# II: Of Restraints Upon the Importation from Foreign Countries of Such Goods as Can Be Produced at Home explained — The Wealth of Nations > Chapter companion for The Wealth of Nations by Adam Smith. ## What happens Smith argues against protectionist trade policies, asserting that individuals naturally pursue their own gain, which, guided by an 'invisible hand,' benefits society more effectively than government intervention. He uses the example of a prudent family to illustrate that nations should import goods cheaper abroad rather than produce them domestically at higher cost. Smith criticizes monopolies granted to domestic industries, warning that such regulations diminish national wealth and empower special interests that can intimidate the legislature. He acknowledges that sudden trade liberalization can harm manufacturers but advocates for gradual change. He also discusses cases where taxes on foreign goods may be justified, such as for defense (e.g., the Navigation Acts) or to counterbalance domestic taxes, but cautions against excessive taxation that distorts trade. ## Themes in this chapter ### Self-Interest and the Invisible Hand Smith introduces the 'invisible hand' concept, explaining how individuals pursuing their own gain unintentionally promote the public good. ### Free Trade and Market Competition The chapter argues against import restraints and monopolies, advocating for free trade as more beneficial to national wealth. ### Role of Government Smith criticizes government attempts to direct private capital and warns against the dangers of legislative intervention in trade. ### Social Class and Inequality Discusses how monopolists and manufacturers gain disproportionate influence over government, harming the broader society. ## Character check-ins ### Adam Smith Author and narrator; presents the core argument against import restraints and for free trade. ### The Employer Used as an example of a prudent individual who buys rather than makes goods when cheaper to do so. ### The Masters Refers to merchants and manufacturers who benefit from monopolies and lobby for protectionist policies. ### Great Britain The nation whose commercial regulations, such as the Navigation Acts, are discussed as examples of trade policy. ### The Servants Implied as part of the household analogy; the prudent master does not attempt to make at home what can be bought cheaper. ## Key lines > By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. When individuals act in their own self-interest, they often benefit society more than if they had deliberately tried to help. _This is a key statement of the invisible hand principle._ > It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. A wise household head will not produce goods at home if they can be purchased more cheaply elsewhere. _Smith uses this analogy to argue for free trade between nations._ > If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage. If another nation can sell us a product for less than we can produce it, we should import it and focus our own labor on goods where we have a comparative advantage. _This is a foundational argument for free trade based on comparative advantage._ > This monopoly has so much increased the number of some particular tribes of them, that, like an overgrown standing army, they have become formidable to the government, and upon many occasions intimidate the legislature. Monopolies have made certain groups of manufacturers so powerful that they can threaten and pressure the government, much like a large standing army. _Smith criticizes the political influence of monopolists._ > As defence, however, is of much more importance than opulence, the act of navigation is, perhaps, the wisest of all the commercial regulations of England. Because national security outweighs wealth, the Navigation Acts—which restrict trade to protect shipping—are among England's most sensible commercial laws. _Smith acknowledges an exception to free trade for defense purposes._ ## Links - HTML: https://www.betterreads.online/discover/the_wealth_of_nations_se/chapters/ii-of-restraints-upon-the-importation-from-foreign-countries-of-such-goods-as-can-be-produced-at-home - Book: https://www.betterreads.online/discover/the_wealth_of_nations_se - All chapters: https://www.betterreads.online/discover/the_wealth_of_nations_se/chapters