The Real Voice of Adam Smith
Michael Hauben
An Inquiry Into the Nature and Causes of The Wealth of Nations focuses
on the wealth of nations; which is the fund the "annual labour of every
nation" produces. (Modern Library, 1965, p. ivii) From the very
introduction of The Wealth of Nations, Adam Smith concentrates on the
laborer, the person who's labor constitutes the wealth of the nation. A
common thread throughout the book that has received very little emphasis
is Smith's empathy for the common worker. Smith believes that there should
be a fair relationship between employers and workers.
The interests of society are Adam Smith's interests. Smith's empathy
for the common laborer stream from the interests of society. In Book I,
Chapter XI, Smith equates the interests "of those who live by wages" with
"the interest of the society." (249) However the "interest of this third
order," which is "those who live by profit," or manufacturers, "has not
the same connection with the general interest of the society" as do the
workers or landowners. (250) Smith explains these differences by writing
"As their thoughts, however, are commonly exercised rather about the
interest of their own particular branch of business, than about that of
the society." (250) Interests that sway from those of society's, often
hurt society. Smith writes:
It comes from an order of men, whose interest is never
exactly the same with that of the public, who have
generally an interest to deceive and even to oppress
the public, and who accordingly have, upon many occa-
sions, both deceived and oppressed it. (250)
Smith is critical of this deception and oppression. Smith equates
a well-governed society as one where the whole of the people gain
from the society's production. In the beginning of Book I, Adam
Smith writes:
It is the great multiplication of productions of all the
different arts, in consequence of the division of labour,
which occasions, in a well-governed society, that universal
opulence which extends itself to the lowest ranks of the
people. (11)
This differentiates from when only the manufacturers or certain classes of
society gain from society's production. A society's improvement as a whole
is linked to "what improves the circumstances of the greater part" of
society. (78) Smith states that "servants, labourers, and workmen of
different kinds" (78) make up the greater part of every political society.
He finishes this sentiment by writing, "No society can surely be
flourishing and happy, of which the far greater part of the members are
poor and miserable." (78) His statements point out that high earnings of
labor are an advantage to society.
The attempts the manufacturing class use for their advantage, in total
disregard of the workers, hurts the society since the wealth of society is
made up of the production from the great collection of individuals who are
the workers. In the striving for employer's "personal" gain, the
individual workers are hurt and thus society is hurt. Adam Smith is thus
against inflated profits which the manufacturing class always seek. He is
vehemently opposed to the opportunities allowed to monopolies. Smith
writes:
The monopolists, by keeping the market constantly understocked, by
never fully supplying the effectual demand, sell their commodities much
above the natural price, and raise their emoluments, whether they consist
in wages or profit, greatly above their natural rate. (61)
In the search for greater and greater profits, companies neglect or
purposely attempt to keep wages down and raise prices so as to collect
higher and higher profits. Smith reports this in the following:
People of the same trade seldom meet together, even for
merriment and diversion, but the conversation ends in a
conspiracy against the public, or in some contrivance
to raise prices. It is impossible indeed to prevent
such meetings, by any law which either could be execut-
ed, or would be consistent with liberty and justice.
But though the law cannot hinder people of the same
trade from sometimes assembling together, it ought to
do nothing to facilitate such assemblies; much less to
render then necessary. (128)
When the manufacturer's interest is for the highest profits, the
worker is the first to be affected by this policy. Among the first place a
manufacturer can gain is by increasing the percentage of income that goes
to profit while lowering the percent that goes to the worker as wages.
Smith explains this conflict:
What are the common wages of labour, depends every
where upon the contract usually made between those two
parties, whose interests are by no means the same. The
workmen desire to get as much, the masters to give as
little as possible. The former are disposed to combine
in order to raise, the latter in order to lower the
wages of labour. (66)
The manufacturer is frustrated by the worker's contradictory role. On
the one hand, the worker's labor is integral to production. On the other
hand, the worker's wages represent a drain or reduction in profit. The
crucial contradiction lies in the wellbeing of the worker. While being
contrary to the wants of the employer, the worker must be able to live and
support a family to continue able production for his employer. Adam Smith
writes:
A man must always live by his work, and his wages must
at least be sufficient to maintain him. They must even
upon occasions be somewhat more; otherwise it would be
impossible for him to bring up a family, and the race
of such workmen could not last beyond the first genera-
tion. (67)
It is thus in the best interest of the employer to keep their workers well
paid in order to keep production high. Smith goes on to write:
The liberal reward of labour, as it encourages the
propagation so it increases the industry of the common
people. The wages of labour are the encouragement of
industry, which, like every other human quality, im-
proves in proportion to the encouragement it receives.
(81)
In this case high wages keep productivity which leads to higher profits
for companies:
A plentiful subsistence increases the bodily strength
of the labourer, and the comfortable hope of bettering
his condition, and of ending his days perhaps in ease
and plenty, animates him to exert that strength to the
utmost. (81)
Smith explains that high wages are a common interest of both workers and
manufacturers in that productivity is direct affected by the wage rate:
Where wages are high, accordingly, we shall always find
the workmen more active, diligent, and expeditious,
than where they are low; (81)
Often the manufacturer's reliance on the workers restrains some otherwise
tempting activity. He writes:
The pretence that corporations are necessary for the
better government of the trade, is without any founda-
tion. . . . It is the fear of losing their [workmen]
employment which restrains his frauds and corrects his
negligence. (129)
Adam Smith talks about the use of laws and regulations. While the
common belief is that Adam Smith is against such measures he comes out in
favor of laws in favor of workers. He writes:
Whenever the legislative attempts to regulate the
differences between masters and their workmen, its
counsellors are always the masters. When the regula-
tion, therefore, is in the favor of the workmen, it is
always just and equitable; but it sometime is otherwise
when in favor of the masters. (142)
Much is made of the "father of deregulation." Adam Smith has been
designated such by many in the field of economics. His connection takes on
a mythical role. These connections are taken for granted, and perhaps,
like mythical legends are not always true. Adam Smith's beliefs have been
stereotyped so when someone says "individuality" or "deregulation", we are
supposed to think "Adam Smith." The actual reading of Smith's books must
be a curiosity because he constantly winds up supporting the rights of
workers and seeking a fair relationship between employers and workers.
While Smith is connected to "laissez faire" economics, throughout The
Wealth of Nations, there is a strong sentiment that society is better off
when the common worker is treated good.
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