University of Virginia
That the market economy inevitably leads to inequality is widely accepted today, with disagreement confined to the desirability of redistributive action, its extent, and the role of government in the process. The canonical text of liberal political economy, Adam Smith's Wealth of Nations, is assumed even in the most progressive interpretations to accept inequality, rationalized as the inevitable trade-off for increasing prosperity compared to less developed but more equal economies. I argue instead that Smith's system, if fully implemented, would not allow steep inequalities to arise. In Smith, profits should be low and labor wages high, legislation in favor of the worker is “always just and equitable,” land should be distributed widely and evenly, inheritance laws liberalized, taxation can be high if it is equitable, and the science of the legislator is necessary to put the system in motion and keep it aligned. Market economies are made in Smith's system. Political theorists and economists have highlighted some of these points, but the counterfactual “what would the distribution of wealth be if all the building blocks were ever in place?” has not been posed. Doing so encourages us to question why steep inequality is accepted as a fact, instead of a pathology that the market economy was not supposed to generate in the first place.
Deborah Boucoyannis is Assistant Professor at the University of Virginia (firstname.lastname@example.org). Her interests lie in the historical preconditions for the emergence of the liberal order and of constitutionalism.
The author wishes to thank Sheri Berman, Colin Bird, Pete Boetke, Carles Boix, John Echeverri-Gent, Fonna Forman, Michael Frazer, Alex Gourevitch, Jacob Hacker, John James, Jacob Levy, Branko Milanovic, Glyn Morgan, Kevin Narizny, Nassos Pittaras, Eric Schliesser, Herman Schwartz, Bas van Leeuwen, the anonymous reviewers, and especially David Ciepley and Jeffrey Isaac for their feedback on this work.