Introduction
According to Smith, prosperity results from human determination and self-interest. He argued that by giving everyone freedom to exchange their own produced goods, the economy would grow significantly. Correspondingly, opening markets for individuals to trade their goods to foreign countries will attract more funds to the US. Smith suggested that rather than putting government interventions in the economy’s growth, promoting human self-interest would lead to greater prosperity. He states that the free market is guided through invisible means and reduced government interventions. The duties of the government should revolve around the provision of public goods, administration of justice, and national defense (Smith 2019). Therefore, the government should not intervene in the economy but instead, allow people to produce goods for foreign trade.
Smith’s Reasons against Tariffs
Smith affirms that when tariffs limit the market of goods by individuals, they harm the whole country. He explains the effects of tariffs and warns of their adverse outcomes. Tariffs prevent the allocation of efficient goods in the market. When government controls the imports and exports, it regulates the goods to export from or import into the country and may disadvantage certain individuals. Some may be denied the opportunity to trade in the free market, causing an increase in product prices. Another reason is that; tariffs enable the government to take control over the market price of domestic products. However, Smith suggests that deploying the tariffs may help to repeal the trade restrictions that mainly occur in the market, and canceling the trade restrictions creates a more accessible market environment (Paganelli 2019). Therefore, Smith’s most concerns point to rejecting the government interventions in the economy as they bring adverse outcomes.
Hamilton’s Conclusion about Government Intervention in the Economy
Hamilton supports that the government would encourage the industry’s growth to move away from practicing agriculture to an industrial economy. He believes that government power should be entrusted to some talented and intelligent individuals to govern people’s interests. This will help the country’s economy to be equal to that of Europe. Similarly, he argues for the imposition of tariffs on foreign goods alongside money. According to Hamilton, the process will enable individuals to establish various new businesses that contribute to the growth of the economy (Bartling 2017). Therefore, Hamilton had a vision for the country’s economic growth of a bank in the US, supporting the emerging industries and federal assumptions of state debts.
Hamilton’s Justification on the Use of Tariffs
Hamilton argues for the moderation of tariffs but not the protection roles. He affirms that tariffs account for almost all the federal revenue and that the imported goods would help raise domestic businesses. Through the formation of a new national bank, the government will be able to hold resources and use the sanctuaries as capital to promote impending growth (Hamilton 1789). Therefore, the imports should keep flowing into the United States to fund the federal government’s Revolutionary War debt and protect the credits of the young nation. He claimed that the scheme would ensure the provision of profits to veterans who had acquired bonds from the revolutionary war for 10 to 15 cents on the dollar (Bartling 2017). Consequently, Hamilton embraces government intervention in the economy to secure the nation as a whole.
Smith’s Convincing Argument Concerning Government Intervention in the Economy
Considering the arguments from Smith and Hamilton, the extent of interventions requires weighing the government’s involvement in the economy. Smith tends to make a more convincing argument in which he allows the government to intervene in the United States economy to some extent. In 2018, Trump led the United States in imposing tariffs on China, but later many people lost their expectations since no economic gains have been experienced (Smith 2019). In this regard, Smith’s argument is convincing since it allows government interventions to use tariffs in creating a more accessible economic policy and should be used with great caution. Since government involvement leads to an inefficient allocation of resources, increased costs, and denial of personal freedom, they should not intervene in the economy.
References
Bartling, Hugh. 2017. Climate policy and leadership in a metropolitan region: Cases from the United States. Local Economy: The Journal of the Local Economy Policy Unit, 32(4), 336-351. doi: org/10.1177/0269094217707278
Hamilton, Alexander. 1789. The First Report on Public Credit”. Norton.
Paganelli, Maria-Pia. 2019. Adam Smith and the Origins of Political Economy. SSRN Electronic Journal. doi: org/10.2139/ssrn.3356022
Smith, Adam. 2019. Of Restraints Upon the Importation from Foreign Countries of such Goods as Can Be Produced at Home. In an Inquiry into the Nature and Causes of the Wealth of Nations: Book IV, 589-592. Chicago. University of Chicago Press.