will struggle to maintain any

sense of purpose and cohesion. So Smith discerned that bosses of the specialised

corporations of modernity therefore have an extra responsibility to their workers:

to remind them of the purpose, role and ultimate dignity of their labour.

Smith’s age saw the development of what

we’d now call consumer capitalism.

Manufacturers began turning out luxury goods for a broadening middle class.

Some commentators were appalled. The philosopher Jean-Jacques Rousseau wished to ban ‘luxury’

from his native Geneva. He was a particular fan of ancient Sparta and argued that his

city should copy its austere, martial lifestyle.

Disagreeing violently, Smith pointed out to the Swiss philosopher that luxury consumerism

in fact had a very serious role to play in a good society – it generated the surplus

wealth that allowed societies to look after their weakest members. Consumer societies,

despite their frivolity, didn’t let young children and the old starve, for they could

afford hospitals and poor relief.

So Smith defended consumer capitalism on the basis that it did more good for the poor than

societies devoted to high ideals. That said, Smith held out some fascinating hopes for

the future of capitalism. He didn’t want it to stay stuck at the frivolous level forever.

He observed that humans have many ‘higher’ needs that currently lie outside of capitalist

enterprise: among these, our need for education, for self-understanding, for beautiful cities

and for rewarding social lives.

The hope for the future is that we’ll learn to generate sizeable profits from helping

people in truly important, ambitious ways. Properly developed, capitalism shoudln’t just

service our basic material needs while exciting us to buy frivolous things. It should make

money from goods and services that deliver true fulfiflment.

Then as now, the great question was how to

get the rich to behave well towards the rest of society. The Christian answer to this was:

make them feel guilty.

Meanwhile, the radical, left-wing answer was then and is now: raise taxes. But Smith disagreed

with both approaches: the hearts of the rich were likely to remain cold and high taxes

would simply lead the rich to flee the country.

He proposed that, contrary to what one might expect, it isn’t money the rich really care

about. It is honour and respect. The rich accumulate money not because they are materially

greedy, but primarily in order to be liked and approved of.

So rather than taxing the rich, governments should understand the vanity at the heart

of the rich and their motivations.

They should therefore give the rich plenty of honour and status – in return for doing

all the good things that these narcissists wouldn’t normally bother with, like funding

schools and hospitals and paying their workers well. As Smith put it,

“The great secret of education is to direct vanity to proper objects.”

Big corporations feel very evil to us now, the natural targets of blame for low-paying

jobs, environmental abuse and sickening ingredients.

But Adam Smith knew there was an unexpected, and more important, element responsible for

these ills: our taste. It’s not companies that primarily degrade the world. It is our

appetites, which they merely serve.

As a result, the reform of capitalism hinges on an odd-sounding, but critical task: the

education of the consumer. We need to be taught to want better quality things and pay a proper

price for them, one that reflects the true burden on workers and the environment.

A good capitalist society doesn’t just offer customers choice, it also teaches people to

exercise this choice in judicious ways. Capitalism can, Smith suggests, be saved by elevating

the quality of consumer demand.

The economic state of the world can seem at

once so wrong and yet so complicated, we end up collapsing into despair and passivity.

Adam Smith is on hand to lend us confidence and hope. His work is full of ideas about

how human values can be reconciled with the needs of businesses. He deserves our ongoing

attention because he was interested in an issue that has become a leading priority of

our own times: how to create an economy that is at once profitable and civilised.