The following was one of the top essay entries in our 2017 Adam Smith Challenge on the topic “How Does Free Market Promote Equality According to Adam Smith?”
In simple terms, free market is a market economy which is operates without undue and active interference by the government. Various authors have given various opinions on the principles of free market but the most detailed explanation was given by Adam Smith, who specialized in the field of economics.
His propositions on the principles of free-market can be traced to one of his books written in 1776 titled ‘The Wealth of Nations’. Instead of unnecessary interference by the government, Adam suggested ideas and set down various principles which according to him are guidelines to guarantee the success of a free market economy in achieving objectives such as the promotion of equal opportunities. Despite restricting government interference, he maintained that they can provide help in certain aspects in relation to performing normal function as the government such as the banking regulation.
How does free market promote equal opportunities?
One role the government is permitted to perform is to ensure everyone who is a consumer of public good or service should enjoy equal consumer satisfaction without the enjoyment of one causing deprivation of satisfaction for another. Therefore the free market economy advocates for selflessness, equality and fairness in the market. It can therefore promote equal opportunities by following the principles laid down by Adam Smith;
The Principle of Division of Labour: This provides equal chance for labourers to put their various professions into practice towards a particular objective and earn a living therefore ensuring a balance in the society. Sometimes it has to do with the use of invented machineries to carry out a job required. This means the opportunity is also extended to the inventors and not just the labourers physically at work.
The Principle of Trade by Barter: This simply involves the exchange of goods or services between people to ensure all parties acquire equal amount of satisfaction based on the wants and needs of each person. It also provides an atmosphere to explore the skills of one another.
The Principle of payment for government services based on ability: This can be in form of imposition and payment of tax to ensure the provision of good roads and other infrastructure. Good roads would benefit the members of the society generally and serve as a means of transporting goods and rendering services by traders. This therefore ensures equal opportunities for all traders in the market.
The principle of payment for government services based on utility: Here, the government charge based on the usage by consumers. It simply means the amount paid by consumers is directly proportional to the benefit enjoyed. This ensures equality and fairness in the society.
Free market should be adopted by various countries as it promotes the economy of a country if the guidelines of Adam Smith are followed. Taking Chile as an example, free market economy indeed promotes equal opportunities.