The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers (26 page)

Although Smith managed to exorcise all considerations of class from his theoretical representation of the world, in practical matters, these examples show that class discipline remained a matter of utmost importance. For Smith, individual virtue rather than social influences determine people’s fate. In a particularly striking passage, Smith suggested:

If we consider the general rules by which external prosperity and adversity are commonly distributed in this life, we shall find [that] every virtue naturally meets with its proper reward, with the recompense which is most fit to encourage and promote it…. What is the reward most proper for encouraging industry, prudence, and circumspection? Success in every business. And is it possible that in the whole of life these virtues should fail of attaining it?
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The truth was (and still is) that members of the lower class had little chance of succeeding in business, even with a high degree of virtue. Today, in California, you can see farm workers sweating in the fields under the 100-degree sun. Nobody can doubt that what these people are doing is difficult, but despite their hard work, their chance of material success is slight.

Yet Smith seemed bewildered about why many poor people would express their discontent. The real surprise should be that such people accept their lot in life, while others wallow in obscene luxury.

In the end, Smith was wildly successful. He was able to throw in his lot with the Procrusteans while maintaining his reputation as a philosopher of liberty.

Class Warfare

How could Smith write so glowingly about a classless economy in
The Wealth of Nations
, then turn around and explain how to conduct class warfare? The key to disentangling Smith’s contradiction is that he designed his book for two different—and even contradictory—purposes.

The first part of the book celebrated the growth of the market economy. In that cleverly designed work of ideology, Smith cast the development of the market in as favorable a light as possible. Here, facts and details were not much needed, except to make an ideological point. Discussion of the Carron works would have been a diversion. In contrast, charming anecdotes, such as his portrayal of the pin factory, offered evidence to support his ideology, while making the discussion a joy to read.

In the second part, Smith was developing a handbook of practical administration. Here, too, Smith had his stories, but he necessarily had to deal with real facts—even unpleasant facts. As a result, these two parts are often inconsistent, as was the case with his negative characterization of the division of labor in discussing the military.

The first part of the book emphasizes voluntarism. Then suddenly, in the latter part of the book, the state, which heretofore was the enemy of all economic progress, becomes essential for keeping workers in line. Now the state rather than the market must administer the Procrustean bed. Students of Adam Smith’s work rarely address his call for government intervention, with notable exceptions, such as Jacob Viner.
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Instead, they emphasize the first part of the book, where the proper role of government was mostly limited to education and national defense.

Smith’s advocacy of harsh discipline reflected an important element of his social thinking. A lack of discipline not only cut into
potential profits, but threatened insecurity as well. Smith was living at a time in which the English ruling class had reason to feel insecure.

England faced three threats—regional insurrections, foreign wars, and class war. The danger of regional insurrections seemed to be rapidly diminishing, because England had recently quashed the last serious rebellion in Scotland. Smith thought that the union with England would integrate their economies, bringing both peace and prosperity to Scotland. More important, Smith saw the traditional Scottish aristocracy dissipating its wealth and power through ostentatious consumption. Smith mocked that foolish behavior of the aristocracy:

All for ourselves and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind. As soon, therefore, as they could find a method of consuming the whole value of their rents themselves, they had no disposition to share them with any other persons. For a pair of diamond buckles, perhaps, or for something as frivolous and useless, they exchanged the maintenance, or what is the same thing, the price of the maintenance of a thousand men for a year, and with it the whole weight and authority which it could give them … and thus, for the gratification of the most childish, the meanest, and the most sordid of all vanities, they gradually bartered their whole power and authority.
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England was also in the midst of a long series of difficult wars, but more worrisome, England appeared to be on the verge of revolutionary insurrection on the part of workers. For Smith:

In free countries, where the safety of government depends very much upon the favourable judgment which the people may form of its conduct, it must surely be of the highest importance that they should not be disposed to judge rashly or capriciously concerning it.
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Unfortunately for Smith, this “favourable judgment” among the poor did not seem to be very common. Perhaps it is fitting that the house in which Smith spent his last years eventually became a municipal center for troubled boys.

Labor in Smith’s World

Adam Smith was full of contradictions. Despite his individualist philosophy, workers’ individual qualities, other than a willingness to keep their noses to the grindstone, had no interest for him.

Ordinary people just had to earn their income by the sweat of their brow, according to the biblical injunction (Genesis 3: 19). Any role for creativity is out of the question. As Ferguson wrote, far more accurately than Smith:

Many mechanical arts, indeed, require no capacity; they succeed best under a total suppression of sentiment and reason; and ignorance is the mother of industry as well as of superstition. Reflection and fancy are subject to err; but a habit of moving the hand, or the foot, is independent of either. Manufacturers, accordingly, prosper, where the mind is least consulted, and where the workshop may, without any great effort of imagination, be considered as an engine, the parts of which are men.
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Members of the working classes were limited to two options. Either they would obediently perform almost animalistic tasks in the workplace or they would become dissolute beings who submerged themselves in unruly mobs that threatened privileged members of society.

Despite Smith’s denigration of workers, he knew that production still depends upon the ability to mobilize labor. Therefore, he occasionally continued in the long mercantilist tradition that attributed the value of production to labor. For example, we read in
The Wealth of Nations
:

The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. What is bought with money or with goods is purchased by labour.
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Smith’s labor theory of value treats workers as interchangeable parts. He went further than modern economic theory, which regards work as nothing more than the loss of the potential utility of leisure. Smith presumed that the psychology of any worker was indistinguishable from the others. In his words:

Equal quantities of labour, at all times and places, may be said to be of equal value to the labourer; in his ordinary state of health, strength and spirits; in the ordinary degree of his skill and dexterity, he must always lay down the same portion of his ease, his liberty, and his happiness.
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Given this perspective, no one should be surprised that Smith paid little attention to working conditions, with one exception: he alluded to working conditions by mentioning that without strict supervision workers might slack off. The workers he used to make his point in this case were not manual workers laboring under difficult conditions. Instead Smith turned to the lax performance of college professors—workers with whom Smith was acquainted.

It is in the interest of every man to live as much at his ease as he can; and if his emoluments are to be precisely the same, whether he does or does not perform some very laborious duty, it is certainly his interest, at least as interest is vulgarly understood, either to neglect it altogether, or, if he is subject to some authority which will not suffer him to do this, to perform it in as careless and slovenly a manner as that authority will permit. If he is naturally active and a lover of labour, it is his interest to employ that activity in any way from which he can derive some advantage, rather than in the performance of his duty, from which he can derive none.
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Neither Smith nor most later economists gave much consideration to exactly what the toil and trouble actually meant for the masses of workers who made life comfortable for people who had the leisure to reflect upon such matters.

As his book progressed, Smith shifted his approach, abandoning this idea of labor-based value. Smith had good reason for this. He
was attempting to put the relations between labor and capital in the best possible light. This objective explains why Smith would go to such lengths to obscure the role of technology and large-scale production. Similarly, Smith avoided criticizing government policies to rig the labor market by holding down wages.
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Such regulations would give the lie to Smith’s vision of the market where people met as equals.

In the end, Smith succeeded, giving considerable support to future generations who wished to exclude work, workers, and working conditions from economics.

The Degradation of Adam Smith’s Legacy

Although labor was important for the political economists who followed Smith, their idea of labor was not a reflection of workers’ individual skills and knowledge. Instead, their conception of labor was reduced to an abstraction—much like the eternal lament that good help is hard to find.

The concern with labor is understandable. Technology was not yet particularly advanced. Management’s main task was to mobilize labor. However, the realism of basing economics on the labor process created a significant contradiction that Smith missed. How could an analysis that treated labor with such disrespect turn around and then give labor great credit as a productive force? Beginning around 1830, this contradiction came to a head.

One of the most vehement opponents of a labor-based theory of production was Samuel Read, who advocated giving capitalists the place of honor in production. Read’s work was probably more in tune with the underlying thrust of Smith’s writings than with David Ricardo’s then influential labor-based approach.

Read feared that basing value on labor might provide workers with grounds for demanding higher wages. His goal was to provide objective proof that any attempt to use economic theory to justify higher wages was fallacious. According to Read:

The labourers have been flattered and persuaded, that they produce all, whilst the capitalists on the other hand, have combined and established laws of preference and favour which really tread upon the rights of the labourers…. The labourers must be informed, and made to understand that they do not produce all, whenever they seek the assistance of capital; the capitalists lending that assistance must be equally instructed that no individual can have a right to exclude or interdict others from coming forward or to attempt to enhance their gains by means which are unjust or injurious to their neighbours.
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For Read, the capitalists provide the essential means of production, such as machines and material, but more important, value itself reflects the preferences of consumers rather than the work of laborers. This masterpiece of intellectual legerdemain eventually became the centerpiece of economics, although few of the economists who were answering Marx a half century later acknowledged Read as their forerunner.

Read’s theory provided stronger grounds to regard the context of work as a matter of indifference. As for workers, they should merely content themselves with the consumption that their work makes possible—the idea that Simon Patten echoed almost a century later.

Although Ricardo used a labor-based theory of value, his intentions could give little comfort to workers because he was showing how wages could be reduced. In particular, Ricardo was calling for the elimination of the protection of domestic agriculture, which made labor more expensive and thus lowered profits. And for Ricardo: “Nothing contributes so much to the prosperity and happiness of a country as high profits.” Then he added:

There is no other way of keeping profits up but by keeping wages down. In this view of the law of profits, it will at once be seen how important it is that so essential a necessity as corn, which so powerfully affects wages, should be at a low price; and how injurious it must be to the community generally, that, by prohibitions against importation, we should be driven to the cultivation of our poorer lands to feed our augmenting population.
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By contrast, Smith himself, despite his authoritarian streak, at least wished success for those workers who accepted the rules of the game:

No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged.
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