By Amol Agrawal, The writer teaches at the National Institute of Securities Markets
2026 marks the 250th anniversary of American independence and Adam Smith’s Wealth of Nations (WoN). It is really interesting how these two landmark moments in world have shaped our past, present, and future. While WoN gave birth to modern economic thinking, America’s independence established to a modern economy.
Adam Smith’s WoN was truly a tour de force book. The full wordy title of the book is ‘An Inquiry into Nature and Causes of Wealth of Nations”. The title suggested that Smith was seeking answers to what determines certain countries to become rich. Smith argued that the wealth of a nation is determined by the productivity of a nation’s resources. The productivity, in turn, depends on factors like the division of labour, capital accumulation, specialisation, freer markets and trade, lesser government, role of institutions, and so on.
The initial questions and answers by Smith continues to inspire and influence economists even 250 years later. The Nobel Prize in economics for 2025 was also given to three economists who pointed that it is technology which determines growth of a nation. Most economists (if not all) will argue that their quest to understand economic development eventually takes them to the pages of WoN.
American independence was driven by years of struggle against British colonial rule. The 13 colonies on America’s east coast were under British rule from 1607 onwards. From 1756 to 1763, the British incurred heavy costs fighting a seven-year war with the French. To recover the costs, British imposed heavy taxes on the local Americans, leading to huge protests and boycotts. The protests eventually turned into the American War of Independence from 1775 to 1783. However, to unify the people, American nationalists declared independence on July 4, 1776, which is nowcelebrated as American Independence Day.
Smith’s classic was published on March 9, 1776, four months before the declaration of American Independence. Smith discussed The US extensively (258 times) in his tome. He stated that even though the US was not as prosperous as Great Britain, it was expanding rapidly. He added how the population would double in the US in 20-25 years compared to Great Britain and Europe, which would take 500 years! The wages and interest rates were higher in the US compared to Great Britain due to high fertility of land. He also writes extensively on how silver mining in the US led to lower prices of silver.
Smith even wrote that the US should not transition from being an agricultural nation to an industrial country. He said that “the principal cause of the rapid progress of our American colonies” is because “their whole capitals have hitherto been employed in agriculture”, and that the US had “no manufactures” except for some household goods driven by agriculture. The British merchants also traded in the American agriculture goods. He cautioned that if Americans switched strategies and granted a “monopoly to such of their own countrymen as could manufacture the like goods”, and “divert any considerable part of their capital into this employment”, then “they would retard, instead of accelerating”.
Adam Smith was highly popular amidst America’s founding fathers not just for WoN but also for his another classic Theory of Moral Sentiments. Thomas Jefferson and James Madison read and referred to Adam Smith. Jefferson even recommended books to his fellow colleagues saying that “in political economy I think Smith’s WoN the best book extant …”
The most interesting connection between America’s founders and Adam Smith comes via Alexander Hamilton, the first Treasury Secretary. Hamilton wrote “Report on Manufactures”, where he disagreed with Smith’s advice and laid down a path for America’s industrial progress. Without directly mentioning Smith, Hamilton writes, “There still are, nevertheless, respectable patrons of opinions, unfriendly to the encouragement of manufactures.”
To usher industrialisation, Hamilton wrote about theneed to give bounties (subsidies) to industry, implement tariffs, restrict exports, and so on. In other words, Hamilton broadly disagreed with Smith on almost all fronts. This silent debate between Smith and Hamilton on America’s future continues to be constant fodder for economic historians. Few suggest that there were strong disagreements between the two, whereas others say it is overstated.
Whatever be the nature of these debates, Smith would be amused about how his name is associated with American progress on two opposite views. The first view is that of Hamilton disagreeing with Smith and paving the path for an industrial nation. This view states that state-driven industrial policy leads to economic progress. The second view is Smith being associated with the US becoming a liberal and free market economy. Glory Liu of Georgetown University in her book “Adam Smith’s America” traces how generations of Americans have read and reinterpreted his ideas to champion the cause of free markets. Adam Smith was central to Ronald Reagan’s Presidential campaign, with supporters wearing Smith neckties.
It is quite a remarkable coincidence that American independence and WoN will be celebrating 250 years in 2026. The irony cannot be lost as President Donald Trump will be ushering in the celebrations, questioning and undoing much of what the US and Smith have stood for in the past 250 years.