The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers (21 page)

Although Smith placed great faith in an ideal market society, the actual conditions he saw fell short of his ideal. As a result, Smith advocated Procrustean measures to coerce people into conforming to his vision.

While we will focus on Smith’s authoritarian side, it is fair to say that he was relatively progressive for someone of his time and standing. He was still a creature of his time. Smith himself observed how earlier people had followed customs that their own society considered abhorrent. For example, Smith asked:

Can there be greater barbarity for example, than to hurt an infant? Its helplessness, its innocence, its amiableness, call forth the compassion, even of an enemy, and not to spare that tender age is regarded as the most furious effort of an enraged and cruel conqueror. What then should we imagine must be the heart of a parent who could injure that weakness which even a furious enemy is afraid to violate? Yet the exposition, that is, the murder of new-born infants, was a practice allowed in almost all the states of Greece, even among the polite and civilized Athenians; and whenever the circumstances of the parent rendered it inconvenient to bring up the child, to abandon it to hunger, or to wild beasts was regarded without blame or censure.
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Just as Smith presumably did not regard Plato and Aristotle as monsters for condoning infanticide, Smith’s own intolerance might be forgiven as a reflection of the society in which he lived. It is important, however, for us to keep in mind the way that powerful calls for freedom of the marketplace today still coincide with measures to withhold what might be regarded as a minimum degree of humanity.

Smith and the Production of Personality

Despite the title,
The Wealth of Nations
, Smith’s chief interest was not the material fruits of economic growth but a deeper form of progress—the development of better people. George Stigler accurately captured the outlook of Adam Smith and other major early economists with his perceptive comment:

Their concern was with the maximizing, not with the output. The struggle of men for larger incomes was good because in the process they learned independence, self-reliance, self-discipline—because, in short, they became better men…. The desire for better men, rather than for larger national incomes, was a main theme of classical economics.
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In this sense, Smith was not exactly an orthodox Procrustean. Although he agreed with the Procrusteans about the overriding importance of discipline, his highest stated priority was not the ability of the wealthy to accumulate more wealth. Some later economists, such as Alfred Marshall and John Maynard Keynes, partially followed in Smith’s footsteps in this respect, but all of them wanted workers to become well-behaved and obedient employees. They share much of the vision of modern economists who consider workers’ development largely irrelevant, except as it promotes the ultimate goal of increasing output.

The attitude of most of those who followed Smith reflected the class interest of capital rather than a concern for the betterment of the less fortunate. Many of them agreed that the state must refrain from giving any significant assistance to the poor, in order to prevent any
weakening of their moral fiber—by which they meant the work ethic of the poor.

According to Smith, “Little else is requisite to carry a State to the highest degree of opulence … but peace, easy taxes and a tolerable administration of justice.”
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John Ramsay McCulloch, an influential economist of the early nineteenth century, writing with his characteristic “confident dogmatism,” showed how Smith’s sentiments translated into practical policy:
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But whenever property is secure, industry free, and the public burdens moderate, the happiness or misery of the labouring classes depends almost wholly on themselves. Government has there done for them all that it should, and all in truth that it can do. It has given them security and freedom. But the use or abuse of these inestimable advantages is their own affair. They may be either provident or improvident, industrious or idle; and being free to choose, they are alone responsible for the consequences of their choice.
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Smith was more sincere than those like McCulloch, whose interest in behavioral improvement shrouded a vision of a totally Procrustean world in which everybody stands ready to do whatever is necessary for capital. His self-assured demand that ordinary people accept responsibility for their own lot and be content with what they earned from their hard work—no matter what their circumstances might be—does not require much from a person already enjoying a comfortable position and sheltered from the hardships that the poor commonly experience. On the contrary, the affluent are sure to benefit from compliant behavior on the part of the diligent poor.

Neither McCulloch nor his successors would ever admit to cruel or selfish motives. They prided themselves on a perverse benevolence. Their “tough love” was for the benefit of the poor, who, cut off from welfare support, will necessarily change their behavior, regardless of their circumstances. As a result, workers have the opportunity to pull themselves up by their bootstraps and enjoy the consumption made possible by hard work.

Smith and the Four Stages

Central to Smith’s analysis was his overarching theory of historical evolution. Like other Scottish academics at the time, Smith proposed that society naturally progresses stepwise through four predetermined stages, beginning with an initial primitive stage of hunting and gathering, then progressing to herding, followed by agriculture, and finally to a commercial economy. At each stage, the typical individual personality has to adjust to the productive requirements of the economy. In the earliest stage, hunter-gatherers had to put great stock in individual courage. Survival depended on locating a food source and consuming the food. In such an environment, people would have good reason to act upon their immediate impulses, without much need to plan for the future.

With each successive stage, people’s psychology has to become more future-oriented. Herders, and even more so farmers, have to nurture animals or crops in order to benefit from them later. Eventually, with the arrival of commercial society, people become even more future-oriented. Characteristics such as frugality, honesty, and hard work become just as important for survival as individual courage was in an earlier age.

Smith’s approach might have led in the direction of a materialist analysis of the economy. Instead, Smith used his four stages theory to show how all previous forms of social organization ultimately led to a full-blown market society, which centered on transactions.

For Smith, as societies progress, the shackles that limit common people fall away, including cultural restraints. The superstitions that restrict primitive hunters and gatherers from developing a deeper understanding of the world disappear. Similarly, Smith expected to see the powers of the aristocrats and bureaucrats wane, giving way to the impersonal market forces that would be sure to liberate the potential of the ordinary person.
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So, in the end, the market forms a powerful motor of individual, social, and economic betterment. Freed from the oppression of feudal lords or slave masters, the incentives of commercial society, which Smith saw as a system of natural liberty,
would create both a new social structure as well as personality changes that would promote greater productivity.

Smith used the example of agriculture to illustrate how each stage of development requires a different system of organizing society. In early society, as the productive potential of agriculture increased, great chieftains, and later kings and emperors, first used slavery to extract as much wealth as they could. Yet slavery represented the height of inefficiency. Under this primitive form of economic organization, slaves, like workers on a chain gang today, could be compelled to perform certain kinds of routine work, but in performing their work they had no reason to exert themselves any more than necessary. Their efforts would merely help their owners while exhausting themselves.

The experience of slavery in the southern United States confirms Smith’s speculation. The sandy soils, typical of the South, are ideal for light equipment pulled by horses, yet the plantations typically used heavy tools drawn by mules. Frederick Law Olmsted, the designer of both New York’s Central Park and Golden Gate Park in San Francisco, brought this phenomenon to the attention of the world, just before the outbreak of the Civil War:

I am shown tools that no man in his senses, with us, would allow a laborer, to whom he was paying wages, to be encumbered with; and the excessive weight and clumsiness of which, I would judge, would make work at least ten per cent. greater than those ordinarily used with us. And I am assured that, in the careless and clumsy way they must be used by the slaves, anything lighter or less rude could not be furnished them with good economy, and that such tools as we constantly give our laborers, and find our profit in giving them, would not last out a day in a Virginia corn-field—much lighter and more free from stones though it be than ours.

So, too, when I ask why mules are so universally substituted for horses on the farm, the first reason given, and confessedly the most conclusive one, is that horses cannot bear the treatment that they always must get from negroes; horses are always soon foundered or crippled by them, while mules will bear cudgeling, and lose a meal or two now and then, and not be materially injured, and they do not take cold or get sick if neglected
or overworked. But I do not need to go further than to the window of the room in which I am writing, to see, at almost any time, treatment of cattle that would insure the immediate discharge of the driver, by almost any farmer owning them at the North.
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The slaves were not inherently clumsy or abusive. Their behavior was a rational response to an irrational situation. A society that consigned human beings to the status of property could not expect them to have much incentive for hard work. On a hot, muggy day, while the slave driver glanced away, a slave might be tempted to “stupidly” hurt a horse or damage a piece of equipment in order to take a brief break from unbearably hard labor.

According to Smith’s account of the transition out of slavery, feudal lords later allowed serfs to produce food for themselves for part of the year, but they also had to spend a predetermined amount of the year working for their masters, almost as slaves. Serfs would work hard while producing for themselves, but they had no reason to do so while laboring on their masters’ land.

After people had won the freedom to produce for themselves, the lords could still claim a share of the harvest for their own. Since workers could keep only part of what they produced, they had less incentive to work hard.

At the next stage, the lords granted people the right to all of what they produced, although the farmers still had to pay a fixed rent. Under this arrangement, farmers had a greater incentive to work hard since they could keep everything they produced, over and above what went for rent. At last, the peasants became more like capitalists. These peasants were far from being capitalists, unless they began hiring workers for wages, but their situation represented an important stage in Smith’s road to capitalism.

This transition had not been completed when Smith wrote, but he believed that it was inevitable because the improvident aristocrats who owned much of the land were not likely to hold on for long.

Smith’s four stages theory presents a curious anomaly. In the first three stages, the actual demands of work seem to form the core of
human personality. By the fourth stage, work as such falls into the background, except for occasional reference to simple, traditional tasks. Instead, the transaction becomes the focus of Smith’s commercial stage. The actual performance of work passes into obscurity, along with the outmoded traditions of the aristocracy.

The Elimination of Class in Smith’s World

Extrapolating Smith’s analysis from independent farmers who rented their land to workers who worked for wages requires a bit of a leap. His approach was to assume that wage earners were capitalists, except that these particular capitalists sold their labor rather than finished commodities.

Smith was too intelligent to presume that more effort alone would suffice to lift most wage earners out of poverty. To succeed, workers would also need a different kind of personality, one that stressed prudence and frugality. Wage earners who behaved appropriately could hope to improve their station in life by moving on to a different kind of work, perhaps becoming independent artisans, and then maybe employers in their own right.

A corollary of this vision would be that even if low-wage workers remained poor for a few years, over the course of their lifetimes they could comfortably enjoy the fruits of their labor. If this life cycle of labor were common, then consideration of class would be irrelevant. Poverty would be a temporary stage through which diligent young people might pass before moving up to a more prosperous life.

How realistic was Smith’s vision? In a small, isolated village in which industry only consisted of artisans producing on a small scale, a market society might have worked the way Smith suggested. In such a world of micro-businesses, the ratio of workers to employers would be small. Under such conditions, young workers could reasonably expect that with diligence and a bit of luck their time as wage laborers might be relatively short. Such an economy has probably never existed.

The problem, however, is that the “normal” life cycle of labor that Smith imagined precludes a world in which large operations have become common. If only relatively few rungs at the top are open to the many at the bottom, how could the typical young worker expect to ascend the ladder of success merely through hard work and diligence?