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V SUNDARAM

        Narasimha Rao liberated Indian society and Indian economy from the stranglehold of State - sponsored, State-guided and State-controlled Nehruvian Democratic (in actual practice dictatorial!!) Socialism in 1991. The revolutionary economic reforms introduced by him through the processes of globalisation, privatisation and commercialisation of the then dead as stone Indian economy, have opened up hitherto unknown and new vistas for the Indian economy. When he introduced his radical economic reforms in 1991, India had foreign exchange reserves to last just for a week!. After 15 years of economic reforms, the Indian economy has become one of the fastest growing economies in the world today. What has brought this about? Thought it was left unsaid, yet the fact remains that in actual practice it meant the dethronement of the dead ideology of Karl Marx and his communism and enforced acceptance of the economic and political ideology of Adam Smith (1723-1790). It was indeed the Second coming of Adam Smith. Adam Smith was a Scottish moral philosopher often called 'father of modern economics', or more accurately the founder of modern political economy. In his epoch-making work 'Inquiry into the nature and cause of the wealth of nations' published in 1776 — which was equal parts economic history, industrial analysis and policy prescription — he laid the foundations of free market economics. Adam Smith's friend and great statesman Edmund Burke (1729-1797) called 'The Wealth of Nations' probably the most important book ever written.

        Anther friend of Adam Smith, the great philosopher David Hume (1711-1776) praised the 'The Wealth of Nations', but warned that popularity for it would come only slowly. He was proved wrong. The book was an instant success and the first edition was sold out in six months. Todd G Buchholz, a modern economist has brilliantly observed 'But is it a good book?. Not only is it a good book, it is a great one. With the Hurbis that goaded Gods into striking down Greek tragic heroes, Adam Smith stared confidently at the world and delivered nine hundred pages of analysis, prophecy fact and fable — most of it clear, charming, and aimed at helping the reader to understand his great book.'

        'The Wealth of Nations' introduces readers to the world of philosophy, politics and business with the sharp, sceptical, yet ultimately optimistic Adam Smith as a guide. Just when the Industrial Revolution explodes in England, Smith confidently points to every player, from farmer to friar to merchant to shipper, masterfully making sense of the social upheaval. Furthermore, Smith approaches economic policy without a biased brief for a particular party or class. No one could accuse him of sycophancy or insincerity. Though he finally endorses the rise of the bourgeois, he warns society not to naively succumb to bourgeois blandishments. In a way, the 1776 publication of 'The Wealth of Nations' brought forth a declaration of independence for economists.

        Adam Smith is the father of free market economics. He brilliantly states that individual ambition, effort and choice are guided by an 'invisible hand' — a term employed by him in his earlier 'Theory of Moral Sentiments' (1759) and mentioned only once in 'The Wealth of Nations' — to create the highest social benefit: that in order to encourage individuals, government ought not to interfere in economic matters; that efficiency in production will be increased by division of labour (his classic example was a pin factory in which worker specialisation boosts output); that value and price are distinct aspects of economic transactions; that prices and wages are best determined competitively and that 'balance -of-trade' justifications for high tariff walls and other mercantilist protections are hogwash.

        The important natural drives or 'propensities' Smith discovers in human nature form the basis of his analysis in 'The Wealth of Nations' and the foundation of classical economics. All humans want to live better than they do. Smith finds 'a desire of bettering our condition, a desire which, though generally calm and dispassionate, comes with us from the womb and never leaves us till we go to the grave ... Between the womb and the grave, there is scarce perhaps a single instant in which any man is so perfectly and completely satisfied with his situation, as to be without any wish of alteration or improvement of any kind'. Second, Adam Smith points to 'a certain propensity in human nature to truck, barter, and exchange one thing for another. It is common to all men'. Adam Smith called these urges as the invisible hand of enlightened self-interests.

        To increase the wealth of a nation, Smith argues that society should exploit these natural drives. Government should not repress self-interested people, for self-interest is a rich natural resource. People would be fools and nations would be impoverished if they depended on charity and altruism. A healthy society cannot rest its future on the noblest motives, but must use the strongest motives in the best possible way. All of us and indeed the whole world have now become aware of the fact that the Congress party under Nehru and Indira Gandhi only tried to use the basest instincts in human nature for the self advancement of a Private Limited Company called the Congress Party!

        Adam Smith's influence was dramatic and immediate. William Pitt (the younger, who became Britain's Prime Minister in 1783) adopted and embraced Adam Smith's free-trade views, and launched Britain on a two-centuries expansion of wealth and power. Such enduringly popular phrases as 'supply and demand', 'benlightened self-interest', and 'invisible hand' testify to Smith's continuing impact and influence.

        When Ronald Reagan won the 1980 Presidential Elections, conservative supporters in Washington rejoiced. At cocktail parties and meetings they congratulated one another and looked so forward to prosperity under 'Reganomics'. They also noticed that they were wearing the same neckties, which featured the profile of Adam Smith. What made those politicians and activists pride themselves on patriotism parading the profile of an eighteenth century Scotsman called Adam Smith? Why not Theodore Roosevelt, Thomas Jefferson or even Barry Goldwater? The answer is simple. They were convinced that Adam Smith was more relevant to contemporary economic issues than the thousands of economists and political leaders who had come after him. Narasimha Rao felt the same way in 1991 and saved India from total economic disaster and self-extinction.