The moral foundations of capitalism. An Investigation of Adam Smith Pessimism

Smith’s ideal vision of capitalism envisages a virtuous loop between social prudence and macroeconomic performance that outlines a “progressive state” of society. The trickle down of wealth strengthens the confidence in the future and a steady adherence to prudent behaviour. At the same time, this reinforcing character of prudence encourages liberal virtues needed for growth. However, a path of perpetual growth is not conceivable in Smith analysis, considering both a moral and an economic perspective. Indeed, Smith’s pessimism about the future of commercial society relates to the intrinsic inability of capitalism to sustain social prudence in the long run due to an internal contradiction in its development process. In the progress of division of labour, the industry of labourers is progressively substituted with the industry of machines. Therefore, the development process, which is initially sustained by “the industry of mankind”, endogenously expels those liberal virtues that grounds a progressive state of society, with crucial social and political implication.