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Big Spenders : Adam Smith warns that politicians are the last people who should lecture the public about how to run their affairs.
Big Spenders

From ‘Wealth of Nations’ II.3, by Adam Smith (1723-1790).

Adam Smith, the pioneering Scottish economist, objected very strongly when politicians criticised the public for their spending habits. Private individuals alone actually create wealth, he said. By definition, Governments spend other people’s money and never make a penny in return.

GREAT nations are never impoverished by private, though they sometimes are by public prodigality and misconduct. The whole, or almost the whole public revenue is, in most countries, employed in maintaining unproductive hands.*

Such are the people who compose a numerous and splendid court, a great ecclesiastical establishment, great fleets and armies, who in time of peace produce nothing, and in time of war acquire nothing which can compensate the expense of maintaining them, even while the war lasts.* Such people, as they themselves produce nothing, are all maintained by the produce of other men’s labour. […]

It is the highest impertinence and presumption, therefore, in kings and ministers to pretend to watch over the economy of private people, and to restrain their expense. They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of the subject never will.

* That is to say, people who consume more than they produce. ‘Unproductive’ does not necessarily mean bad. As Smith says later, a man who throws lots of parties for his friends is all the poorer for it in monetary terms, but he is much more likeable than a miser.

* Then as now, people argued that lavishing taxpayers’ money on government jobs or the arms industry boosted the economy. Smith shows that it actually drains the economy, far more than the little weaknesses and luxuries of wealth-creating private citizens do.

From ‘Wealth of Nations’ II.3, by Adam Smith (1723-1790).

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Picture: © Anthony O’Neil, Geograph. Licence: CC-BY-SA 2.0. View original
The northern entrance to Burlington Arcade behind Bond Street in London, which opened on March 20th 1819 “for the sale of jewellery and fancy articles of fashionable demand, for the gratification of the public”.
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