The perspective on the political economy of James Steuart and Adam Smith could be controversial. James Steuart considered the role of the science of political economy on free economies in which he particularly examined the importance of trade, labour, money, public credit, and taxes. However, in Adam Smith’s book, An inquiry into nature and the wealth of nations in 1776, an author fails to appreciate the contribution of Steuart’s research to the work of Adam Smith, even though Steuart had published a book eleven years earlier. In fact, two political economists played a crucial role in the development of the discipline of political economy. This paper will compare and contrast the contribution of James Steuart and Adam Smith to the political economy because it is important to understand who had more convincing arguments and whose concepts relate to modern society.
James Steuart was born and raised in Edinburgh. He attended Edinburgh University. On graduation, he was admitted to the Scottish bar at the age of 24. He contributed immensely to the discipline of political economy. James Steuart believed that the science of political economy would secure a certain fund for subsistence used by all the inhabitants of an economy. The secured fund could enable an economy to avoid any circumstance that may render it dependent on other economies, provide basic needs for the society, and employ the inhabitants (Bianchini14). Furthermore, James Steuart was a supporter of mercantilism and recommended high protective tariffs in order to maximise the use of domestic resources. It was a strategy to avoid dependence on other economies and to meet subsistence needs of the society.
Adam Smith was born in Scotland. He was and still remains a key figure in the discipline of political economy. The economist argued that wealth of nation was not based on the quantities of gold reserves but rather on the volume of trade. He further stated that when two parties (buyer and seller) freely agree to exchange goods for value expecting to make a profit in exchange, then the total wealth of nation increases (Rashid151). Adam Smith observed that markets generally regulate themselves freely from coercion. He referred to the free market mechanism metaphorically as to the invisible hand (Bateman 49). Smith warned about the danger of monopoly and stressed the importance of competition. He also advocated that the government should provide public needs, such as education and infrastructure because the private sector could not find it economically viable to provide them.
James Steuart and Adam Smith had similar perspectives on political economy. They both supported the role of the government in economic growth. The scholars also indicated that the taxes are the tool which the government uses to correct market imperfection and to provide society with basic. These political economists agreed that the need for commercial society leads to the development of money as a medium of exchange and the development of financial institutions. Smith and Stuart were convinced that labor played a critical role in improving the productivity of an economy. Moreover, they supported trade as an economic activity through which an economy meets its fundamental goal of creating wealth. Furthermore, they discussed the concept of interest. In fact, they argued that whatever a person saves from his revenue, it increases his capital. When it appears in someone else’s production process, it will create an interest to the owner.
In terms of political economy, Smith confronted more sophisticated theories of the determination of prices and the population. He had a clear grasp of the interdependence of economic phenomena. Though, Steuart’s awareness of the potential for economic growth and his acknowledgement of the contribution of international trade to economic growth were undoubtedly outstanding. James advocated for moderate mercantilism, where he recommended high trade tariffs in order to maximise the utilisation of domestic resources as well as a strategy of overdependence on foreign economies to meet local needs of an economy. On the contrary, Smith opposed mercantilism and supported laissez-faire. Laissez-faire is a free market economy when the prices of goods and services are purely determined by market forces.
Adam Smith argued that the productivity of labour is enhanced through its division while James Stuart argued that the productivity of labour is enhanced by employing it locally by the imposition of high tariffs and import discourage. While Adam Smith demanded a free trade within and between nations as a mean of creating wealth, James Steuart encouraged the use of high protective tariffs to discourage trade between countries. In terms of allocation the factors of production, Adam Smith argued that it is driven by the desire of owners and the factors of production which maximise their returns. Alternatively, James Steuart confronted that the government plays a central role in the allocation of resources to ensure the subsistence needs of the society. Adam Smith clearly stated the factors of production and their reward while Steuart only listed the factor of production such as land, labour, and capital.
In conclusion, the contribution of James Steuart and Adam Smith was paramount to the development of the discipline of political economy. However, Adam Smith gave a more convincing perspective of the political economy as compared to James Steuart’s. His classical idea that wealth of any nation is only created through free trade and his detailed explanation of the role of the government in removing market imperfections in order to allow free trade to thrive remain relevant nowadays.