Adam Smith on the “liberal system” of free trade (1776)

This passage on the benefits of free trade in agriculture is noteworthy for several reasons. Firstly, it is an early example of Smiths’s use of the word “liberal” in its more modern sense of economic liberty instead of its more traditional meaning of “liberality” or generosity of spirit. Second, it is interesting to see that he uses it in contrast to another system, that of the “mercantilist system” of trade regulations and restrictions. One tends to associate Smith with strong criticisms of “men of system” who wished to impose their vision of a future society on their fellow citizens. Here he seems to accept the idea that there is another “system” which is not necessarily harmful to the liberty of others but which in fact defends it vigorously. Third, he grounds his defence of free trade in grain firmly on utilitarian arguments not upon any right to liberty or property held by the would-be traders. He states that regulating the grain trade may in fact turn a local shortage of food into a more serious famine. And fourthly, he makes a very interesting argument about the similarities between regulating the grain trade and regulating religion. Since people are passionately interested in the things that concern them most, such as food for the body and food for the soul, they put pressure on governments to regulate these matters. Smith however warns that this is not always wise as experience has shown that “we so seldom find a reasonable system established with regard to either of those two capital objects.”

Visit our sister site, AdamSmithWorks for a classroom bellringer based on this quote.