The aim of this paper is to provide a reconstruction of Hegel’s theory of economic development. The Jena writings and the Philosophy of Right are considered and it is shown that Hegel proposed a description of the functioning of market economies where overproduction crises inevitably occur. Overproduction is due, in turn, to the continuous increase in the demand for luxury goods and the parallel decrease in the production of wage goods. This gives rise to the genesis of the Pöbel, i.e. the unemployed without social (and moral) recognition. The paper explores the analytical links which, although implicitly, lead to these conclusions. A comparison between Hegel and Smith is also provided, in the light of the debate on the ‘invisible hand’ approach. Hegel’s view appears to be in contrast with Smithian ‘optimism’ and, therefore, with his theory of economic development. Keywords: History of economic thought; Income distribution, prices and cyclical fluctuations; Labour economics.