Prophets like Adam Smith are followed by priests who codified the prophet's insights and often the priests turn his creativity into drudgery. It seems that if Smith had been around for the last 100 years, he would have explicitly acknowledged that the Invisible Hand operates through the Price Structure aka Price System [PS].
Businessmen and consumers (and most people are both) need accurate information on the current prices of everything that affects them. The transmitting of prices is essential for there to be a free market. When people are provided false information, that make decisions which they otherwise would not make. Fraud deprives the victim of his right to make a free choice. If I believe that a bundled mortgage is worth $10 M, I will pay $10 M, but if the real value is $5 M, I certainly would not pay double the real price. When the government allows sellers to misrepresent the value of their goods, not only does the innocent buyer lose his money, but serious disruptions in the market can occur when the frauds reach a massive scale.
Only government is large enough to clamp down on people who would disseminate false information about prices. The government can outlaw certain behavior which harms the PS. The Glass-Steagall Act prohibited certain type of business transactions as experience with the Great Depression had taught that cheaters do prosper and predatory and fraudulent business practices are more alluring than sound investments.
For example, it was easier for Wall Street to find hundreds of thousands of subprime home mortgages (i.e. with high default rates) than it was to find top notch mortgages with very low default rates. Thus, Wall Street realized that by bundling together a lot of subprime mortgages and then getting a rating agency like Standard and Poor to give them AAA ratings, they could sell lead for gold.
Wall Street's scam was a direct attack on the fundamentals of capitalism as Smith had set them forth. When lead is sold as gold, the PS is destroyed and people are deceived into putting too much money into home mortgages. Every dollar that went into a fraudulent bundled mortgage was a dollar that was not invested in a wiser way to make money for the investor and as a result make society as a whole wealthier. But for the fraud, the Invisible Hand of the PS would have directed the investment dollars elsewhere.
Capitalism needs a government that is large enough and with regulatory powers to protect the system from crooks. As we have seen in the last 3 years, when fraud enters the market place, the Invisible Hand ceases to function and the economy crashes But, a few corrupt individuals become extraordinarily wealthy.
The first goal of any government should be to protect the integrity of the Price System so that the Indivisible Hand may function. The new Administration has failed to re-instate Glass-Steagall, and Wall Street had continued to make billions upon billions of dollars by interfering with the Price System so that people do not know the true value of Food or Oil. As a result, we have had riots through the Middle East which were touched of by the rising price of food, and here at home Americans have paid about 40% mor for gasoline.
People make the mistake of thinking that term Invisible Hand means that it is some divine power which operates without any human assistance. Quite the contrary, without a government with the power and the will to protect it, the Invisible Hand withers.
The "capitalists" who operate without regulation will alter the price system so that people make bad decisions which favor the capitalists. Thus, the saying that Capitalists themselves are the greatest threat to Capitalism. Whenever one sees some group advocating for a small weak government, one almost always finds corrupt businessmen behind the group. If we did not know the Koch Bros were financing the tea party, we could discern that fact from Adam Smith. While we will not know the identity of the persons, corporations and countries financing political parties due to the Citizens United Case, we know that those who advocate for a small government and attack regulations have the agenda of destroying Adam Smith's Invisible Hand.
When people understand that the Invisible Hand requires a government large enough to regulate predatory business practices, then we will have a chance for a steady increase of prosperity. As we have seen during the last 3 years, without proper regulation, money flows to the corrupt as they can cheat millions of people out of their money and then the corrupt buy more politicians to make certain government stays small and weak.
As a result, the economy enters into wild fluctuations as it is thrown about by all the corrupt manipulations of the Price System. Because the Invisible Hand cannot operate in the sea of fraud and deceit, people do not know where to put their money and almost every place turns out to be the wrong place.