Adam Smith’s Model of Capitalism and its Relevance Today

Modern Capitalism has been criticized on many different grounds, especially for the genuine imperfections of actual forms of capitalist organization and the difference that it has created between rich and poor. There is one more front where capitalism has come under severe attack i.e. the ethics of the capitalist system. Neo classical thinking has legitimized a narrow conception of capitalism that has largely excluded social and moral considerations from economic thinking. Such a narrow conception of capitalism that excluded wider moral motivations and institutions from their economic thinking has prevented capitalism from harnessing its full potential. This paper argues that for profit to endure we need a higher form of capitalism involving a social purpose along with profit. This sophisticated form of capitalism, one imbued with a social purpose, involves a deeper understanding of Adam Smith’s insights on economy and society.