change in the state of the industrial arts； which has materially
altered the scope and method of industry and the conditions under
which men live in all the civilised countries。 Accordingly； as a
point of comparison； it will be to the purpose to call to mind
what were the material circumstances； and more particularly the
state of the industrial arts； which underlay and gave character
to the modern point of view at the period when its constituent
principles were found good and worked out as a stable and
articulate system； in the shape in which they have continued to
be held since then。
The material conditions of industry； trade and daily life
during the period of transition and approach to this modern
ground created that frame of mind which we call the modern point
of view and dictated that reconstruction of institutional
arrangements which has been worked out under its guidance。
Therefore the economic situation which so underlay and
conditioned this modern point of view at the period when it was
given its stable form becomes the necessary point of departure
for any argument bearing on the changes that have been going
forward since then； or on any prospective reconstruction that may
be due to follow from these changed conditions in the calculable
future。 An this head； the students of history are in a singularly
fortunate position。 The whole case is set forth in the works of
Adam Smith； with a comprehension and lucidity which no longer
calls for praise。 Beyond all other men Adam Smith is the approved
and faithful spokesman of this modern point of view in all that
concerns the economic situation which it assumes as its material
ground； and his description of the state of civilised society；
trade and industry； as he saw it in his time and as he wished it
to stand over into the future； is to be taken without abatement
as a competent exposition of those material conditions which were
then conceived to underlie civilised society and to dictate the
only sound reconstruction of civil and economic institutions
according to the modern plan。
But like other men。 Adam Smith was a creature of his own
time； and what he has to say applies to the state of things as he
saw them。 What he describes and inquires into is that state of
things which was to him the 〃historical present〃； which always
signifies the recent past； that is to say； the past as it had
come under his observation and as it had shaped his outlook。
As it is conventionally dated； the Industrial Revolution took
effect within Adam Smith's active lifetime； and some of its more
significant beginnings passed immediately under his eyes； indeed；
it is related that he took an active personal interest in at
least one of the epoch…making mechanical inventions from which
the era of the machine industry takes its date。 Yet the
Industrial Revolution does not lie within Adam Smith's
〃historical present；〃 nor does his system of economic doctrines
make provision for any of its peculiar issues。 What he has to say
on the mechanics of industry is conceived in terms derived from
an older order of things than that machine industry which was
beginning to get under way in his own life…time； and all his
illustrative instances and arguments on trade and industry are
also such as would apply to the state of things that was passing；
but they are not drawn with any view to that new order which was
then coming on in the world of business enterprise。
The economic situation contemplated by Adam Smith as the
natural （and ultimate） state of industry and trade in any
enlightened society； conducted on sane and sound lines according
to the natural order of human relations； was of a simple
structure and may be drawn in few lines； neglecting such minor
extensions and exceptions as would properly be taken account of
in any exhaustive description。 Industry is conceived to be of the
nature of handicraft； not of the nature of mechanical
engineering； such as it has in effect and progressively come to
be since his time。 It is described as a matter of workmanlike
labor； 〃and of the skill； dexterity and judgment with which it is
commonly applied。〃 It is a question of the skilled workman and
his use of tools。 Mechanical inventions are 〃labor…saving
devices；〃 which 〃facilitate and abridge labor。〃 The material
equipment is the ways and means by manipulation of which the
workman gets his work done。 〃Capital stock〃 is spoken of as
savings parsimoniously accumulated out of the past industry of
its owner； or out of the industry of those persons from whom he
has legally acquired it by inheritance or in exchange for the
products of his own labor。 Business is of the nature of 〃petty
trade〃 and the business man is a 〃middle man〃 who is employed for
a livelihood in the distribution of goods to the consumers。 Trade
is subsidiary to industry； and money is a vehicle designed to be
used for the distribution of goods。 Credit is an expedient of the
needy； a dubious expedient。 Profits （including interest） are
justified as a reasonable remuneration for productive work done；
and for the labor…saving use of property derived from the owner's
past labor。 The efforts of masters and workmen alike are
conceived to be bent on turning out the largest and most
serviceable output of goods； and prices are competitively
determined by the labor…cost of the goods。
Like other men Adam Smith did not see into the future beyond
what was calculable on the data given by his own historical
present； and in his time that later and greater era of investment
and financial enterprise which has made industry subsidiary to
business was only beginning to get under way and only obscurely
so。 So that he was still able to think of commercial enterprise
as a middle…man's traffic in merchandise； subsidiary to a
small…scale industry on the order of handicraft； and due to an
assumed propensity in men 〃to truck； barter； and exchange one
thing for another。〃 And so much as he could not help seeing of
the new order of business enterprise which was coming in was not
rated by him as a sane outgrowth of that system of Natural
Liberty for which he spoke and about which his best affections
gathered。 In all this he was at one with his thoughtful
contemporaries。
That generation of public…spirited men went； perforce； on the
scant data afforded by their own historical present； the economic
situation as they saw it in the perspective and with the
preconceptions of their own time； and to them it was accordingly
plain that when all unreasonable restrictions are taken away；
〃the obvious and simple system of natural liberty establishes
itself of its own accord。〃 To this 〃natural〃 plan of free
workmanship and free trade all restraint or retardation by
collusion among business men was wholly obnoxious； and all
collusive control of industry or of the market was accordingly
execrated as unnatural and subversive。 It is true； there were
even then some appreciable beginnings of coercion and retardation
lowering of wages and limitation of output by collusion
between owners and employers who should by nature have been
competitive producers of an unrestrained output of goods and
services according to the principles of that modern point of view
which animated Adam Smith and his generation； but coercion and
unearned gain by a combination of ownership； of the now familiar
corporate type； was virtually unknown in his time。 So Adam Smith
saw and denounced the dangers of unfair combination between
〃masters〃 for the exploitation of their workmen； but the modern
use of credit and corporation finance for the collective control
of the labor market and the goods market of course does not come
within his horizon and does not engage his attention。
So also Adam Smith knows and denounces the use of protective
tariffs for private gain。 That means of pilfering was familiar
enough in his time。 But he spends little indignation on the
equally nefarious use of the national establishment for
safe…guarding and augmenting the profits of traders；
concessionaires； investors and creditors in foreign parts at the
cost of the home community。 That method of taxing the common man
for the benefit of the vested interests has also grown to more
formidable proportions since his time。 The constituent principles
of the modern point of view； as accepted advisedly or by
oversight by Adam Smith and his generation； supply all the
legitimation required for this larcenous use of the national
establishment； but the means of communication were still too
scant； and the larger use of credit was too nearly untried； as
contrasted with what has at a later date gone to make the
commercial ground and incentive of imperialist politics。
Therefore the imperialist policies of public enterprise for
private gain also do not come greatly within the range of Adam
Smith's vision of the future； nor does the 〃obvious and simple
system〃 on which he and his generation of thoughtful men take
their stand comprise anything like explicit declarations for or
against this later…matured chicane of the gentlemen…investors who
have been managing the affairs of the civilised nations。
Adam Smith's work and life…time falls in with the high tide
of eighteenth…century insight and understanding； and it marks an
epoch of spiritual achievement and stabilisation in civil
institutions； as well as in those principles of conduct that have
governed economic rights and relations since that date。 But it
marks also the beginning of a new order in the state of the
industrial arts as well as in those material sciences which come
directly in touch with the industrial arts and which take their
logical bent from the same range of tangible experience。 So it
happens that this modern point of view reached a stable and
symmetrical finality about the same date when the New Order of
experience and insight was beginning to bend men's habits of
thought into lines that run at cross purposes with this same
stabilised point of view。 It is in the ways and means of industry