[p_monk]

Adam Smith was making this same argument the only time he ever used the term "invisible hand." Smith assumed (incorrectly) that capitalists would always prefer their own domestic markets. For Smith, his conception of capitalism was good because it offered the best chance at achieving equality. However, globalization of capital has proven that his underlying assumptions were incorrect, so it may very well be that Smith today would have been seen alternatives to capitalism as better suited to provide equality. I believe Smith's beliefs would have led him to be something like what we call a "market socialist" these days.

The original passage from Wealth of Nations:

"He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."

[boreas]

I think you may be wrong in your interpretation of the present situation. Instead of concluding that, because modern capitalists are happy to invest abroad, Smith was wrong about their preferences, you could conclude that the world is becoming so integrated that the difference between foreign and domestic is less relevant than ever. In other words, the entire world is "domestic".

I think this could be a reasonable conclusion given the increase in the strength of property rights for foreigners ("he intends his own security") and the decrease in transportation costs and time, the two things I assume Smith was reasoning about.

[ArkyBeagle]

I strongly suspect that Smith was right and that the rise of global capitalism has more in common with Mercantilism than actual Capitalism.

Then again, Smith may well be my One True Scotsman :) Isn;t there a baby in that bathwater?

I do recommend the bookTv ( CSPAN anyway ) presentation of Peter Whybrow on his book "The Well-Tuned Brain".

[Spooky23]

Another issue is the scale that modern business can operate at. A free market with two players isn't really "free" in a meaningful sense of the word.