An Inquiry into the Nature and Causes of the Wealth of Nations (more commonly called ‘The wealth
of Nations), published in 1776 has played in the construction of our modern economic system. Indeed,
Adam Smith is considered as the father of the modern economy, as his ideas have been followed by
the most powerful countries in the world.
Andrew Wyatt Walter associates Adam Smith to the notion of a natural “harmony of interests” (83).
Indeed, in the wealth of Nations, Adam Smith explained the principle of the invisible hand by showing
that every individual is acting in the way to maximize his personal benefits:
“As every individual, therefore, endeavours as much as he can, both to employ his capital in the
support of domestic industry, and so to direct that industry that its produce maybe of the greatest
value; every individual necessarily labours to render the annual revenue of the society as great as he
can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is
promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own
security; and by directing that industry in such a manner as its produce may be of the greatest value,
he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to
promote an end which was no part of his intention”(84).
As explained by Andrew Wyatt Walter, Smith recognized a “natural order” drives by a self-interested
behavior(85). The benefits from this behavior will be more important if it is applied in a system of
“natural liberty”. Indeed, due to the important regulations applied by the governments, the liberalism
theory assumes that it is important to banish them in order to have an economic liberalization, which
would create an economic growth. According to Smith, this economic liberalization would be
characterized by the promotion of free choice of occupation (according to the personal interests), free
trade in land, free internal trade and free trade in foreign commerce(86).
Indeed, these principles according to Smith would help to expand the market, which is really desirable
as it would bring a greater advantage of the division of labor and of man’s natural propensity to
exchange(87). In the Wealth of Nations, Smith reduced the state to sovereign functions:
“According to the system of natural liberty, the sovereign has only three duties to attend to; three
duties of great importance, indeed, but plain and intelligible to common understandings: first, the
duty of protecting the society from the violence and invasion of other independent societies; secondly,
the duty of protecting, as far as possible, every member of the society from the injustice or oppression
of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly,
the duty of erecting and maintaining certain public works, and certain public institutions, which it can
never be for the interest of any individual, or small number of individuals to erect and maintain;
because the profit could never repay the expense to any individual, or small number of individuals,
though it may frequently do much more than repay it to a great society”(88)
According to many authors, Liberalism and free trade do not only generate an economic growth.
Indeed according to Immanuel Kant, the liberalism system would lead to the peaceful relations
between the countries. Indeed he believed that self-interests behavior (Smith theory) would permit the
end of tensions between the different nations(89).
Liberal internationalism of Kant, takes into consideration that wars can be overcome, thanks to
domestic changes and the establishment of international structures of governance. Kant has established
three points directly connected to the Liberal theory, which should permit the end of wars. Indeed, the
“Kantian constraints” are(90):
– Democracy: Kant suggested that democracies can lead to a worldwide stability. Indeed
democracies rarely fight each other.
– International trade: This point has a solid place in the liberal thought. As international trades
reinforce the GDP of the countries involved, it creates an interdependency which means that
the nations maintain good relations between each other.
– International organizations: IGOs have each to focus on specific topics, in specific regions of
the world. They ensure the good functioning of the liberal system (for example World Ttrade
Organization), or good political relations between the countries (United Nations).
These liberal points developed by Kant have good interactions, to provide peace and economic
prosperity to the countries. The following graph shows how work these interactions (The Kantian
triangle).
(91) Figure 7: The Kantian triangle
Bruce Russett used the European Union as a case study to explain better the classical liberalism
system. Indeed according to the author, the founding fathers of the EU (Konrad Adenauer, Alcide de
Gaspari, Jean Monnet, and Robert Schuman) had set up an economic system based on the classical
liberalism(92).
Indeed as Bruce Russett analyzed, the EU is one of the most liberalized institution in the world. First,
it is important to highlight the free trade within the EU area. This point perfectly answers to the theory
of Adam Smith about the free trade. The EU even adopted a common currency to facilitate the
exchange. As we have previously seen, there is also a specialization of the territories (clusters in Paris
and in every regions of Europe) in order to maximize the profits and efficiency, and be in an
international trade. As Kant has shown, these exchanges created an economic interdependence, which
set good relations between the European member states
This European Union is also composed by supranational institutions in order to control the exchanges
and take common decisions in order to keep a homogenous strategy (European court of Justice,
European council, or the European parliament).
The European Union is the perfect example to characterize the liberal system. Indeed it is composed
by all the Liberalism insights such as free trade, and proves perfectly the efficiency of the Kantian
triangle.
Bruce Russett has shown that the European Union was driven by the classical liberalism insights. Paris
being the most important city of Europe, we can formulate our first hypothesis regarding the economic
development.
83 Andrew Wyatt Walter, Ian Clark, Iver B. Neuman, Classical theories of international relations, St Antony’s
series, 1996, P.P.143-172
84 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776, Book IV, Chap.II, P.P.
363-364.
85 Andrew Wyatt Walter, Ian Clark, Iver B. Neuman, Classical theories of international relations, St Antony’s
series, 1996, P.P.145
86 Ibid, 1996, P.P. 145-146.
87 Ibid 1996, P.P. 147
88 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776, Book IV, Chap.II, P.P.
560-561.
89 Bruce Russett, Tim Dunne, Milja Kurki, Steve Smith, International relations theories discipline and diversity,
Oxford, 2010, P.P. 96
90 Ibid, 2010, P.P. 102-104
91 Reproduction from : Bruce Russett, Tim Dunne, Milja Kurki, Steve Smith, International relations theories
discipline and diversity, Oxford, 2010, P.P. 107
92 Bruce Russett, Tim Dunne, Milja Kurki, Steve Smith, International relations theories discipline and diversity,
Oxford, 2010, P.P. 109
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