Adam Smith is known as the father of economics. He taught the principles of free markets, free trade and the benevolence of the "invisible hand" that shapes most of our current global economic structure. Most would say his teachings have created a better society and allowed the upward mobility of billions of humans in the last two centuries.
And they would be right. But it seems the global economy has taken a turn for the worse since the global financial crisis of 2008-09. The current global economy is still recovering from the meltdown and is potentially on the brink of another crash triggered by Europe's massive sovereign debt problem.
Today's Daily Ticker guest Graeme Maxton, economist and author of "The End of Progress: How Modern Economics Has Failed Us," says it's because economists and market participants have neglected some of Smith's most important teachings, including that of social responsibility.
"The gap between rich and poor has gotten far bigger than it should have," Maxton tells Aaron Task in the accompanying clip. "We're not taxing the rich, as Adam Smith said we should, we're underpricing the world's resources, and we're not intervening in markets when we should."
Maxton says Smith was not solely about profits and gains. Smith was just as interested in morality. However, modern economists have ignored that notion and focused primarily on "this belief that the markets were self-correcting."
The result: greater income inequality and instability that "will last for years to come," says Maxton.
Maxton is convinced the global economy will continue to struggle and probably deteriorate because our ability to borrow and consume to seemingly limitless bounds has come to an end. (See: 'The End of Progress': Expect Decades of Slow Growth, Author Graem Maxton)
"We can't have economic growth without adding more debt," he claims. "In 2008, the world economy reached a turning point. It wasn't just a bump in a road. We reached the end of a 30-year period of history and we can't carry-on the path anymore."
- Adam Smith