That's called advance of modern capitalism. There wasn't true capitalism back in those days. There were very few "join stock companies" -- a very primitive form of modern corporation. There was no real industry. In those days laissez faire was a liberal idea: as opposed to mercantilism, which thought to establish the colonies are a guaranteed market, and a guaranteed supplier of raw resources -- pretty much the effect of neo-liberal politics on the Third World (former colonies) right now.
Also, why do you assume there's a "market" for all products? Some things, like electricity, like cable television, like telephone service can't truly be chosen. So there isn't a market, unless you claim that your choice is not consuming those services (which is not very practical). In some things you might have a choice who to get it from, but no choice of whether to get it or not. Such as health care. In the days of Adam Smith, they would bleed your (visible) hand, to cure a decease, there was no modern health care industry. You also assume that the supply and demand side of the equation is both infinite. Not true now. Oil is running out, and people are switching to diesel, natural gas and electricity. Thus if you start a new oil company, to protect yourself against any actions which are commited by all the main oil companies, shit you're out of luck.
Nature of business, as I have said before changed now. Whether in Adam Smith's day there was generally a family, a person, or a partnership which owned an enterprise, right now it's stock holders who do. They are not driven by sences of deceny, of morality, of social responsibility. They are driven by senses of profit. Why? Not because they are all immoral beings -- because there's so many of them, profit is the only thing in common. Anyone can buy stock of a company, or sell it, as long as they have money. Hense there's vertical or horizontal expansion, which given a limited supply or demand can allow a monopoly to be established. Thus a corporation now has guaranteed supply and guaranteed demand, and both a source of supply and a market is fixed for a corporation or a group of corporations. You get the same situation as with mercantilism.
Now you may say, "well tough luck, this is how it works". Then don't talk about the invisible hand, don't use an outdated argument. You might have a point if you mentioned that government regulated markets offered more dissadvantages and capitalism is the only market system compatible with <your ideology>. Now there's a debate.
And why do you think that everything Adam Smith said is right? He is just like any human being. Even worse a politician. Do you also trust everything Dubya or Clinton say? You may argue that he was a scholar who presented a radical theory, which worked so well in many cases. So did the many scholars who advocated socialist change, and it worked well in so many cases, and with side effects as well.
And humans have not dumbened down, they've only become more and more intelligent. Public education, so advocated by Jefferson is now a reality. Adam Smith could only dream of a time where majority of a nation could read and write, much less talk about economics. Heh, Jefferson could even only dream of the time there would be no slavery.
man in the world is he who stands most alone. - Henrik Ibsen.