The Invention of Capitalism: Classical Political Economy and

"Science," the Greek word for knowledge, when appended to the word "political," creates what seems like an oxymoron. For who could claim to know politics? More complicated than any game, most people who play it become addicts and die without understanding what they were addicted to. The rest of us suffer under their malpractice as our "leaders." A truer case of the blind leading the blind could not be found. Plumb the depths of confusion here.

Re: The Invention of Capitalism: Classical Political Economy

Postby admin » Tue Feb 20, 2018 8:10 am

Part 1 of 2 

Chapter 7: Sir James Steuart's Secret History of Primitive Accumulation

A river may as easily ascend to its source, as a people voluntarily adopt a more operose agriculture than that already established.

— Sir James Steuart, An Inquiry into the Principles of Political Economy


The Destruction of Feudal Society in Scotland

This chapter concerns Sir James Steuart's contribution to the theory of primitive accumulation. Steuart, forgotten today, was one of the most important of the classical political economists. Steuart's analysis benefited from his upbringing in Scotland. His Scotland was a mysterious world, even for the English visitor in the age of classical political economy. In the early eighteenth century, Defoe (1724-26, 3:663) remarked, "Our geographers seem to be almost as much at a loss in their description of this north part of Scotland as the Romans were to conquer it." Toward the end of the century, Samuel Johnson recalled his tour of the Highlands: "I got an acquisition of more ideas by it than anything that I remember. I saw quite a different system of life" (cited in Boswell 1799, 199).

Tribal values remained strong in the Scottish Highlands. All commentators agreed that the household economy maintained an exceptional degree of self-sufficiency in the countryside (see Marx 1977, 472, 6i6n; see also Smith 1976, I.iii.2, 31; Anderson 1777, 12-15). Defoe, an enthusiastic prophet of early capitalism, noted that despite the unfavorable environment, the people of the rugged Scottish Highlands could provision themselves with remarkable ease. In his words, "Their employment is chiefly hunting. . . . however mountainous and wild the country appeared, the people were extremely well furnished with provisions" (Defoe 1724-26, 664-67 ). He specifically mentioned the availability of venison and salmon.

Before the union with England in 1707, clan chiefs ruled the Highlands. The lairds received goods in kind, as well as military service from their people. Custom fixed rents at a nominal sum or a lamb or sheep (Smith 1976, III.iv.6, 414). Here is James Anderson's (1777, 12) portrayal of this society:

Accustomed to an almost independent sovereignty, the chieftains, till of late, lived each in the midst of his own people, and shared with them the produce that his demesnes afforded. Ignorant of the luxuries that commerce had introduced into the other parts of the island, they lived contented with their own homely fare. . . . This naturally produced a kind of warmth of attachment between the vassal and his chief, that is almost entirely unknown in every other stage in the progress of civil society.

Adam Smith (1976, III.iv.11, 419; see also 1978, 202, 248) suggested a more material basis for this pattern of social relations: "In a country where there is no foreign commerce, nor any of the finer manufactures, a man of ten thousand a year cannot well employ his revenue in any other way than in maintaining, perhaps, a thousand families, who are all necessarily at his command."

After the union with Britain, the lairds appreciated that access to the lucrative English market allowed a dramatic rise in the value of cattle, their chief produce (Smith 1976, I.xi.b.8, 165; I.x.1.2, 237-8; Ommer 1986). According to Adam Smith (1976, 1.xi.1.3, 239-40), "Of all the commercial advantages, however, which Scotland has derived from the Union with England, this rise in the price of cattle is, perhaps, the greatest. It has not only raised the value of all highland estates, but it has perhaps been the principle cause of the improvement of the low country."

As new opportunities for profit emerged, some lairds started to shift their reference point from the self-sufficient clan economy to the world of the Lowlands and English aristocracy (Ommer 1986). A hunger for money set in (see Smith 1978, 262; see also S. Johnson 1774, 85, 94). Thomas Selkirk (1805, 12) aptly commented on this relationship:

By allowing his tenants to posses their farms at low rents, he secured their services whenever required, and, by the power of removing any one who was refractory, maintained over them the authority of a monarch. The sacrifice of pecuniary interest was of inferior importance The Highland gentlemen appear to have been so anxious on this subject that they never ventured to raise their rents.

The final defeat of Scottish hopes for independence from Britain at the Battle of Culloden (1745) put an end to the remains of traditional economic structure. James Anderson (1777, 13) explained:

As the government, for wise reasons, found it necessary to deprive the chieftains of that power and authority, . . . many of these, who still remained in the country, finding their authority curtailed, and becoming gradually acquainted with the pleasures of a civilized life, grew less and less fond of that kind of life they had formerly been accustomed to.

Once the union became an accepted fact, the chiefs had little need for the military services of the clan members. This situation offered a pretext for the conversion of the traditional feudal system of land tenure. The lairds ceased to be the head of a traditional feudal society. Instead, they became landlords who saw their land as a source of monetary rent (ibid., 12-14). ln the words of Samuel Johnson (1774, 89), "Their chiefs being now deprived of their jurisdiction . . . gradually degenerate from patriarchal rulers to rapacious landlords." As a result, during the third quarter of the nineteenth century, Highland rents quadrupled (see Johnson 1775, 38).

Similarly, Benjamin Franklin (1959, 20:523) noted in 1773, "It seems that some of the Scottish Chiefs, who delight no longer to live upon their Estates . . . chuse rather a Life of Luxury . . . , have lately raised their Rents most grievously to support the Expense."

Despite their increased income, the lairds still fell deeply into debt. J. H. Grey Graham (1937, 29) observed, "It was a tradition that in the days of the Scots Parliament . . . , when the sessions closed, the Cannongate jail was crowded with peers, whom their creditors could seize the moment their period of immunity ceased." Adam Smith's (1976, III.iv.10, 419; see also Carter 1980, 384) contemptuous reference to an effete nobility purchasing a diamond buckle for an amount that could maintain a thousand men was symptomatic of the changes that were occurring.

In some ways, we could compare the Scotland of Steuart's day to ancient Athens while it was transforming itself from a tribal to a civil society. Like Athens, Scotland became a center of intellectual ferment, enjoying what was perhaps the most advanced university system in the world. Likewise, it was to fall victim to the superior military might of a neighbor. Nonetheless, Steuart, as we shall see, identified with Sparta rather than Athens.

Primitive Accumulation in Scotland

To satisfy their newfound lust for luxuries, the lairds cast aside their traditional obligations to the community. Even though originally they only held their land as leader of a clan, they laid claim to clan land as their personal property. Based on questionable property rights, they threw large numbers of people off the land in the name of agricultural improvements. Indeed, the first lairds who turned to raising sheep on this land profited handsomely (Selkirk 1805, 32).

This confiscation of clan property was one of the most dramatic examples of primitive accumulation. Benjamin Franklin (1959-, 20:523; see also S. Johnson 1775, 38) cited an issue of the Edinburgh Courant in 1773, which claimed that 1,500 people had emigrated from Sutherlandshire in the space of two years. Many years later, between 18 14 and 1820, a descendant of Steuart's wife's cousin, the duchess of Sutherland, took vigorous measures to evict another 15,000 inhabitants. According to Marx's (1977, 891-92; see also Smout 1969, 353-54; Ross 1973, 182-93) description of the event:

All their villages were destroyed and burnt, all their fields turned to pasturage. British soldiers enforced this mass of evictions, and came to blows with the inhabitants. One old woman was burnt to death in the flames of her hut she refused to leave. It was in this manner that this fine lady appropriated 794,000 acres of land which belonged to the clan since time immemorial. ... By 1825, the 15,000 Gaels had been replaced by 131,000 sheep.

Although this particular method of eviction might seem overly harsh, we should note that landlords recently applied it to their tenants in India (see Perelman 1977, 149).

Lest our sympathies for the disposed divert our attention too far afield, we should take note that Jean Charles Leonard de Sismondi (1827, 52; see also Ross 1973, 242) reported a few years later that the unfortunate proprietor of the estate had been extremely anxious about the precarious state of her fortunes at the time. Incidentally, Marx (1853a, 491) incorrectly enlisted Steuart in condemning these clearings in his New York Tribune article by means of a rare misquotation, where he cited Steuart to the effect that "a plot of land in the highlands of Scotland feeds ten times more people than a farm of the same extent in the richest provinces." Steuart (1767, 1:137) had actually written "value" where Marx cited the word "extent."

Enclosures and clearings, such as the Sutherland affair, might appear to be conducive to progress in the long run, but their immediate effect was devastating to the people who were uprooted in the process of primitive accumulation. Even the purported long-term benefits are somewhat dubious. Recall that the increase in pasturage was followed by an expansion in deer parks (see chapter 3).

The lairds also had political motives for removing people. After all, the peasants were fierce warriors, who expected the lairds to respect traditional rights. In his travel report on Scotland, Samuel Johnson (1774, 97) cynically remarked that "to hinder insurrection, by driving away the people, and to govern peaceably, by having no subjects, is an expedient that argues no profundity of politicks."

Others took a more charitable view of the massive primitive accumulation that was occurring in Scotland. For example, Thomas Pennant (1772, 145; 1774, 145) rhapsodized: "Let a veil be flung over a few excesses consequential to a day of so much benefit to united kingdoms. . . . The Halcyon days are near at hand: oppression will beget depopulation, and depopulation will give us dear-bought tranquility." Years later, the kindly Nassau W. Senior (1868, 282; also cited in Marx 1977, 892) wrote of the work of the duchess of Sutherland as "one of the most beneficent clearings since the memory of man." No wonder the classical political economists could lay claim to the virtue of humanitarianism.

These forced migrations following the first Jacobite rebellion, as well as the Battle of Culloden, resulted in concentrations of propertyless people available for employment. The lairds were anxious to turn this situation to their own advantage. The most important employment for these displaced people was the labor-intensive business of gathering kelp (Gray 1951; Carter 1980, 372; Smith 1976, I.xi.a.2, i6o ; Matsukawa 1965), an industry employing as many as 50,000 people (see Ross 1973, 230).

The kelp industry was strategically placed during the early years of the industrial revolution (see B. Thomas 1980, 7). This primitive industry provided the alkali needed for the dynamic textile industry. Without kelp, scarce timber would have been burned for potash (Smith 1776, 1.xi.a.3, 161).

All of the elements of a capitalist development seemed to be in place. Unfortunately, manufacturing did not take a firm hold in Scotland. English competition swamped the fine Scottish woolen industry, as well as most other manufactures (Campbell 1953, 12). Scottish prosperity did not extend much beyond Glasgow, which benefited from the extension of the Navigation Acts to Scotland rather than from an indigenous economic development (ibid., 12; Devine 1976).  

In short, depopulation of the Scottish countryside led to a future of poverty for the kelp gatherers alongside the prosperity of the emerging capitalist potentates. As Thomas Pennant (1771, 180; see also Boswell 1799, 5:221) commented, "The great men begin at the wrong end, with squeezing the bag, before they have helped the poor tenant to fill it, by the introduction of manufactures."

Steuart's Scotland

Sir James Steuart was well suited to serve as the leading theoretician of Scottish development. His family was highly placed. One grandfather was Lord Provost of Edinburgh. His father led an erratic career, compromised by involvements in Scottish conspiratorial politics; nonetheless, he eventually won appointment as Solicitor-General of Scotland.

He personally embodied the conflict between the traditional economy of the household and capitalist development. Moreover, he displayed a rare "sense of the historical differences in modes of production," a gift perhaps belonging to no other classical political economist except Richard Jones (Marx 1963-71, pt. 3, 399). Elsewhere, Marx (ibid., 43) expanded on this aspect of Steuart's importance:

His service to the theory of capital is that he shows how the process of separation takes place between the conditions of production, as the property of a definite class, and labour-power. He gives a great deal of attention to this genesis of capital— without as yet seeing it directly as the genesis of capital, although he sees it as a condition for largescale industry. He examines the process particularly in agriculture: and he rightly considers that manufacturing industry proper only came into being through this process of separation in agriculture. In Adam Smith's writings this process of separation is assumed to be already completed.

Keith Tribe (1978, 88, 94) wrongly ascribed a precommercial understanding of economics to Steuart. True, he stood with one foot firmly planted in the old way of life (see Marx 1974, 83-84). Steuart's native Lanarkshire, although not far from Edinburgh or Glasgow, was surrounded by "the wildest country" that Defoe (1724-1726, 617) saw during his tour of Scotland.

Steuart, however, had his other foot tentatively pawing at the new modes of existence. We have already discussed the evictions that took place in this very region. In fact, Steuart displayed a keen sense of the nature of a market economy. He was not only connected with traditional Scottish society; he also had the opportunity to witness the unfolding of capitalist development from the vantage point of the Scottish Highlands. He also had personal ties with recent capitalistic developments. For example, his own mother, supposedly "for the sake of finding employment to her mind, had taken coal work" (Kippis 1842, 282).

Steuart also had the advantage of extensive travels. In his youth, he had compromised himself by his involvement in Jacobite conspiracies leading up to the battle of Culloden. As a result, he was forced to spend fourteen years in exile on the Continent. Such experience can be invaluable to perceptive economists. Petty's work certainly benefited from his years in Holland and Ireland. Similarly, Cantillon profited from his firsthand knowledge of the difference between Ireland and France.

Steuart himself appreciated that the practical information that he garnered during his years away from Scotland gave him an advantage in comprehending his native economy. In the dedication to his handwritten manuscript of his Principles in 1759, he wrote, "The best method I have found to maintain a just balance . . . has been, in discussing general points, to keep my eye off the country I inhabit at the time, and to compare the absent with the absent" (cited in Chamley 1965, 137). By availing himself of this method, even before his return to the British Isles, he was able to anticipate the exceptional nature of what was occurring in his native Scotland.

Intellectual Roots

Andrew Skinner (1966, xxxvii) believes that Steuart drew heavily from Mirabeau's Friend of the People (1756), whereas Paul Chamley (1965, 768 1 ) suggests the flow of ideas may well have gone in the other direction. A third possibility does present itself. The books of both Steuart and Mirabeau bear striking similarity to the work of Richard Cantillon. Steuart's connection with Cantillon was indirect. True, he twice cited the English version of a work published under the name Philip Cantillon (Steuart 1767, 2:22, 67), but in the first book of his, Principles, already completed by 1 75 9, the same year that Philip Cantillon's work appeared, the parallels with Cantillon were more pronounced. Yet there, Richard Cantillon was not cited.

Steuart may have had privileged access to Cantillon's work prior to its publication, although I can only speculate. We do know that he dedicated the 1759 handwritten version of his Principles to Lady Mary Wortley Montagu (1689-1732), whom Steuart had met in Venice the previous year (Chalmers 1805, 372). This brilliant English woman of letters was often immersed in scandals that were not always literary in nature (see Halsband 1956, 268-79).

This very same Lady Mary Wortley Montagu had become, a quarter century earlier, the close friend of Mary Anne Mahoney, the wife of Richard Cantillon (see Montague 1966-67, 2:25, 29). She wrote to her sister that Cantillon's wife "eclipses most of our London beauties" (ibid., 25). In 1 74 1, she seems to have been referring to Cantillon as "one of the prettiest men I ever saw in any country" in writing of an affair between Cantillon and the wife of the British consul in Naples, where she was staying (ibid., 213). Almost two decades later, while taking a deep interest in the work of Steuart, she may have called Cantillon's book to the attention of her protege in case that he himself had not already been familiar with the theories of that most important earlier, peripatetic economist.

Although Steuart depended less on the printed word than did Adam Smith, he did seem to make some use of his predecessors. Steuart wrote extensive notes on Hume's History, and sent the Principles to Hume for comments before publishing it (Skinner 1966, xlv). Another possible influence on Steuart was Robert Wallace's A Dissertation on the Numbers of Mankind, published in 1753, the year after Hume, in his Political Discourses, challenged Wallace to publish it (see Hume 1752b, 379; Hume to Montesquieu, June 1753; cited in Rotwein 1955, 184).

Steuart's work also bore some resemblance to that of James Harrington (on Harrington, see Hill 1964; Macpherson 1962). Like Steuart, Harrington opposed smallholders, called for high rents to stimulate labor, and attempted to calculate an appropriate balance among classes in which the nobility was to oversee agriculture and bear arms (see Macpherson 1962, 187, 178-79).

Steuart's Call for an Agrarian Transformation

Steuart clearly recognized the advantages for the gentry in moving with the times, accepting that the future lay in capitalism. He assumed that the nobility would not support themselves by trading. To begin with, they lacked the requisite funds (Steuart 1767, 1:84). More important, to sink to the status of a mere shopkeeper was unthinkable. The proper course for them was to establish themselves as prosperous capitalist farmers.

In a letter of 14 October 1777, he described this outcome in language that could have come from Adam Smith:

The allurement of gain will soon engage everyone to pursue that branch of industry which succeeds best in his hands. By these means many will follow manufactures and abandon agriculture,others will prosecute their manufactures in the country, and avail themselves at the same time of portions of land, proper for gardens, grass for cows, and even for producing certain kinds of fruit necessary for their own maintenance, (cited in Chamley 1965, 87]

Steuart himself appears to have been adept at the new husbandry (Chalmers 1805, 377; Campbell 1953, 25-26). In the words of one contemporary report on his agricultural practices, "No person who is acquainted with Sir James Stewart [sic], but must admire his genius and zeal to promote agriculture" (Wight 1778-1784, 3:544-46). Agricultural successes such as his, however, generally necessitated costly victories over the rights of tenants.

Steuart's proposition that the gentry engage in capitalist farming represented a clarion call to break with tradition by separating large numbers of such people from their means of subsistence. In the process, the farmers would no longer be limited to the customary rents. Steuart (1769, 286) acknowledged that "raising . . . rents was thought [by some] to be robbing the present possessor," but he came out squarely in favor of the new husbandry by virtue of its ability to raise rents (ibid., 2,8/ff.; Steuart 1767, i:28off.). In this sense, we may judge the new husbandry to have been most successful.

Steuart (1767, 1:204; see aiso l: 55) justified higher rents because "the surplus of the farmers . . . goes for the subsistence of others," adding, "The surplus I show to be the same thing with the value of rents." Higher rents would also serve to drive those remaining on the land to intensify agricultural production. As a result of such "silent compulsion," market forces would compel them to specialize in the production of commodities for the market, rather than continuing to produce so many goods as pure use values.

Steuart's position about rents is reminiscent of the Physiocratic school, but with a significant difference. In spite of the relatively extensive nature of the new husbandry that the Physiocrats proposed, they could suggest that the commercialization of farming would increase the supply of food on account of the large tracts of unused land in France, even though they ultimately rested their case on the net rather than the gross output.

Steuart made no such claim. Instead, he identified the march of progress with the replacement of cropland by pasture. In fact, he openly admitted that the mass of food produced would fall with the changes he recommended (Steuart 1767, 1:282; see also Malthus 1976, 106-7). The advantage of the extension of pasture was that it could increase the surplus (ibid., 1:5 5 ff.). When the crops had grown on the land, the people who grew them consumed a significant proportion of the harvest. Pastures require a minimum of labor, thereby leaving almost all the proceeds of the land to its owner.

Steuart versus Traditional Producers

The connection between the creation of a widespread wage-labor relationship and the social division of labor was essential to Steuart. He had no doubts that his plans required the destruction of traditional agriculture. In this respect, Steuart displayed one of his numerous affinities with the Physiocrats (see Weulersse 1910, 2:697). Well before he had begun the formal study of political economy in 1737, he expressed deep concern in a letter about "the laziness of the people," such as the peasants he saw in Spain (cited in Chamley 1965, 127).

Steuart did not even seem to think the self-sufficient peasant worthy of working unimproved land. He asked his readers, "How can extended tracts of bare land be improved, but by subdividing them into small lots of about ten, fifteen or twenty acres, and letting them to those who make their livelihood (by doing) . . . things for hire" (Steuart 1769, 328). He considered it to be "evident" that these lands would be so finely subdivided that it "is in no way sufficient to enable the possessors to maintain themselves, and pay their rents out of the product. The land will contribute towards maintaining themselves and their family; their industry must support their family and pay the rent" (ibid.).

As far as Steuart (1767, 1:111) was concerned, the mode of existence of the traditional agriculturalist was appropriate only for "rude and uncivilized societies." So long as they had been free to live off the spontaneous fruits of the earth, they could content themselves with a few wants and much idleness (ibid., 1:48, 62).  

Thus Steuart (ibid., 1:65, 77; see also Marx 1977, 649) called for the "separation between parent earth and her laborious children" in order that they no longer be "suckle[d] in idleness." Otherwise, "who will increase his labour, voluntarily, in order to feed people who do not work for himself?" (Steuart 1767, 2:174). According to him, "Any person who could calculate his labours in agriculture purely for subsistence, would find abundance of idle hours. But the question is, whether in good economy such a person would not be better employed in providing nourishment for others, than in providing for other wants" (ibid., 1 : 1 1 0; see also Weulersse 1910, 1:687). As a result, the lives of rural workers had to be turned to purposes not of their own choosing.

Steuart's program owed not a little to Hume (i752d, 256-57), who had called for the employment of "superfluous hands" as soldiers to extend the power of the state. Taking his cue from his countryman, Hume, and consistent with Turgot and the Physiocrats, Steuart joined in the call for the elimination of the "free hands" who resided on the land. W. Arthur Lewis recently made this interpretation of rural development fashionable once again (1954).

These superfluous workers represented a substantial "burden on the husbandman" for Steuart (1767, 1:40, 43; see also Hume 1752d, 260-61; Turgot 1766, pars. 4, 8; Weulersse 1910, 1:350; Quesnay 1758, vi). Elsewhere, he categorized these same people as nothing more than "superfluous mouths" (Steuart 1767, 1:58, 198, 304). Steuart even went so far as to state that insofar as a person exercised the art of agriculture, "as a direct means of subsisting . . . , the state would lose nothing though [he] . . . and his land were both swallowed up by an earthquake" (1767,1:116; see also 4:314).

In the absence of an earthquake, what would come of the people who would be uprooted from the land? In answering this question, Steuart developed the most sophisticated analysis of primitive accumulation in the entire literature of political economy.

Steuart's Rhetoric of Primitive Accumulation

Steuart (ibid., 2:23) fretted that masses of people detached from the land could pose a serious political threat, given that capitalism threatened to unleash the dread forces of democracy. The danger was all the more troubling because the majority of people considered the property of the lairds to be illegitimate.

Steuart (ibid., 1 :98) believed the poor to be incapable of self-government, tracing the "principle cause of decay in modern states [to] . . . liberty" (ibid., 93). He asserted that the Spartan republic of Lycurgus offered "the most perfect plan of political economy" (ibid., 332; see also Hume i752d, 25758). At one point, he even seemed to have been comparing himself with Lycurgus, referring to him as "a profound politician, who had travelled over the world with a previous intention to explore the mysteries of the science of government" (ibid., 334).

Steuart's affection for a slave society may shock modern readers, but his sentiments were more common when he was writing. As religion had lost its appeal in some circles, many writers used Sparta as a convenient image for community. For example, Samuel Adams envisioned America's future as a "Christian Sparta" (cited in McCoy 1982, 52).

The frequent admiration of Sparta owed much to Jean-Jacques Rousseau, who emphasized Sparta's collectivism and antipathy to trade (see Therborn 1976, 119-24). Praise of Sparta became a common characteristic of the tradition of civic humanism, which held that property was important because it allowed the possessor the independence to exercise civic virtue (see Pocock 1985a, 115; 1982, 92). In this vein, Goran Therborn (1976, 122) remarked:

The Enlightenment was strongly attracted by tradition and by collectivist traditions at that. It turned to an antique-pagan heritage, instead of a medieval-christian heritage. . . . The austere public virtues of Sparta, the Roman Republic, and even the Roman Empire at its zenith, were the social ideals of many of the philosophes, not a freewheeling individualism. Rousseau admired Sparta and in the Discourse on Inequality, the Spartan lawgiver Lycurgus is presented as the model of a revolutionary politician.

A number of Scottish writers portrayed Sparta in a positive light, including Adam Smith's "never to be forgotten Dr. Hutcheson" (cited in Mossner and Ross 1977, 309), in his chapter "Of the Nature of Civil Laws and their Execution," commended Lycurgus to modern legislators (Hutcheson 1755, 2:310).

What made Steuart's use of Sparta unique was not his approval of totalitarian methods, but his straightforward recognition that these methods could be used to further capitalist development. He admitted the futility of his hope of re-creating a Spartan republic based on slave labor supporting a commercial society of frugal warriors.

The Slavery of the Market

While Steuart (1767, 1:51) taught that slavery was a "violent method (for) making men laborous in raising food," he understood that the market, properly arranged, could accomplish the same objectives that Spartan slavery promised. In the past, he argued, "men were . . . forced to labour because they were slaves to others,men are now forced to labour because they are slaves to their own wants" (ibid., 1:52).  

What did Steuart mean by "wants"? He wrote, "Those who become servants for the sake of food, will soon become slaves" (ibid., 1:28). Thus although wage earners, unlike slaves, are formally free, Steuart understood that workers would be subject to an increasingly strict discipline. In this sense, capitalism seemed to be the next best alternative to a slave society.

Although no other classical political economist would have been so blunt, this idea was not unique to Steuart. For example, Mirabeau, whose work differed from that of Steuart in many respects (see Chamley 1965, 73 ff.), exclaimed, "The whole magic of [a] well-ordered society is that each man works for others, while believing that he is working for himself" (Mirabeau's Philosophie Rurale-, cited in Meek 1963, 70). Cantillon's analysis of how feudalism and the market could lead to the same outcome offered an even closer parallel.

Not unexpectedly, Steuart's insensitive language did not win much acceptance. For example, one reviewer took Steuart to task on this point:

In plain English, that by one way or another, men are made slaves by statesmen, in order that the useful may feed the useless. This is, indeed, the present state of what is called liberty in England. But, in fact, they are not made slaves to their passions and desires, for that is common to all men. It is the hard hand of necessity at present, like that of the taskmasters in preceding times, which compels them to work. The hired husbandman has, indeed, one passion that engages him to become a slave, and to labour; it is the goading dread of starving that enslaves him, and urges him to toil without desire. (Reviewers 1767, 127)

This review should not be read as a refutation of Steuart, but as a clarification. Certainly, the reviewer's semantics, referring to hunger and poverty instead of wants, is more informative than Steuart's. Nonetheless, Steuart's presentation has the merit of reminding us of the power of the silent compulsion of the market.

Steuart (1767, 2:217) realized that the market had many advantages over the crude Spartan system, but he also understood that it could run amok. In his words, "The Lacedemonian form may be compared to the wedge. . . . Those of the modern states to watches, which are continually going wrong."

As a result, Steuart looked to a statesman to guide the system. This perspective led him to focus his attention on one overriding question: How were wants to be structured so that they would effectively enslave people?

Here we come to the heart of Steuart's work. Steuart found himself in a land where labor had not yet been fully subjugated to the needs of capital. His agricultural experience was well suited to equip him to become the theorist par excellence of primitive accumulation. He knew that the traditional Highlanders had wants, but they were not yet "slaves" to them in the sense that Steuart used the term. In responding to this situation, Steuart went further than any other classical political economist in trying to develop a program to integrate the traditional sector into the economy.

Steuart and The Organizing of Economic Development

Steuart (ibid., 2:80) clearly connected his desire to purge the land of free hands, as well as his antagonism toward subsistence farming, with the rise of commodity production: "Now the frequent sale of articles of the first necessity makes a distribution of inhabitants into labourers, and what we have called 'free hands.' The first are those who produce the necessaries of life; the last are those who buy them." Steuart realized that merely throwing people off the land would not necessarily lay the path for a smooth transition to capitalist social relations. He recognized the complexity of the underlying dynamic of primitive accumulation, along with the need to be specific about the nature of this momentous transformation.

Unlike other classical political economists, Steuart stressed that one cannot overlook the tempo at which changes are introduced. What may be disastrous when suddenly introduced might well be beneficial if it could be accomplished more slowly (ibid., 1:160-61, 284, chap. 19). In Steuart's words, "Sudden revolutions are constantly hurtful, and a good statesman ought to lay down his plan for arriving at perfection by gradual steps" (ibid., 1:1 11). The recent experience of the countries of the former Soviet Union also suggests how difficult the sudden transition to capitalism can be.

In particular, primitive accumulation required much caution. With this thought in mind, Steuart cautioned (ibid., 1:175), "A young horse is to be caressed when a saddle is put upon his back." For this reason, he called for the gradual conversion of cornfields into pasture (ibid., 1:181). Unfortunately, many modern economists, even with the benefit of hindsight, have failed to take the tempo of their project into account in confidently dismantling traditional agricultural systems around the world. In addition, some of the advisors of post-Soviet Russia could have benefited from looking at the dusty volumes that Steuart wrote.

A second consideration was more substantial. Steuart knew full well that although the Scottish gentry was able to throw masses of people off the land, eviction alone was not sufficient to force people into wage labor. Time and time again, Steuart (ibid., 1:8, 29, 237) repeated that the crux of his investigation was to discover how people came to submit voluntarily to authority. In a capitalist society, submission implied the acceptance of the wage relationship.

A third concern was closely related to the second. How could the first capitalist firm, say a shoe factory, emerge out of a noncapitalist economy? Since the factory would presumably be the first capitalist institution in the economy, the workers there could not exchange their wages to obtain the goods that they customarily consumed, except for shoes. The workers could use some of their earnings to purchase shoes, but in order to be a productive operation, the owners of the factory would have to ensure that the workers would be able to produce more shoes than they could afford to purchase with their wages.

Moreover, the workers have other needs besides shoes, even though no other commodity -producing firms are selling the goods that the workers in the shoe factory might want to purchase. Consequently, the shoe factory presumes the existence of other entities manufacturing consumer goods for sale. This phenomenon was doubly important in eighteenth-century England, where the absence of coin of small denomination led to the common practice of paying workers with a share of their product, which they then had to market on their own.

How, then, would the first factory come into existence? Paul Rosenstein-Rodan (1943; see also Hume 175 2d, 260-61), writing in the midst of the devastation of World War II, brought this question to modern economists while wondering about the possibility of the re-creation of a market in war-ravaged southern and eastern Europe. Nurkse (1953) later associated the solution to this problem, which he termed, the "big push," with the Smithian tradition, but it is the very antithesis of Smith's project.

We already alluded to Adam Smith's basic answer, which we shall examine in more detail (see chapter 10). According to Smith, the first institutions were not large factories, but the works of small artisans who gradually increased the scale of their operations. Unfortunately, Smith's approach does not shed any light on the process by which the artisans became wage laborers— a central concern of Steuart and the rest of the classical political economists.
admin
Site Admin
 
Posts: 27268
Joined: Thu Aug 01, 2013 5:21 am

Re: The Invention of Capitalism: Classical Political Economy

Postby admin » Tue Feb 20, 2018 8:10 am

Part 2 of 2

Steuart's Construction of the Social Division of Labor

Steuart (1767, 2:157) explicitly stated that the "object of our enquiry hitherto has been to discover the method of engaging a free people to concur in the advancement of one and the other, as a means of making their society live in ease, by reciprocally contributing to the relief of each others' wants." Politics, for Steuart, rather than the market, was the fundamental determinant of the social division of labor during the initial stages of capitalist development. Specifically, Steuart called upon the state to guarantee an appropriate social division of labor:

I conclude, that the best way of binding a free society together is by multiplying reciprocal obligations and creating a general dependence between its members. This cannot be better affected, than by appropriating a certain number of the inhabitants, for the production of food required by all, and by distributing the remainder into proper classes for supplying every other want. . . .

Steuart assumed that statesmen, whom he credited with enormous powers, would be capable of manipulating the people to create reciprocity. In his words:

Nothing is impossible to an able statesman. When a people can be engaged to murder their wives and children, and to burn themselves, rather than submit to a foreign enemy,when they can be brought to give their most precious effects, their ornaments of gold and silver, for the support of a common cause; ... I think I may say, that by properly conducting and managing the spirit of a people, nothing is impossible to be accomplished, (ibid., 1:15)

If people could be moved so far to support precapitalist ends, why should the capitalist statesman be less able to direct society? Presumably, the creation of a social division of labor should not raise serious difficulties for capable leaders.

Steuart expected the statesman "to lay down his plan of political economy, and chalk out a distribution of its inhabitants" (ibid., 2:175). Elsewhere he was more specific, calling upon the statesman to "regulate the distribution of . . . classes of his people" (ibid., 2:17). He stressed the importance of this objective (ibid., 1:46).

Steuart frequently returned to the theme of the need to create an appropriate social division of labor in order to ensure a proper structuring of reciprocal wants (see ibid., 1:3, 20, 33, 46, 86, 211, 316; 2:158).

In developing the social division of labor, Steuart called upon his statesman to act "with an impartial hand" (ibid., 2:183), perhaps alluding to the famous impartial spectator of Adam Smith's Theory of Moral Sentiments (e.g., Smith 1759, 26).

Steuart even expressed some humanistic concerns. For example, he opposed "excessive misery among the poor" (1767, 1:277). His standards of humanism, however, were not excessively high. For example, he believed that a proper wage could be calculated from the expense accounts of hospitals and workhouses, which were hardly seats of opulence (ibid., 1:415).  

But then Steuart also recognized the need to restrain his humanistic impulses: "I am very far from wishing to see any industrious person in distress for want of food. . . . But I think . . . that the more soberly our lowest classes are made to live at all times, the cheaper may our manufactures be sold" (ibid., 2:210). In this spirit, he recommended:

If the luxurious taste and wealth of the country prevent any one who can do better, from betaking himself to a species of industry lucrative to the nation, but ungrateful to those who exercise it, the statesman must collect the children of the wretched into workhouses, and breed them to this employment, under the best regulations possible for saving every article of unnecessary expence [sic], (ibid., 1:379, 9 8 ) Steuart's proposal may suggest a deeper meaning to the term "infant industries." One can only guess at the expected fate of the poor without the protective measures advocated by Steuart. In short, he supported enslavement without slavery.

For Steuart, the statesman also had an obligation to restrict profits from rising above a certain standard (ibid., 2:185). However, he sounded substantially more emphatic when he turned to this subject, warning that "when a statesman looks coolly on, with his arms across, or takes it into his head, that it is not his business to interpose, the prices of the dexterous workman will rise" (ibid., 1:314).

Steuart and The Dialectics of Household Production

Steuart was the only classical economist to express clearly the dialectical nature of the household economy. Toward this end, he crafted a rich theory of the dialectical role of self-provisioning in the course of economic development. In the process, he provided the outlines of a program to modify the condition of labor. His intention was that more and more people would have no choice but to accept wage labor. In Marx's words, workers would be "powerless as an independent force, that is to say, [they would be unable to exist] outside of this capitalist relationship" (1963-1971, 391).

Steuart (1767, 1:29, 8, 62) ultimately wanted to restrict the masses' access to their traditional means of subsistence in order to ensure their "voluntary subordination," but as we already noted, he understood that this transformation of the populace would have to occur over an extended period of time.

At times, Steuart saw the same problem from the perspective of food prices. He realized that when food is too expensive, wages have to increase to permit subsistence. He also recognized that self-provisioning would lead to a lower price of grain (ibid., 2:89-99). As a result, employers could hold down the wage rate and enjoy a higher rate of surplus value (ibid., 1:197, 304)Recall that many mercantilists, and even David Hume, suggested that when food is too cheap, even those people without access to any substantial degree of self -provisioning, will not feel as much compulsion to labor (see chapter 5 ).

Steuart saw that low food prices did not represent a serious threat to employers in Scotland, since the economic situation of the people who had been displaced from their land was so dire. For example, Steuart estimated the wage rate of a day laborer according to the cost of grain required for subsistence. He found that spinners required two days' wages to nourish themselves for a single day (ibid., 1:304; see also Smith 1776, I.x.b., 134).

According to Steuart, this enforced poverty was certain to have a wholesome effect on labor. He was confident that leisure would be restricted (Steuart 1767, 1:35; see also Pollard 1978, 144) and labor would become more intense (Steuart 1767, 1:139; 2:176). Specifically, he expected that once workers cease the production of a diverse set of use values, a regime of "good economy" would commence.

Otherwise, how could a family survive? Assuming that the typical worker had a vegetable garden and potato patch in addition to a cow, selfprovisioning could help feed the family. Steuart (1769, 291-92) expected that the meager earnings of the wife's spinning would be sufficient to meet all other expenses.

In short, Steuart's hostility to the household economy was conditional, since he recognized its value as a prop to the early capitalist accumulation process. Recall his plan to throw small farmers off the land only after they had improved barren holdings (Steuart 1767, 1:112-13; see also 1769, 328). For Steuart, in the stage of emergent capitalist development, a cottage industry supported by a high degree of self -provisioning was the preferred course, so long as the changes were not overly abrupt. The sort of putting-out system that Steuart recommended, developing in tandem with the strong household economy, could allow business to begin with a minimum of investment in plant and equipment. As Steuart (1767, 1:395) maintained, "People . . . must glean before they can expect to reap."

Steuart anticipated that the market would be especially effective in mobilizing the labor of children as capitalist social relations began to gel. In a market economy, children would no longer dissipate their time on such relatively unproductive chores as the herding of a few geese. Along with women, they would be set to work spinning (ibid., 1:136-38).

Once capitalist relations would take hold, Steuart expected that the economy would prosper because of gains in efficiency, as well as the increased efforts of the workers. He predicted that the typical farm would come to be regulated by a precise economy: "Cattle consume the exact quantity of grain and forage necessary; what remains is money; a superfluous egg is money; a superfluous day of cart, of a horse, a superfluous hour of a farmer is all money to the farmer" (ibid., 1:72).

In an apparent anticipation of the modern economic theory of labor (Schultz 1968), Steuart recognized that with development, "Time becomes more precious" (1767, 1:230; see also 303ff.), although he gave no indication that the working people would ever enjoy any benefits from the increasing value of their productivity. Eventually, the working class was expected to develop that most wonderful of all qualities, "a taste for labour" (ibid., 1 :200, 202)— all as a result of a well-designed market.

According to Steuart's vision, this transformation would set in motion a broad process of capital accumulation. Over time, the variable capital per worker would increase with the subsidence of the household sector. The increasing mass of labor, as well as its heightened productivity, was supposed to allow capitalists to pay a larger wage bill. In addition, as more commodities come on the market, the problem that Rosenstein-Rodan described would recede.

Steuart, however, did not sense the full potential of capital. Like the Physiocrats, he still saw the world from the standpoint of the profit of capitalist farmers. In addition, Steuart overestimated capital's ability to control the Scottish Highlands at the time. For example, a half century later, the agent of the duke of Sutherland, in attempting to get textile entrepreneurs to invest in factories on his employer's property, spoke honestly of the tenants: "They have all some land— labour remarkably cheap" (cited in Ross 1973, 228). Yet profit-seeking businesspeople did not stake their money on Scottish Highland labor.

Steuart's work is invaluable in understanding the early stages of capital accumulation. Certainly, the other classical political economists have little to offer in helping us understand why industry was slow to emerge in the Highlands.

The point that Robert Urquhart (1996, 403) made about Steuart's approach certainly holds for his analysis of primitive accumulation: "Steuart's distinctive significance ... is that he is the last major political economist to have a true theoretical commitment to complexity." Perhaps one of Steuart's contemporaries was able to see as far and clearly concerning the nature of early economic development as Steuart was, but if so, he covered up any evidence of that insight.

Steuart's Hostile Reception

Modern historians of political economy, a breed noted for its excellence in perusing the most obscure documents, have largely ignored Steuart. With few exceptions, such as S. R. Sen (1957), Paul Chamley (1965), Andrew Skinner (1981; 1993), and Michael Hudson (1992), scholars have scrupulously avoided the social content of Steuart's work (for a convenient bibliography of this sparse literature, see Akhtar 1979). A search of all economics journals collected in JSTOR (jstor.org) found the name Steuart mentioned a mere 83 times, compared to 1,669 for Adam Smith.

While few authors credit Steuart, many in the past have profited from his books without attribution. P. Dockes regards von Thiinen as a mere derivative of Steuart. Indeed, Steuart (1767, i:i87ff.) clearly anticipates von Thiinen in describing the economic determination of the locations of gardens and fields. Since economists sometimes credit von Thiinen with anticipating much of what became marginal analysis, conventional economic theory might well afford Steuart some of the honors usually poured on Smith for his occasional modernisms (Dockes 1969).

This neglect is astonishing considering that Steuart was the most important economist of his day. After all, he was the author of the first complete English treatise on political economy. Moreover, besides The Wealth of Nations, no other comparable works were published until Ricardo's Principles.

So why the thundering silence with respect to Steuart's achievements? In part, Steuart earned his neglect by adopting a different class perspective than most classical political economists. Unlike Adam Smith (1759, bk. 6, chap. 1), who mocked pretensions of the nobility and lauded prudence, Steuart pointed to the nobility as the appropriate source of future class leadership. For example, Steuart complained that the middle class held the nobility in contempt, except during wars. He insisted that in times of military crises, those same characteristics that impede the nobility's success in the humdrum world of bourgeois calculation suddenly become admirable (Steuart 1767, 1:83).

Steuart (ibid., 1:320) was not one to base his work on the airy fiction of a social contract. Instead, he wrote with a blunt honesty about the harsh nature of capitalist development, seeking out the real forces that impelled people to produce surplus value for others, especially the destruction of the self-sufficient household.

Whereas most of his contemporaries described historical evolution in terms of the romance of natural law, Steuart (ibid., 1:237) was willing to investigate the real forces that caused "men ... to submit to labour." His sophisticated application of the classical theory of primitive accumulation made his work an embarrassment to the mainstream political economists who pretended that capitalist development was a voluntary affair. In this respect, he was far more truthful than the rest of the classical political economists combined.

From the first, Steuart understood the uniqueness of his efforts. He observed:

No problems of political economy seem more obscure than those which influence the multiplication of the human species, and which determine the distribution and employment of them, so as best to advance the prosperity of each particular society. ... I have nowhere found these matters treated to my wish, nor have I ever been able to satisfy myself concerning them, (ibid., 1:89).

Steuart was correct. He was unique among the central figures of political economy in his emphasis on the creation of a social division of labor. Yes, Malachy Postlethwayt (17 51, 1:118) touched on the social division of labor in arguing that "prosperity of a trading nation to consist in the multiplying of the number of new trades; that is to say, in the multiplying of the different species of mechanics, artificers and manufactures," but he was a secondary figure at best.

Public acclaim eluded Steuart. Indeed, he seemed to realize that he was flying in the face of the prevailing fashion in political economy. He asked his readers, "Is it not of the greatest importance to examine with candour, the operations by which all of Europe has been engaged in a system of policy so generally declaimed against, and so contrary to that which we hear daily recommended as the best" (Steuart 1767, i:xix ; emphasis added).

Steuart recognized that he could have eliminated some of the resistance to his book by adopting a style that would "prevent certain expressions here and there interpreted, from making the slightest impression upon a reader of delicate sentiments," but: Nothing would have been so easy as to soften many passages, where the politician appears to have snatched the pen out of the hand of the private citizen; but as I write for such only who can follow a close reasoning, and attend to the general scope of the whole inquiry, I have, purposely, made no correction; but continued painting, in the strongest colours, (ibid., i:xvii)

Steuart grossly misjudged the reaction of his readers. Despite the reviewers' obvious respect for Steuart's insights, they wanted to reject his conclusions. An anonymous reviewer in Scots Magazine admitted as much. Following a Smithian line of reasoning, the reviewer argued: "It is the common interest which is properly subject to laws; while the management of the particular interest of each individual, not interfering with that of the public, ought to be left to itself" (Review 1767b, 199).

Instead, this same reviewer charged that in Steuart's work, "we behold the dismal prospect of millions enslaved for the gratification of the few" (ibid.). Yet the same reviewer could not easily dismiss him:

The observations he has made, and the intelligence he has acquired, during his residence in several parts of Europe have furnished him with the most authentic facts for the foundation of his reasoning; and a capacious philosophical genius which has been employed in producing a composition which cannot fail to be admired by all who are able to comprehend it. But whether this admiration may not, in some sort, resemble that which we bestow on a well-constructed instrument of war, calculated either to defend or to destroy, according to the hands that it falls into [is an open question], (ibid.)

This astute reviewer was indeed correct. Steuart's work was "a wellconstructed instrument of war." Neither this reviewer nor the reading public appreciated Steuart's bluntness about the role of government in stimulating economic development. Polite society preferred to pretend that economic progress was a neutral affair, guided by market forces.

Steuart's contemporary readers understood that he was a central figure. One particularly unsympathetic reviewer felt compelled to label Steuart a "penetrating genius" (Review 1767c, 125), and another still less sympathetic one termed his work "a code for future statesmen and ministers" (Review 1767a, 32). The latter of these two reviewers was typical in his attitude toward Steuart. He feigned surprise that the state had a major role in constructing the economy, claiming: "We have no idea of a statesman having any connection with the affair, and we believe that the superiority which England has at present over all the world in point of commerce is owning to her excluding statesmen from the executive part of commercial concerns" (ibid., 412). In fact, the East India Company solicited Steuart's advice and later gave him a diamond ring as a token of gratitude for his efforts (see Chalmers 1805, 381). Yet, for the most part, we hear little about Sir fames Steuart.

One puzzle remains. Why was Steuart singled out for such rough treatment when David Hume said much the same thing in his essay "Of Commerce"?  

Parallels between Hume and Steuart

Edward Gibbon once referred to David Hume as the Tacitus of Scotland (Pocock 1985, 125). Unlike Tacitus, who wrote his history of the conquest of foreign barbarians, Hume shared the nationality of the "uncivilized" peasants who fell under the heel of the modern Caesar— capital. He spoke with a broad Scottish accent, although he advised his friends to anglicize both their written and spoken language (Mossner 1954, 370-75).

Hume had the ability to write like both Steuart and Smith within the same paragraph, suggesting that the gulf between these supposedly polar opposites was not nearly as wide as it might seem. After all, in many ways, Steuart merely expressed truths that Smith preferred to shroud in silence.

Nonetheless, assessing Hume's relationship to Steuart is not a straightforward matter. Allegedly, Steuart had written the first part of his Principles by 1749, prior to the publication of Hume's famous essays. Hume did express approval of Steuart's Principles prior to its publication (Skinner 1993, 32).

Without access to the early version of Steuart's work, I am not sure how much of the similarity between Steuart and Hume is due to Hume's influence, and how much reflects their shared culture.

In his essay "Of Commerce," Hume (175 2d, 256) explained that "the bulk of every state may be divided into husbandmen and manufacturers. " He then went on, "Time and experience improve so much these arts, that the land may easily maintain a much greater of men, than those who are immediately employed in its culture, or who furnish the more necessary manufactures to such as are employed." As a result, society finds itself with "superfluous hands," who can either be used to produce luxuries or "the sovereign [may] lay claim to them, and employ them in fleets and armies, to encrease the domination of the state abroad, and spread its fame over distant nations" (ibid., 256).

Hume (ibid., 257) also observed, "A state is never greater than when all its superfluous hands are employed in the service of the public." Still, after posing the possibility of emulating Sparta, Hume (ibid., 259) concluded: "I answer, that it appears to me, almost impossible, and that because ancient policy was violent, and contrary to the more natural and usual course of things." At this point, Hume (ibid., 260-61) noted:

Where manufactures and mechanic arts are not cultivated, the bulk of the people must apply themselves to agriculture; and if their skill and industry encrease, there must be a great superfluity from their labour beyond what suffices to maintain them. They have no temptation, therefore, to encrease their skill and industry; since they cannot exchange that superfluity for any commodities, which may serve either to their pleasure or vanity. A habit of indolence naturally prevails.

Then Hume (ibid., 261) penned his famous expression: "Everything in the world is purchased by labour; and our passions are the only causes of labour."

Like so many of his day, Hume (17526, 300) taught that this passion could be turned to serve the interests of capital, suggesting: "There is no craving or demand of the human mind more constant and insatiable than that for exercize and employment; and this desire seems the foundation of most of our passions and pursuits."

Once labor is harnessed to these passions, farmers will produce a surplus, which they will then exchange for luxuries. In Hume's (1752d, 261) words: "When a nation abounds in manufactures and mechanic arts, the . . . [agricultural] superfluity, which arises from . . . labour is lost; but is exchanged with manufactures for those commodities, which men's luxury now makes them covet."

Hume's analysis of luxury differed from that of Smith. For Smith, the choice was between luxuries and goods that serve a mass market. Hume, in contrast, was concerned about putting the superfluous hands to work producing luxuries, rather than letting them fall into inactivity: "Luxury, when excessive, is the source of many ills; but is in general preferable to sloth and idleness" (ibid., 280).

Smith believed that mass production for the home market was the key to economic success, but Hume did not share that opinion. He speculated that "in most nations, foreign trade has preceded any refinement in home manufacturers, and given birth to domestic luxury" (ibid., 263).

Hume considered the same alternative with which Steuart toyed. He wrote:

The greatness of the sovereign and the happiness of the state are, in great measure, united with regard to trade and manufacturers. It is a violent method, and in most cases impracticable, to oblige the labourer to toil, in order to raise from the land more than what subsists himself and family. Furnish him with manufactures and commodities, and he will do it of himself. Afterwards you will find it easy to seize some part of his superfluous labour, and employ it in the public service, without giving him his wonted return. Being accustomed to industry, he will find this less grievous, than if, at once, you obliged him to an augmentation of labour without any reward, (ibid., 262)

All in all, the flow of ideas is remarkably similar to that of Steuart. For example, Hume expressed concern about creating the proper mix of agriculture and industry. He noted that although manufactures are advantageous, "a too great disproportion among the citizens weakens any state" (ibid., 265).

Like both Steuart and Smith, Hume (i752f, 32-33) was distrustful of the masses, yet he understood that the state depended on their acquiescence: "Nothing appears more surprizing to those, who consider human affairs with a philosophical eye, than the easiness with which the many are governed by the few. . . . [A]s force is always on the side of the governed, the governors have nothing to support them but [the] opinion [of the masses]."

Fearing the masses, Hume hoped to keep them ignorant enough to maintain their allegiance to the existing order of things. For example, in discussing the execution of Charles II in his History of England, Hume (n.d., 4:491) wrote:

If ever, on any occasion, it were laudable to conceal truth from the populace, it must be confessed that the doctrine of resistance affords such an example, and that all speculative reasoners ought to observe, with regard to this principle, the same cautious silence, which the law in every species of government have ever prescribed to themselves. Government is instituted in order to restrain the fury and injustice of the people, and is being always founded on opinion, not on force, it is dangerous to weaken, by these speculations, the reverence which the multitude owe to authority, and to instruct them beforehand that the case can ever happen when they may be freed from their duty of allegiance. Or should it be found impossible to restrain the licence of human disquisitions, it must be acknowledged that the doctrine of obedience ought alone to be inculcated and that exceptions, which are rare, ought never or seldom be mentioned in popular reasoning or discourses.

Like Steuart, Hume (1752b, 419-20) realized the necessity of creating a social division of labor in order to jumpstart capitalist accumulation, asserting: "The most natural way, surely, of encouraging husbandry, is, first, to excite other kinds of industry, and thereby afford the labourer a ready market for his commodities, and a return of such goods as may contribute to his pleasure and enjoyment. This method is infallible and universal."

Hume stood apart from Steuart in one respect: he put relatively less reliance on primitive accumulation compared to capital accumulation. In other respects, as we noted above, Hume was much closer to Steuart than to Smith, yet contemporary students of classical political economy commonly speak of Smith and Hume in the same breath, while denigrating Steuart as nothing more than a late mercantilist.

In truth, what separates Hume, Steuart, and Smith is a matter of style, not substance. Smith set out to put the best possible face on capitalist development. Steuart was more forthright and detailed in his analysis. As a result, he never received a warm reception for his efforts.

The Circumvention of Steuart

Even those who shared Steuart's views on primitive accumulation seemed to fear associating themselves with his name. For example, our old friend, the Reverend Joseph Townsend (1786, 430), whom we have already met as the "Well Wisher to Mankind," may well have been favorably referring to Steuart when he wrote that "the best politicians in Europe" agreed with his own condemnation of the poor laws. According to Townsend (ibid.), that particular "nobleman, who stands foremost among the literati in the North of Britain, has more freely and more fully delivered his opinion." Indeed, the sixth section of his book, which discussed the role of a wise legislator and the need to "confirm the natural bonds of society," sounds more than a bit like Steuart (ibid., 406 ff.).

Occasionally, published works would refer to Steuart's views on money or other matters, but those whose interest in political economy was primarily theoretical were generally silent regarding Steuart in discussing abstract matters. Take the case of Jean-Baptiste Say (1880, 206), who misspelled Steuart's name when citing him as an authority. This reference merely lumps Smith and Steuart together "in thinking, that the labour of the slave is dearer and less productive than that of the freeman" (ibid.). When dealing with more important questions, he left any debt to Steuart unacknowledged. For instance, in a chapter in his Corns Complet titled "The Influence of Social Life on the Production of Riches," Say (1843, 253-58) scrupulously avoided mention of any conflict in creating a social division of labor. In the place of primitive accumulation, Say (ibid., 233) wrote of "a concert of wills." Once the matter of primitive accumulation was put aside, Say could then address the relationship between the division of labor and the social division of labor:

I will not repeat here, Sirs, what I have said about the division of labor. . . . You have to recall that this prodigious growth of human power is principally due to the possibility of concluding exchanges. . . . The progress of industry establishes bonds, relations among men, by means of which they are at the same time each independent on his side, andyet obliged to manage himself reciprocally, (ibid., 234, 237)

Say, however, neglected to mention Steuart's name in this discussion.

Even Steuart's modern editor, a sympathetic scholar with wide-ranging knowledge of both Steuart and his milieu, departs from his usual detached attitude with respect to Steuart to insert the comment about Steuart's insights into the division of labor: "Statements of this kind are all that Steuart had to offer on the division of labour" (Steuart 1966, 1, 851n). Indeed!

Such remarks merely confirm the usual practice of relegating Steuart to the status of an obscure mercantilist. They would lead the casual reader to expect to have little to learn from what Steuart saw or said concerning the development of capital. They encourage the reader to turn from Steuart to the likes of Adam Smith, whose analysis might seem to represent a more scientific viewpoint.

Steuart and Smith

The public had to wait until almost a quarter century after Steuart's death, for a British author to offer a strongly positive opinion regarding Steuart. In a rather obscure work, Daniel Wakefield (1804, 3) judged Smith to be an "inferior copy" of Steuart, charging:

Few writers have been under equal obligations to another, as Doctor Adam Smith to Sir James Steuart, and but few have been so entirely destitute of candour and gratitude, as in no place to acknowledge the debt, or to pay a tribute to the fame of their instructor. The style of the Wealth of Nations renders the work popular, though . . . obscurity frequently supplies the place of profundity, (ibid.; see also Marx 1859, 167-68)  

Wakefield was the first of a series of writers to comment on the practice of plagiarizing Steuart, "that great master of political science, to whose invaluable work, succeeding writers have had recourse, as to the grand storehouse of knowledge" (ibid., 3).

A couple of years later, an anonymous reviewer, whom Donald Winch (1966,24-25) identified as James Mill, while praising Smith's virtues with respect to his great "mercantilist" rival, acknowledged the value of Steuart's emphasis on detail (Review 1806a, 231-32). This apparently disparaging remark bears some similarity to Marx's complementary evaluation of Steuart, to which I will turn in a moment.

Two years later, a reviewer of Steuart's collected works mentioned his writings concerning "the influence of political economy on civil government." He noted: "To this topic, also, Dr. Smith has only incidentally averted; and here, likewise, in the few observations he makes on it, we find him tread closely in the footsteps of his precursor" (Review 1806b, 115).

The next flash of recognition came from none other than Dugald Stewart, who may be best remembered as Smith's eulogist. Stewart (1855, 2:458) told his students:

With respect to national wealth, I have all along recommended, and must beg leave again to recommend, Mr. Smith's Inquiry, as the book with which the student may, with the most advantage, begin his researches on the subject; not only on account of the comprehensive outline it exhibits of its various parts, but as it is the Code which is now almost universally appealed to, over all Europe, as the highest authority which can be quoted in support of any political argument. The work of Sir James Steuart, too, besides some ingenious speculations of his own, contains a great mass of accurate details.

A few years later, Marx (1859, 167-68) also judged Smith's omission of Steuart harshly:

Adam Smith records the results of Steuart's research as dead facts. The Scottish proverb ["Mony mickles mark a muckle"] that if one has gained a little it's often easy to gain much, but the difficulty is to gain a little, has been applied by Adam Smith to intellectual wealth as well, and with meticulous care he accordingly keeps the sources secret to which he is indebted for the little and turns it into much.

Unlike Steuart, Smith wrote what the reading public wanted to find. Smith expressed trust that the market alone was capable of bringing about economic development. In contrast to Steuart, who attributed the development of reciprocal obligations to the actions of statesmen, Smith (1978, VI. 46, 348) credited this evolution to voluntary market relationships, asserting that a "bartering and trucking spirit is the cause of the separation of trades and improvements in arts."

Where Steuart credited the statesman with the power to do good, Smith's statesman was certain to do enormous harm. For Smith, the statesman was but a "crafty and insidious animal" (Smith 1976, IV.ii.39, 468). In the paragraph following his immortal metaphor of the invisible hand, Smith (ibid., IV.ii.10, 456) charged:

The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.

Of course, Steuart never suggested that his statesman determine how people should deploy their capital. His statesman was more concerned about how people without capital should be deployed. Steuart and Arthur Young

Indeed, Steuart seemed destined to appeal mostly to those whose interests were more practical than theoretical or ideological. We find one of the most remarkable echoes of Steuart is found in Arthur Young's Travels in France. In assessing the importance of Young, the longtime secretary of the British Board of Agriculture, keep in mind that almost none of the major figures of classical political economy except Steuart had much agricultural experience. The one exception to this generalization was Richard Jones, an avid gardener, whom Harriet Martineau addressed as "My dear King of Roses" (cited in R James 1979, 283), the same Richard Jones whose knowledge of growing plants supplied him with the penetrating insight with which he demolished classical rent theory.

Although Young is rarely counted among the significant classical economists, all of his contemporaries seemed ready to credit him as being a major authority on agricultural affairs. In late-eighteenth-century parliamentary debates concerning economic matters, Young's name came up far more rarely than that of Adam Smith (Kirk 1979, 5 10). In this sense, his response to Steuart represents a test of the practical value of Steuart's work by an individual who had little sympathy for matters of pure theory.

Young (1794, 366) described Steuart as "a genius of superior cast." Like Steuart, Young (ibid., 365) judged the success of an agricultural system by its contribution to the deepening of the social division of labor. After a long discussion of the subject, Young (ibid., 312) concluded: "The size of farms is most beneficial, in general, which secures the greatest produce in the market; or, in other words, converted into money"; although he later qualified this conclusion with the remark: "In the preceding observation, I have had rented farms only in view" (ibid., 315). However, Young was no great friend of self-provisioning. In a long passage that reflected the ideas of Steuart, although the latter's name was misspelled, Young (ibid., 427 I wrote:

It is a remarkable circumstance in the agriculture, or rather in the domestic economy of France, that the culture of hemp or flax, for home uses pervades every part of the kingdom. It is a curious question how far this is beneficial or not to the general interests of the national prosperity. On the one hand, in favour of this system it may be urged, that the national prosperity being nothing more than the united prosperity of single families, if any such article of economy be advantageous to individuals, it must be so to the nation at large,that it cannot fail of being beneficial to a poor man's family to have the women and children industriously employed on clothing the whole rather than forced to buy such articles at an expense of money which they may not be able to procure. By means of industry, thus exerted, a poor family is rendered as independent as its situation admits. All of them are likewise warmer, and more comfortably clothed, as far as linen is concerned, than if it were bought; for whatever demands money will be consumed with much more caution than if the result merely of labour. ... A modern society flourishes by the mutual exchange of the products of land for the manufactures of towns; a natural connection of one with another, and it may be remarked, that in proportion as the exchange is rapid from a great consumption, in such proportion will a people generally flourish. If every family in the country have a patch of flax or hemp for its own supply of all the manufactures founded on these materials, this beneficial intercourse of the country with the town, is so far cut off, and no circulation takes place. If the practice be good in flax, it is good in wool; and every family should have a sufficient number of sheep, to cloth [sic] themselves in woolens; and if every little village have its little tanner, the same supposition may be extended to leather. A patch of vines furnishes the beverage of the family,and thus, by simple domestic industry, all wants are supplied; and a poor family, as it would be improperly called, would have no occasion to resort to the market for any thing to buy. But with nothing to sell; ... [A] minute division of the soil into small properties always attacks the existence of towns, that is to say, of what Sir James Stewart [sic] calls the free hands of a society. A countryman living on his own little property with his family industriously employed in manufacturing for all their own wants, without exchange, connection, or dependence on any one, offers, indeed, a spectacle of rural comfort, but a species absolutely inconsistent with the prosperity of a modern society.

In what sense was this spectacle of rural comfort inconsistent with the prosperity of modern society? Young (ibid., 27) estimated that French agriculture was able to deliver food to market at a very low cost: "Living is reckoned cheap here. ... As I conceive the English to have made far greater advances in the useful arts, and in manufactures, than the French have done, England ought to be the cheaper country. What we meet with in France, is a cheap mode of living, which is quite another consideration." According to his detailed calculations, "The consumption of bread, and the price of labour [were] about 76 percent cheaper in France than in England" (ibid., 339-40), just as Steuart had predicted would be the case under such circumstances. The problem lay elsewhere. Primitive accumulation was a prerequisite for the development of the social relations of capitalist production.

Again, Young (ibid., 322) clearly revealed the logic of the early marketplace:

The most industrious and hard labouring of our poor peasants, are not those who keep their little gardens in the best order and cultivation; but such, on the contrary as make inferior earnings, that mark something of debility. . . . No labour is so wretchedly performed, and so dear, as that of hired hands accustomed to labour for themselves; there is a disgust, and a listlessness, that cannot escape an intelligent observer; and nothing but real distress will drive such little proprietors to work at all for others; so that I have seen, in the operosely cultivated parts of France, labour comparatively dear, and ill performed, amidst swarms of half wild people. . . . Can anything be apparently so absurd, as a strong hearty man walking some miles, and losing a day's work which ought to be worth 1 5 or 20s. in order to sell a dozen of eggs, or a chicken, the value of which would not equal the labour of conveying it, were the people usefully employed? This ought to convince us, that these small occupations are a real loss of labour.
Just what did Young mean by a "real loss of labour"? Certainly, he did not mean that peasants who worked on their own account were lazy. Young himself had written, "Give a man the secure possession of a bleak rock, and he will turn it into a garden" (ibid., 45). With a revealing turn of a phrase, Young recalled, "I saw nothing respectable on small properties, except a most unremitting industry" (ibid., 316). After all, for Young, as for many of his contemporaries, unremitting work was not respectable unless it was performed for wages.

What of the time dissipated in carting insignificant quantities of produce to market? On several occasions, Young sneered at peasants who dissipated their energy in trifling transactions (see ibid., 81, 306). Yet he knew enough peasant life to realize that market day was not strictly an economic affair. It was a time for socializing by people who were often cut off from society. The peasant whom he met carrying two chickens to a market twenty-four miles away may not have been behaving economically, but we have no reason to believe that he or she was acting irrationally (ibid., 306). All in all, Steuart could not have asked for a more devoted disciple than Young.

Intellectual Primitive Accumulation

Steuart never realized that his work would eventually win modest appreciation. In the last year of his life, frustrated by the lack of public acceptance of his ideas, he wrote of his deceased dog, "Were I to write his life, it would be a work as voluminous as my Political Oeconomy and perhaps as little relished by the public" (cited in Skinner 1966, iv).

The reference to "dead dogs" brings up a curious coincidence. Marx (1859, 167 ), writing of Steuart's eclipse, said: "Steuart remained even more of 'a dead dog' than Spinoza appeared to be Moses Mendelssohn in Lessing's time." On another occasion, Marx applied the very same metaphor to Hegel, whose work was also related to that of Steuart (see Marx to Kugelmann, 27 June 1870, in Marx and Engels 1975, 225).

Over the years, Hegel's reputation fared much better than Steuart's. To some extent, however, Steuart may have been responsible for the recognition that Hegel received.

In his youth, Hegel drew heavily on the unacknowledged Steuart, all the while praising Smith (see Chamley 1965, 142-47; Dickey 1987, 192). Indeed, Steuart's discussion of double competition bears considerable similarity to Hegel's dialectic.

Hegel would not have been alone in claiming Steuart's original research as his own. Malthus, for example, praised Steuart in private correspondence with Ricardo (see Ricardo 1951-1973, 6:33-35), vet we search his published work in vain looking for a reference to Steuart. Other writers (see Young 1794, 318; Steuart 1767, 4:315; Stewart 1855, 1:150-51), including even Adam Smith, fell to publishing Steuart's ideas as their own. In the words of Smith's pupil and lifelong friend, the earl of Buchan:

As for the great work, the Political Oeconomy, it is needless to praise it, for the public will do ample justice to it, when it has thrown from its literary meal the high-seasoned cookeries of the plagiarists, who have obtruded Sir James's facts, principles, and reasoning, on the world, without acknowledging from whence they were derived, (cited in Chamley 1965, 26)

We might value the earl's words even more highly if they had not been lifted verbatim from those published earlier by Archibald Hamilton (ibid.).

In short, the same honesty that allowed Steuart to produce such an insightful theoretical system guaranteed his obscurity. Given this obscurity, political economists seemed to realize that taking credit for Steuart's work was relatively riskless. Moreover, to acknowledge Steuart would lend credence to his frank treatment of the process of capital accumulation. Thus Steuart, the greatest classical theorist of primitive accumulation, found himself the victim of a primitive accumulation of a literary sort. We are all the poorer for the lack of attention given to this seminal mind.
admin
Site Admin
 
Posts: 27268
Joined: Thu Aug 01, 2013 5:21 am

Re: The Invention of Capitalism: Classical Political Economy

Postby admin » Tue Feb 20, 2018 8:11 am

Part 1 of 2

Chapter 8: Adam Smith's Charming Obfuscation of Class

They were standing on a plank which had heen laid across a tanning pit; the doctor, who was talking warmly on his favorite subject, the division of labor, forgetting the precarious ground on which he stood, plunged headlong into the nauseous pool. He was dragged out, stripped, and carried with blankets and conveyed home on a sedan chair.

— London Times, 6 August 1790


Smith, The Unworldly Professor

Smith's theory of primitive accumulation has heretofore passed unnoticed. Probably, Smith would have been pleased with the lack of attention to this aspect of his work. After all, he was so intent on minimizing the role of class conflict that bursts of harsh realism rarely intruded into Smith's presentation.

Perhaps Smith felt justified in taking this approach. In his early essay on the history of astronomy, he asserted that intellectual effort is nothing more than a response to the discomfort that the mind feels in the face of contradictory phenomena. As a result, he went so far as to identify science as an attempt to discover the underlying harmonies in order to "sooth[e] the imagination" (Smith 1790a, 46). Primitive accumulation is hardly a soothing subject.

In his efforts to calm, Adam Smith became a highly abstract writer who used charming prose to disarm his readers. He himself commended this tactic to his students, telling them that if they wanted to sway an unsympathetic audience, "we are not to shock them by affirming what we are satisfied is disagreeable, but are to conceal our design and beginning at a distance, bring them slowly on to the main point and having gained the more remote ones we get the nearer ones of consequence" (Smith 176263, 140-41). Just compare Smith's advice here with Steuart's description of his own uncompromising style.

In addition, Smith (1759, VII.iv.2,5, 336) himself described the weight that he placed on persuasion, writing, "The desire of being believed, the desire of persuading, of leading and directing other people, seems to me to be one of the strongest of all our natural desires. It is, perhaps, the instinct on which is founded the faculty of speech, the characteristic faculty of human nature."

Awareness of Smith's rhetorical practices helps solve a riddle that has troubled many of his readers: Why did Smith, who supposedly has so much to reveal about the nature of economic activity, have so little to say about the most significant contemporary developments in British economic society? This silence is most apparent in his discussion of the production process. Smith (see 1976, II. i. 9, 280) made only passing reference to modern industry. Instead of textile mills, we hear of a pin factory, which Smith himself once deprecated as a "frivolous example" (1978, vi.34, 343). Thomas S. Ashton (1925, 281; see also Michl 1993, 331) wrote: "One may echo Dr. Clapham's regret 'that Adam Smith did not go a few miles from Kirkcaldy to the Carron Works to see them turning and boring their cannonades instead of his silly pin factory.' "

Charles Kindleberger (1976) attempted to explain this defect of The Wealth of Nations by writing off the author as an "unworldly" professor. Similarly, the usually perceptive Robert Coats (1962, 47; see also Seligman 19 10, xi) explained Smith's lack of material on the specifics of commodity production by labeling Smith as an "economist . . . the domestic period." Such terminology does nothing to resolve the paradox of Smith, so long referred to as a scientific economist despite his great shortcomings. We would get no further by attributing his omissions and oversights to a lack of foresight, as Richard Koebner (1959) once argued.

What, then, could the Smith of Kindleberger, Coats, or Koebner possibly teach us about the wealth of nations? In truth, Smith was far from the unworldly professor that his commentators made him out to be. He won the close friendship of the wealthy merchants of Glasgow (Stewart 181 1, 300). In fact, he owed his initial appointment as a professor, in part, to his close connections with them (Scott 1934, 46-48). Later in life, he became the intimate of some of the most powerful members of British society (Hartwell 1978, 130-35). Even the prime minister of England is said to have declared himself to be Smith's disciple (Rae 1895, 404), although we might note that this same illustrious disciple also wished to set pauper children to toil in workhouses to be known as "colleges of industry" (Pollard 1965, 192).

The supposedly unworldly Smith clearly understood the value of applied economics. He apparently began The Wealth of Nations in response to a request from Charles Townshend for material on "French finance, its administrative method, taxation and public borrowing" (Fay 1956, 151; see also Mossner and Ross 1977, 328n ; 378n ; Campbell and Ross 1981, 88; but see Viner 1965, 86). His appointment as a commissioner of customs may well have been a reward for this aspect of his work (see Campbell and Ross 1981, 88). In addition, Smith seems to have played an active role in the banking controversies in Scotland (Gherity 1993).

Smith's association with practical economic affairs certainly influenced his book. For example, Smith also drew on his business friends, such as Alexander Cochrane, in preparing the original edition of his book (see Scott 1934, 81). One contemporary, a SirT. Munroe, recalled:

I remember about the time of the appearance of The Wealth of Nations, that the Glasgow merchants were as proud of the work as if they had written it themselves; and some of them said that it was no wonder that Adam Smith had written such a book, as he had the advantage of their society, in which the same doctrines were circulated with the punch every day. (cited in Hutchison 1988, 400)

Later, Smith's experience as a commissioner also left its mark in the 1784 revised third edition of The Wealth of Nations (see Campbell and Mossner and Ross 1977, 263-64, 266; Mossner and Ross 1981, 88).

Smith's Project

Why, then, would Smith, now reputed to be the premier political economist of his time, be so frequently interpreted as one who was out of touch with his own age? In answering this question, a comparison with Steuart is most instructive. Despite widespread praise for his detailed information, Steuart's basic message was swept aside, as we have seen. His grim advocacy of primitive accumulation was far too blunt, even for his contemporaries. Smith's cheerful optimism, in contrast, was just what polite society wanted to read: Curb the government, unleash the forces of the market, and all will be well. Unfortunately, Smith could present this vision only by substantially violating the truth.

While many people have commented on Smith's neglect of the emergent industrial system, fewer have taken note of Smith's treatment of the people who make up the economy. Joan Thirsk is an exception in this respect. She observed:

[Smith] was not concerned with the personal lives led by individuals and could achieve the superb clarity of his exposition by detaching his theory from any sensitive consideration of the human beings whose labors created the wealth of the nation. Yet at every turn their lives obtruded themselves, insisting on inserting question marks at the end of his confident expositions. For example, he had to explain inequalities in the wages of labour. (Thirsk 1978, 152)

The defect to which Thirsk draws our attention is not the absence of fact or detail in general, but rather the omission of fact or detail specifically when dealing with the delicate question of conflict between classes. I suspect that Thirsk saw what has escaped most historians of economic thought because she was a distinguished agricultural historian. This background allowed her to see through the fog of laissez-faire rhetoric to sense the connection of Smith's work to primitive accumulation. I will return to Thirsk's insight when examining the roots of Smith's Wealth of Nations. For now, we need only to note that Smith's approach made The Wealth of Nations extraordinarily uneven. It is at once full of detail and devoid of much of the most important phenomena of the time.

Once we recognize that Smith designed his work for two different, and even contradictory, purposes we will see that this unevenness appears all but inevitable. On the one hand, Smith developed a handbook of practical administration of the sort that Townshend requested (see Mossner and Ross 1977, 328n). In this regard, we find an abundance of factual material.

On the other hand, Smith was the architect of a cleverly written revision of political economy and history in which he recast the harsh reality of capitalist development in as favorable a light as possible. In this project, Smith relied mostly on what his student Dugald Stewart termed "conjectural history" (1855, 36; Stewart 1811, 450), an approach that Stewart (1811, 449) defended by claiming that "in want of direct evidence, we are under a necessity of supplying the place of fact by conjecture."

Smith's reliance on conjecture and anecdote is understandable. In his revision of political economy, many facts— especially those concerning existing economic realities— would have inconveniently contradicted Smith's intended lesson: Economic progress should be explained in terms of the increasing role of voluntary actions of mutually consenting individual producers and consumers in the marketplace.

Smith's casual approach to history, a subject that was not held in particularly high regard at the time, would not have shocked his contemporaries. Smith's colleague William Robertson (1781, 6) once described the early period of Scottish history as "the region of pure fable and conjecture and ought to be totally neglected or abandoned to the industry and credulity of antiquaries."

I propose that we can think of The Wealth of Nations as two different books: one concerns the ideology of political economy; the other is a handbook for economic administrators. Although these two works are not physically separated, we can roughly isolate them. We can read the book of practical administration by starting at the end of The Wealth of Nations and working backward. The ideological work begins on page 1 and continues forward as it gradually blends in with the book on political administration.

Despite its obvious deficiencies, Smith's ideological message was a step forward in some respects. He attempted to ground his work, for instance, in a materialistic theory of society that could "explain the origin and something of the progress of government . . . not as some writers imagine from any consent or agreement, but from the natural progress which men make in society" (Smith 1978, vi.19, 207; see also Meek 1977b).

Although Smith considered his application of this theory to the economy to be original, it clearly fell within a solid Scottish intellectual tradition. However, as we shall see, few were willing to accept this idea. Even Smith was prepared to abandon it in his own recommendations for administering economic affairs.

The Late Discovery of Smith's Economics

Even though his Theory of Moral Sentiments won him effusive praise, modern economists tend to overestimate Smith's importance. According to Karl Willis (1979, 510), during the eighteenth-century parliamentary debates, "the number of citations of Smith's is minute compared with . . . other writers," such as John Locke, Sir William Petty, David Hume, Gregory King, Charles Davenant, Sir Josiah Child, Dean Josiah Tucker, and Arthur Young. Willis reported, "Even twenty-five years after the publication of The Wealth of Nations, the Houses of Parliament were largely indifferent to its tenets, suspicious of its truth, and uncertain of its applicability" (ibid., 544). In addition, Willis (ibid., 528) observes that "Smith's influence on Townshend, Burke, and North was slight."

Charles James Fox made the first reference to The Wealth of Nations in Parliament on 11 November 1783, six years after the book first appeared (Rashid 1992, 493). However, Smith's economic ideas did not seem to have much of an impact at the time. In 1789, when Malthus signed out the 1784 edition of The Wealth of Nations from his college library, he was only the third person to do so (Waterman 1998, 295). The book went through five editions, but each of the first two sold only five hundred copies apiece (Waterman 1998b). Emma Rothschild notes with some irony that when Smith died in 1790, The Annual Register devoted twelve lines to him and sixty-five to Major Ray, a deputy quartermaster general with an interest in barometers. The Scots Magazine gave Smith a scant nine lines (Rothschild 1992, 74). Even up to 1800, only a few of the Cambridge colleges had acquired the book (Waterman 1998b).

Only after the beginning of the nineteenth century, when the Edinburgh Reviewbegan promoting Smith, did his economic theories become widely read. As Karl Willis ( 1 9 7 9, 5 42 ) wrote: "It would not be until the generation of Canning (b. 1770), Liverpool (1770), Huskisson (1770), Brougham (1778), Robinson (1782), Palmerston (1784), Peel (1788), and Russell (1792) came to prominence that the ideas of political economy would achieve dominance in Parliament." By the turn of the century, most of the writers on political economy had ostensibly fallen in line with Smithian dogma (see Deane 1957, 88).

Why would the Tory government of Lord Liverpool, with its roots in the aristocracy rather than the immediate representatives of the capitalist class, take the lead in advocating Smith's ideas (Clarke 1988, 49)? The answer lies in the political rather than the economic climate of the period. The great fear arising out of the French Revolution suddenly gave the comforting message of Smith an urgency that it never had before.

How sincere this support for Smithian theory was is another matter. For example, Francis Horner, famous member of the Bullion Committee and editor of the Edinburgh Review, was requested to prepare a set of notes for a new edition of The Wealth of Nations. He explained his refusal in a letter to Thomas Thomson, written on 15 August 1803:

I should be reluctant to expose S's errors before his work had operated its full effect. We owe much at present to the superstitious worship of S's name; and we must not impair that feeling, till the victory is more complete. . . . Until we can give a correct and precise theory of the origin of wealth, his popular and plausible and loose hypothesis is as good for the vulgar as any others, (cited in Horner 1843, 1:229) The Appeal of Adam Smith

We can best understand the appeal of Adam Smith's Wealth of Nations against the backdrop of the work of Sir fames Steuart. Although neither author won widespread acclaim from his contemporaries, Smith was by far the more popular from the outset.

Steuart's writing style put him at a severe disadvantage relative to Smith. Smith's prose is a joy to read, whereas Steuart's is heavy and dense. Their differences went far beyond style. Smith wrote of a familiar world. He began his now-famous book with: "The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life" (Smith 1976, 10). In contrast, Steuart's (1767, 1:1) first words were "It is with great diffidence." He then went on to defend his project and apologize for his style. This defense carried little weight with the public, since the apology made the book no less difficult to read. Joseph Schumpeter (1954, 176) once asserted:

Steuart's work did not ride, like Smith's, on the wave of a single and simple policy that was rapidly conquering public opinion. . . . [0]ne cannot fail to be struck by the number of points that indicate more originality and deeper thought than does the Wealth of Nations. ... In the theories of population, prices, money and taxation Steuart went much below the smooth surface on which A. Smith happily sailed his course.

Schumpeter went on to observe:

Had he been more brilliant, he would have not been taken so seriously. Had he dug more deeply, had he unearthed more recondite truth, had he used difficult and ingenious methods, he would not have been understood. . . . [H]e disliked whatever went beyond plain common sense And it was Adam Smith's good fortune that he was thoroughly in sympathy with the humors of his time.

Although Steuart's prose was turgid, he was said to have been a persuasive speaker. Indeed, Smith himself acknowledged that he understood his rival's system better from their conversations than from reading Steuart's book (Rae 1895, 62; Chalmers 1805, 378). In Smith's case, frequent lapses of memory punctuated his conversation, whereas his book displayed an elegance of style.

The content of their respective books could hardly have been more dissimilar. With Smith, that part of history concerning the means by which the state reinforced the reign of capital falls from view. The litany about the lethargic nature of labor comes to an end, with the significant exception of Smith's (1976, 1.L7, 18-19) portrayal of the small farmer who could afford to divide his time between farming and weaving.

As a result of his approach, Smith appears to be one of the most humanistic figures of classical political economy. Certainly, with the possible exception of John Stuart Mill, Smith was ostensibly more considerate of the interests of labor than any other political economist.  

Finally, with Smith, we enjoy the diversion of charming anecdotes. With Steuart, we encounter the grim face of primitive accumulation.

Adam Smith versus Sir James Steuart

Although Smith was rather coy about his intentions, The Wealth of Nations was a direct challenge to Steuart's authority. Smith never once mentioned Steuart's name in his book, yet he probably aimed his heated denunciations of the mercantile school, at least in part, at Steuart. In his advertisement to the fourth edition, for example, Smith (1976, 9) attacked all previous works on the Bank of Amsterdam as "unintelligible." His modern editors point out that Steuart's perceptive work on that subject could hardly be liable to that charge (Smith 1976, 9n). They mention numerous other instances where notice of Steuart's work would have been appropriate.

Smith's silence concerning Steuart could not be charged to ignorance about him. After all, Smith attended the same Burgh School of Kirkcaldy where Sir fames had earlier studied. Appropriately, Steuart, ever the aristocrat, acted the role of the king in a production of Heniy the Fourth (Rae 1895, 5). By the time Smith wrote The Wealthof Nations, Steuartwas the most eminent political economist of Scotland. Although Smith may not have personally known Steuart until the latter's long period of exile had ended, in later years, Smith and Steuart belonged to several of the same clubs (see Bell i960).

In a private letter dated 3 September 1772, Smith wrote to William Pulteney: "I have the same opinion of Sir James Steuarts [sic] book that you have. Without mentioning it, I flatter myself that any fallacious principle in it will meet a clear and distinct confutation in mine" (Mossner and Ross 1977, 163-64; Rae 1895, 253-54). This letter is doubly interesting because it also concerned Smith's attempt to win an appointment to an East India Company committee that was to travel to India to investigate administrative malpractices. Fortunately for Smith's reputation as a stalwart opponent of entrenched monopolies, the mission was never completed, although Smith was selected as a member (Ambirajan 1977, 2-3).

Smith may well have been aware that the East India Company had already commissioned Steuart to analyze the state of the coinage in Bengal (see Steuart 1772). Smith's (1977, 164) reference to the views he shared with Pulteney on the "disorders of the coin of Bengal" suggests that the letter may have been intended to deprecate Steuart, both as author and consultant. Smith's basic thesis in his attempted refutation of Steuart was appealing: The interest of individuals might clash, but society as a whole, as well as the classes of which it is composed, have a common interest. Within Smith's presentation, primitive accumulation, a term that he inadvertently helped to coin, was an unnecessary, or even nonexistent, element in economic development.

Smith's first book, The Theory of Moral Sentiments, had won the lavish praise of Edmund Burke (1759,488), who gushed that "a dry abstract of the system would convey no juster idea of it, then the skeleton of a departed beauty would of her form and allure when she was alive." Booksellers decorated their display windows with busts of the author (Viner 1965, 3940). Steuart's book suffered a far different fate. One month before his death, he wrote to a correspondent that his "opinions . . . have little weight, they have long been printed, little read and less considered" (cited in Skinner 1966, lv). Despite Smith's commercial success, Steuart may have had more influence on the policy of the time.

Alas, the modern literature of economics has recorded neither the battle between Smith and Steuart, nor Steuart's subsequent defeat. Indeed, we hear little mention of Steuart, except that he was a trifle more modern than the run-of-the-mill mercantilist.

A publication titled The Market and the State: Essays in Honour of Adam Smith (Wilson and Skinner 1976) marked the obliteration of Steuart's contribution. This title suggests a detailed analysis of Smith's response to the question of state intervention. Although some of the contributions do bear titles that relate to his subject matter, a review of the body of the work proves disappointing.

One of the coeditors of this book had produced an earlier edition of Steuart's Inquiry and a number of valuable articles, yet not one mention of Steuart can be found in this volume. One contributor, W. Arthur Lewis (1976,139), was irreverent enough to venture the opinion that "industrialization required government action," but that particular article was at variance with the Smithian theme of the title.

Although other scholars share Lewis's conclusion (Kroos and Gilbert 1972, 162; Kuznets 1965, 108), they are in the minority. Today, the majority of academic economists believe that market forces suffice to develop an economy. In contrast, until the time of Smith, economists almost universally accepted the necessity of government intervention (see Deane 1957, 89 ) Smith vainly attempted to dispute it.

Sociology of Class and Dependent Social Relations

Parallel to his oblique attack on Steuart, Smith launched a vigorous yet surreptitious ideological assault on the social and economic behaviors of all groups, except the particular strata of the middle class with which he identified. In a sense, Smith was not unusual in this regard; economists commonly single out a narrow group of society for special approbation.

Joseph Schumpeter (1950) lauded the entrepreneur while laying the blame for the imminent demise of capitalism on more fainthearted members of the middle class. John Maynard Keynes placed his faith in the welleducated elite while mocking both investors and businesspeople (Perelman 1988, chap. 1). Alfred Chandler's (1977) hero is the corporate administrator, who wrests control of business from less-talented investors.

The unifying feature of Smith's sociology is a strong advocacy of the values of the self-employed artisan, merchant, or professional. Smith expresses this attitude in his negative depiction of dependent social relations, which demean both the lower classes that find themselves dependent and the aristocracy that required others to be subservient.

This concern with dependency is a recurrent theme in all of Smith's mature works, from The Theory of Moral Sentiments to The Wealth of Nations. We should recognize that Smith was not antagonistic to all forms of dependency. He was more than tolerant of the dependency of those in the employ of another, when those employees were producing goods to be sold on the market. We shall discuss the limits of this tolerance later. We shall see that Smith's attitude toward dependency helps to explain his interpretation of productive and unproductive labor, as well as various policy issues.
admin
Site Admin
 
Posts: 27268
Joined: Thu Aug 01, 2013 5:21 am

Re: The Invention of Capitalism: Classical Political Economy

Postby admin » Tue Feb 20, 2018 8:12 am

Part 2 of 2

Smith versus the Aristocracy

As an example of Smith's intemperance, consider his unrelenting hostility toward the aristocracy: "The nobility are the greatest opposers and oppressors of liberty that we can imagine. . . . The people can never have security of person or estate till the nobility be crushed" (1978, iv.165, 264). Could Robespierre have been more shrill?

Smith often couched his antagonism toward the nobility in terms of the demeaning nature of personal dependency that they imposed on those who occupied lower stations in society. Throughout his writings, Smith (1976, III.iv.5, 413) expressed an abiding opposition toward the nobility for maintaining "a multitude of retainers and dependents." He aggressively condemned such dependency: "Nothing tends so much to corrupt and enervate and debase the mind as dependency, and nothing gives such noble and generous notions of probity as freedom and independency" (Smith 1978, vi.7, 333).

According to Smith (1976, III.iv.6, 414-15), "Such a proprietor feeds his servants and retainers at his own house [The servants'] subsistence . . . is derived from his bounty, and its continuance depends upon his good pleasure." Such hospitality owed nothing to generosity. It was merely the result of the lords' inability to convert the produce of the land into exchange values. He explained that "the rich man has no way of spending the produce of his estate but by giving it away to others, and these become in this manner dependent upon him" (Smith 1978, iv.9, 202; see also ibid., 410; Hume 1752a, 291; S. Johnson 1774, 85).

Once the aristocracy obtained access to luxury goods, it abandoned its rustic hospitality. According to Smith:

The arts which are now cultivated give him an opportunity of expending his whole stock on himself. . . . He gives nothing away gratuitously, for men are so selfish that when they have an opportunity of laying out on their own person what they possess, tho on things of no value, they will never think of giving it to be bestowed on the best purposes by those who stand in need of it. (1978, i. 117, 50)

Smith's discussion of the Game Laws offers an additional instance of his antagonism toward the gentry. For Smith, the Game Laws were irrelevant to capital accumulation. Recall how he attributed these laws to the perverse nature of the gentry. In so doing, Smith hid the conflict between labor and capital behind two layers of assertions. To begin with, the gentry are ostensibly concerned with an intense exploitation of the people. Smith was undoubtedly correct here, but his silence conveys the suggestion that capital is disinterested in matters of primitive accumulation. Then Smith went on to assert that the gentry's claim to an interest in economic success was spurious, arguing that their real concern was an atavistic love of hunting and a drive to dominate their fellow human beings (Smith 1978, 192; 1976, III.ii.10, 388).

Here, as in the rest of his work, folly appears to be the most pervasive of all human faults. Conversely, rational thought (read "capitalism") would seem capable of excluding exploitation and misery from the world. Smith's avuncular posture makes for charming reading, but it is hardly satisfactory either as history or political economy.

Smith's attitude toward such personal dependency appears ironic, considering that he frequently found himself dependent on aristocrats for assistance in obtaining teaching positions. Consider John Rae's (1895, 30) description of Smith's circumstances:

In returning to Scotland Smith's ideas were probably fixed from the first on a Scotch university chair as an eventual acquisition, but he thought in the meantime to obtain employment of the sort he afterwards gave up his chair to take with the Duke of Buccleugh, a traveling tutorship with a young man of rank and wealth. . . . While casting about for a place of that kind he stayed at home with his mother in Kirkcaldy ... for two full years. . . . The appointment never came; because from his absent manner and bad address, we are told, he seemed to the ordinary parental mind a most unsuitable person to be entrusted with the care of spirited and perhaps thoughtless young gentlemen. But these visits he paid to Edinburgh in pursuit of this work bore fruit.

The irony goes further. Smith's family, though not particularly wealthy, had its own strong aristocratic roots. His mother was from the Douglas family of Strathenry, a great-great-granddaughter of Sir William Douglas of Lochleven, later earl of Morton, the laird who held Mary Queen of Scots prisoner on an island in Lochleven (Scott 1934, 18). His father descended from a family of Aberdeenshire lairds at one time identified with Rothiebirsben and later with Inveramsay (ibid., 8).

Nonetheless, Smith's branch of the family had long been at odds with traditional Scottish aristocratic values. According to Scott (ibid.), the more wealthy branch was strongly Jacobite, and "the younger sons were even more forceful on the other side." Scott mentioned that during the revolution, many members of the family displayed a flair for administration and won high posts.

Dependency and Unproductive Labor

Smith's contemporaries commonly denounced particular occupations as unproductive. For example, the Physiocrats deemed the labor of agricultural producers as the only productive labor. Smith, in contrast, distinguished labor as productive and unproductive according to the social relations of production. As a result, some workers in a particular occupation might be classified as unproductive workers while others would be productive. Smith left no doubt that he related the question of dependency to his theory of productive and unproductive labor.

Smith clearly associated unproductive labor with the demeaning social relations characteristic of feudalism (Smith 1976, II.iii.9-12, 334-35). Consider his comparison of the social relations of retainers and independent tradesmen:

When the great proprietors of land spend their rents in maintaining their tenants and retainers, each of them maintains entirely all his own tenants and all his own retainers. But when they spend them in maintaining tradesmen and artificers, they may, all of them taken together, perhaps maintain as great, or on account of the waste which attends rustick hospitality, a greater number of people than before

Each tradesman or artificer derives his subsistence from the employment, not of one, but of a hundred or a thousand customers. Though in some measure obliged to them all, therefore, he is not absolutely dependent upon any one of them. (Smith 1976, III.iv.12, 420)

In effect, Smith considered one sort of labor to be productive because he approved of the social relations of commodity production, while condemning another type as unproductive because it entailed social relations of (feudal) dependency. For example, he wrote:

A man of fortune, for example, may either spend his revenue in a profuse and sumptuous table, and in maintaining a great number of menial servants, and a multitude of dogs and horses; or contenting himself with a frugal table and a few attendants, he may lay out the greater part of it in adorning his house or his country villa. . . .

The expense . . . that is laid out in durable commodities, gives maintenance, commonly, to a greater number of people than that which is employed in the most profuse hospitality, (ibid., II.iii.38, 41, 346, 348)

Smith offered no reason why durable commodities should employ more labor.

Elsewhere, he suggested that durability was an end in itself:

The labour of menial servants . . . consists in services which perish generally in the very instant of their performance, and does not fix or realize itself in any vendible commodity which can replace the value of their wages and maintenance. The labour, on the contrary, of artificers, manufacturers and merchants, does naturally fix and realize itself in some commodity, (ibid., IV.ix.31, 675 )

Notice that the extension of the circuits of vendible commodities can widen and even intensify without a comparable accumulation of capital. Recall the Physiocratic analysis where manufacturing is identified with the labor of artisans who work with virtually no capital and earn only a subsistence wage. I am convinced that Smith's advocacy of accumulation was secondary to his desire for commercial social relations.

In fact, the only consistent explanation of Smith's treatment of unproductive labor is that unproductive laborers were dependent on the aristocracy, whereas productive labor is always embedded in market relations. Smith believed that unproductive workers had personal characteristics of which he disapproved. In contrast, productive labor would be more likely to adopt the petty bourgeois values that Smith wished to see flourishing in his society.

In this spirit, Smith contrasted the energy of a commercial city with the idleness surrounding a society in which feudal retainers are common. He noted, "In mercantile and manufacturing towns where the inferior ranks of people are chiefly maintained by the employment of capital, they are in general industrious, sober and thriving" (ibid., II.iii.12, 335).

Smith's Hostility toward Self-Sufficient Farmers

Although Smith denounced the aristocracy for keeping rural people dependent, he showed little concern for the dependent people of the countryside beyond superficially bemoaning their dependency. Using language echoing the brutal analysis of Sir fames Steuart, Smith followed his discussion of the degrading nature of dependency by acknowledging the legitimate need of modern, profit-maximizing farmers to rid the land of those people whom he dehumanized as "unnecessary mouths" (1976, m.iv. 1 3, 42,0). He also commended "the diminution of cottagers, and other small occupiers of land; an event which has in every part of Europe been the immediate forerunner of improvement and better cultivation" (ibid., I.xi.1.10, 243).

Smith's image of the traditional farmer, who had not completely accepted the psychological values that Smith associated with the commercial stage of society, was just as unfavorable. He ridiculed their behavior:

The habit of sauntering and of indolent careless application, which is naturally, or rather necessarily acquired by every country workman who is obliged to change his work and his tools every half hour . . . renders him always slothful and lazy, and incapable of any vigorous application even on the most pressing occasions, (ibid., Li. 7, 19)

This emotional outburst did not do Smith much credit. Joan Thirsk (1978, 151), a keen student of English rural life, described this passage as a "grotesque caricature." No wonder she found fault with Smith's purported psychological analysis. John Stuart Mill (1848, 2:126) also took issue with Smith on this passage: "This is surely an exaggerated description of the inefficiency of country labour. Few workmen change their tools oftener than a gardener; is he incapable of vigorous application?"

Why was Smith so hostile to the small producer? How could he assume that the "natural effort of every individual to better his own condition" was somehow foreign to the allegedly indolent and sauntering country weaver (Smith 1759, 508)?

Indeed, once he moved from the ideological to the administrative sections of his work, Smith (1976, V.i.a.15, 697) admitted that poor but independent small farmers worked very hard: "Those improvements in husbandry . . . which the progress of arts and manufactures necessarily introduces, leave the husbandman with as little leisure as the artificer."

Here Smith was addressing a practical problem. As we shall see, he was concerned that the demands on country folk were so great that they could not spare the time to form a militia. As a result, state had to spend more money for national defense.

Dependency and the Corruption of Cities

Smith's wide-ranging hostility extended to the working class as well. He feared the wrath of large masses of degraded workers huddled in large cities. In one justly famous denunciation of the dark side of the division of labor, he concluded:

In the progress of the division of labour, the employment of the far greater part of those who live by labour . . . comes to be confined by a few very simple operations. . . . But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects too are, perhaps, always the same, or very nearly the same, has no occasion to exert his understanding, or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally . . . becomes as stupid and ignorant as it is possible for a human creature to become. . . . But in every improved and civilized society this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless the government takes some pains to prevent it. (ibid., V.i.f.50, 781-82; emphasis added)

Smith complained about "the gross ignorance and stupidity which, in a civilized society, seem so frequently to benumb the understanding of all inferior ranks of people" (ibid., V.i.f.61, 788). He continued, "A man, without the proper use of the intellectual faculties of a man, is, if possible, more contemptible than even a coward, and seems to be mutilated and deformed in a still more essential part of human nature" (ibid.).

Similarly, after telling his students about the benefits of the division of labor, Smith explained:

It is remarkable that in every commercial nation the low people are exceedingly stupid. The Dutch vulgar are eminently so. . . . the rule is general, in towns they are not so intelligent as in the country, nor in a rich country as in a poor one. (Smith 1978, 539)

According to Smith:

[When a worker] comes into a great city, he is sunk in obscurity and darkness. His conduct is observed and attended to by nobody, and he is very likely to neglect it himself, and to abandon himself to every sort of low profligacy and vice. (Smith 1976, V.i.g.12, 795)

These moral deficiencies threatened grave consequences for the rich, according to Smith (ibid., V.i.f.50, 781-82), who warned that "in the poor the hatred of labour and the love of present ease and enjoyment, are the passions which prompt to invade property, passions much more steady in their operation, and more universal in their influence." Given such attitudes, Smith was not well disposed toward the masses of urban workers. In fact, despite his low regard for independent farmers and farmworkers, Smith (ibid., I.x.c.24, 144; see also 1978, 539) held them in significantly higher esteem than unskilled urban workers. He exclaimed, "How much the lower ranks of the people in the country are really superior to those in the town, is well known to every man whom either business or curiosity has led to converse with both."

Social Relations and the Military in Smith's Work

The degradation of people who move from the countryside to large urban settlements posed a practical problem for Smith's vision of a commercial society. He knew that the bulwark of the traditional army consisted of the same small farmers who stood in the way of his desired commercial society.  

These farmers made excellent soldiers. The rhythms of agrarian life were ideally suited to warfare, since peasants could participate in military campaigns during the off-season. Sweeping the majority of these small farmers off the land would transform them into landless farm workers or urban proletarians, who would be less suited to serve in the military.

While the economic failure of the farmers would weaken the military, the success of other occupations would limit the pool of willing and able soldiers. Specifically, Smith (1978, iv.170, 266) fretted that the minority of urban workers who succeed in commercial society would be disinclined to participate in the military: "The better sort of mechanicks could not get a sufficient compensation for the loss of their time [while on military duty]. An army composed of gentlemen has occasion for very little discipline."

In addition, employers would be loath to let their best workers participate in the military:

In a state where arts, manufactures, and handicrafts are brought to perfection, . . . they cannot dispense with labourers in this manner without the total loss of business and destruction of the state. Every hour a smith or a weaver is absent from his loom or the anvil his work is at a stop, which is not the case with the flocks of a shepherd or the fields of the husbandman, (ibid., 230; see also Smith 1976, V.i.a.9, 694-95; Hume 1752b, 259-60)

The reluctance of the aspiring petty bourgeoisie to serve in the military would leave national defense in the hands of the two classes that represented the greatest threat, in Smith's view, to commercial society: the aristocracy and the unreformed workers, who resented the new society. Smith (1978, iv.170, 266) warned: "But when the army comes to be compos'd of the very meanest people, they must be forced into a standing army and a military discipline must be established."

Unfortunately, troops in these standing armies are "very much dependent" on their officers (ibid., iv.89, 234). Smith feared this arrangement would become a recipe for usurpation of power since "the temptation [to subvert the state] when offered is such as few men would be able to resist" (ibid., 236). Presumably, the greater threat is that neither the officers nor their men would display a sufficiently respectful attitude toward private property.

To make matters worse, Smith realized that the wealth of a commercial society would make it an inviting target for foreign powers. According to Smith, "An industrious, and upon that account a wealthy nation, is of all nations the most likely to be attacked. . . . [T]he natural habits of the people render them altogether incapable of defending themselves" (1976, V.i.a.15, 697-98).

Smith's Humanism and National Security

Craufurd Goodwin (1991, 23) once observed, "Classical political economy was forged on the anvil of war. The Seven Years' War barely ended when Smith published The Wealth of Nations." Goodwin shows that the military was a significant element in Smith's thought. Smith (1776, V.i.a.14, 697) even proclaimed "the art of War . . . the noblest of all arts."

Smith's preoccupation with the military carried into his personal life in the sense that he, like Steuart, belonged to the Poker Club, of which the chief condition for membership was a zeal for the establishment of a militia (Pascal 1938, 169; Rendall 1978, 13). This concern for national security also led him to contradict much of the rest of his work. For example, in the context of national security, Smith abandoned his call to crush the nobility. Instead, Smith proclaimed that "the hereditary nobility is the great security of the people's liberty" (1978, 444; see also 1976, V.i.a.41, 706-77).

Again, considerations of national security prompted Smith to take note of the negative side of commercial society. For example, he complained in his Lectures on Jurisprudence that commerce erodes the military spirit of the people:

Another bad effect of commerce is that it sinks the courage of mankind, and tends to extinguish martial spirit. In all commercial countries the division of labour is infinite, and every one's thoughts are employed on one particular thing. . . . The defence of the country is therefore committed to a certain set of men who have nothing else ado; and among the bulk of the people military courage diminishes. . . . they grow effeminate and dastardly. (Smith 1978, 540; see also 540; and 1976, V.i.a.15, 698)

Such anxiety prompted Smith to make one of his rare references to the social division of labor. Sounding very much like Sir James Steuart, Smith (1976, V.i.a.12, 697) concluded, "It is the wisdom of the state only which can render the trade of a soldier a particular trade separate and distinct from all others."

Smith's trepidation about the future of the military led him to advocate that the state offer prizes to encourage "military and gymnastic excersizes" so that the people would maintain a proper martial spirit (1976, V.i.f.58, 786). Given his fears about the discipline of both the military and the working class, Smith called for state intervention in the educational process. Hopefully, schooling could make the potentially unruly working class more accepting of both military discipline and property rights.

This concern led Smith (ibid., V.i.f.50, 781) to make his famous lament in the previously cited passage concerning the deleterious effects of the division of labor that began "In the progress of the division of labour, the employment of the far greater part of those who live by labour . . . comes to be confined by a few very simple operations."

Typically we find part of this citation offered as evidence of Smith's humanitarian concern for workers. The full citation suggests that workers may be stupid but the division of labor is responsible for their plight. It does seem to fly in the face of Thirsk's claim that Smith left out the human costs of his program.

Seen in a fuller context, we can see that Smith was not at all concerned about the conditions of the workers in this passage. Instead, he was troubled about threats to the welfare of the rich. Consider the ellipsis before the end of the citation about the harmful effects of the division of labor:

[The typical individual] is incapable of defending his country in war. The uniformity of his stationary life naturally corrupts the courage of his mind, and makes him regard with abhorrence the irregular, uncertain, and adventurous life of a soldier. It corrupts even the activity of his body. . . . His dexterity at his own particular trade seems ... to be acquired at the expence of his intellectual, social, and martial virtues. But in every improved and civilized society, this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it. (Smith 1976, V.i.f.50, 782)

Adam Smith's reputation has flourished, not in a small part because of his supposed solicitude for the well being of the working classes. Modern authors often wheel out the preceding portion of the above citation to prove that Smith rose above his time, crying out for justice for the working class.

In reality, the continuation of the citation indicates nothing of the kind. Smith's attention was elsewhere at the time. Within a few brief words, he had forgotten about the welfare of the people and has returned again to the importance of creating a martial spirit to protect the property of the rich. Smith's Hostility toward Workers' Traditional Norms

Smith did not attribute all of labor's negative attitudes to the corrupting influence of urban life. He was equally aghast at the continuing tradition of popular rural justice that displaced rural workers brought with them to the cities. For example, workers insisted that necessities should not sell above what they considered to be a just price. Edward P. Thompson (1971) referred to these traditional attitudes as the "moral economy."

Smith (1978, 197; see also 1976, IV.v.b.8, 527) was outraged that these lower-class cultural values made poor people feel justified in times of high prices when they "break open granaries and force the owners to sell at what they think a reasonable price." He countered that the corn merchants served a useful purpose:

By raising the price he [the corn merchant] discourages the consumption, and puts every body more or less, but particularly the inferior ranks of people, upon thrift and good management. . . . When he foresees that provisions are likely to run short, he puts them upon short allowance. Though from excess of caution he should sometimes do this without any real necessity, yet all the inconveniences which his crew can thereby suffer are inconsiderable in comparison of the danger, misery, and ruin, to which they might sometimes be exposed by a less provident conduct. (Smith 1976, IV.v.a.3, 524)

Apparently, Smith, writing during a time of recurrent food shortages, thought that people should be grateful for their hunger as an educational experience.

Smith opposed every aspect of the moral economy. He was appalled that the government had once passed laws regulating the retail corn trade in order to mollify the populace, although much of this legislation was repealed in 1772 (Sklar 1988, 103). For Smith, such legislation was every bit as unjustified as the laws regarding religion (1976, IV.v.b.40, 539). He claimed that people's fear of forestalling was no more warranted than anxiety about witchcraft (ibid., IV.v.b.26, 5 34).

Smith's Fear of Working-Class Leveling

Smith (1976, V.i.b.2, 709) feared that the working classes were possessed by "passions which prompt [them] to invade property, passions much more steady in their operation, and much more universal in their influence." Consequently, government is necessary to protect the property of the rich (ibid., 67off.). Smith (1978, 208; see also 404) even went so far as to teach his students:

Laws and government may be considered in . . . every case as a combination of the rich to oppress the poor, and preserve to themselves the inequality of the goods which would otherwise be soon destroyed by the attacks of the poor, who if not hindered by the government would soon reduce the others to an equality with themselves by open violence.

Smith repeatedly returned to the idea that the purpose of a legal structure was to protect the rich from the poor (ibid., 709ft.; Smith 1978, 209, 338, 404). He also believed that market society would become increasingly egalitarian. As a result, he prophesied that over time, people would become more accepting of the social order:

Civil government supposes a certain subordination. But as the necessity of civil government gradually grows up with the acquisition of valuable property, so the principle causes which naturally introduce subordination gradually grow up with the growth of that valuable property. (Smith 1976, V.i.b.3, 710)

Less developed regions, where acceptance of the rules of the market was not widespread, required considerably more protection of private property than was common at the time in England. For example, in a letter of 8 November 1799 discussing the poverty of Ireland, Smith observed:

It is ill provided with [coal and] wood; two articles essentially necessary to the progress of Great Manufactures. It wants order, police, and a regular administration of justice both to protect and restrain the inferior ranks of people, articles more essential to the progress of Industry than both coal and wood put together, (cited in Mossner and Ross 1977, 243)

Smith (1759, VI.ii.1.21, 226; see also pt. 2, sec. 1) left no doubt about the priority of law and order. He claimed that, although "the relief and consolation of human misery depend upon our compassion for [the poor], the peace and order of society is of more importance than even the relief of the miserable." Smith (1978, 262) justified his position, in part, arguing that inequality was a necessary stimulant to commerce.

Smith and Working-Class Dependency

Although Smith enjoys an undeserved reputation as a friend of labor, he was, in fact, thoroughly antagonistic toward the vast majority of the working class. Smith did seem to come out squarely on the workers' side in commenting on the conflict over wages. Smith (1776, I.viii.48, 101) also charged that farmers, landlords, and masters alike prefer poor harvests and high prices because, under such conditions, they can "make better bargains with their servants . . . and find them more humble and dependent."

Certainly, Smith's rhetoric sounded more progressive than that of any other classical political economist. He ensured his reputation as a humanitarian by writing:  

Is this improvement in the circumstances of the lower ranks of society to be regarded as an advantage or as an inconveniency to society? The answer seems at first sight abundantly plain. . . . But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. 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, (ibid., I.viii.36, 96)

Nonetheless, Smith's well-known advocacy of high wages did not prove that he took the workers' side. Smith disapproved of low wages because they reinforced precapitalist norms of behavior. Smith was not usually explicit about such matters. Although he never unambiguously articulated his theory, we can deduce that he worried that low wages could lead to two sorts of outcomes, neither of which appealed to him. On the one hand, those workers who do feel humbled may then feel compelled to show an exaggerated deference to employers, re-creating the rural dependency that Smith despised. Such workers could easily fall under the sway of a demagogue. On the one hand, low wages could reinforce workers' tendency to assert themselves. These sort of workers are likely to follow the dictates of the moral economy and attack property or participate in other mob actions. In neither case would low-wage workers tend to conform to the values that Smith so prized.

Smith believed that big business made such class conflict more likely. To begin with, the opulence that goes with large enterprise would be more likely to stir up the mobs. In addition, the small capitalists, lacking the advantages of their larger counterparts, presumably would not be able to conspire to keep wages low.

Smith used his advocacy of high wages to suggest that the harmonious functioning of the market would serve the interests of workers. I will explore this element of Smith's work in more detail in chapter 10. He also hoped that high wages could somehow encourage workers to adopt middle-class aspirations and abandon their antagonism toward market society. He hypothesized:

The liberal reward of labour . . . encourages . . . the industry of the common people. The wages of labour are the encouragement of industry. ... A plentiful subsistence increases . . . the comfortable hope of bettering his condition, and of ending his days perhaps in ease and plenty. . . . [I]t animates him to exert his strength to the utmost, (ibid., I.viii.44, 99)

Of course, not all workers were willing to adopt middle-class values. For those who took pride in their traditional working-class culture, Smith had nothing but scorn. Education, Smith proposed, might help redeem such people. Schools could teach them to accept their lot in a capitalist system and abandon the values associated with the "moral economy" that Smith opposed. He wrote:

Though the state was to derive no advantage from the instruction of the inferior ranks of people, it would still deserve its attention that they should not be altogether uninstructed. The state, however, derives no inconsiderable advantage from their instruction. The more they are instructed, the less liable they are to the delusions of enthusiasm and superstition, which, among ignorant nations, frequently occasion the most dreadful disorders. An instructed and intelligent people besides, are more decent and orderly than an ignorant and stupid one. They feel themselves, each individually more respectable, and more likely to obtain the respect of their lawful superiors, and they are therefore more disposed to respect those superiors. They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition, and they are upon that account, less apt to be misled into any wanton or unnecessary opposition to the measures of government, (ibid., V.i.f.61, 788)

The above citation reflects the fact that Smith was a true son of his age, a period when intellectuals thought that the masses could be molded at will by appropriate instruction from their superiors (see Foucault 1979, pt. 3). Smith's Hostility toward Government and Business

Not surprisingly, Smith spoke ill of government administrators, although he actively curried their support for his own position as a customs collector. Ironically, in his role as customs collector, he enforced government regulations just as energetically as he had previously denounced them in his books (see Tollison 1984; Anderson, Shugart, and Tollison 1985). However, since we popularly associate Adam Smith with a critique of government, we can let his views on that subject go without further comment.

Instead, we will now turn to the strangest entry in Smith's extensive catalog of villains— the capitalist. Many people are startled to learn that Adam Smith, the great defender of capitalism, had few good words for the capitalists. For example, in his exchange with Bentham, Smith favored the prudent, petit bourgeois artisan or small merchant, whereas Bentham lauded the entrepreneur who was willing to take risks (Pesciarelli 1989).

Indeed, Smith saved what may be his harshest criticisms for the wealthy capitalists themselves. Time and time again, he attributed the lofty position that the successful capitalist occupied to government favoritism, perhaps giving lie to his fable that capital had evolved naturally.

Smith even accused employers of behaving unfairly toward their workers. In addition, he charged that they also used the government to achieve their purposes. In Smith's (1976, 1.viii.12, 83-84) words:

It is not . . . difficult to foresee which of the two parties [employers and employees] must . . . have the advantage in the dispute (over wages), and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorizes or at least does not prohibit their combinations, while it prohibits those of the workmen.

Even when they resorted to violence, Smith felt that workers would still be at a disadvantage vis-a-vis their employers. He concluded a page-long discussion of the advantages enjoyed by employers of labor with the comment:

The workmen, accordingly, very seldom derive any advantage from the violence of those tumultuous combinations, which, partly from the interposition of the civil magistrate, partly from the superior steadiness of the masters, partly from necessity . . . generally end in nothing but the punishment or ruin of the ring-leaders, (ibid., I.viii.13, 85)

Although strikes may not promise much to workers, the market did not offer a particularly attractive prospect either. In the next paragraphs, Smith suggested that the lower bound to wages was set only by the minimum level of subsistence (1976, 1.viii.15, 85).

Smith's hostile attitude toward the wealthy capitalists is ironic, since Smith himself had sought out the assistance of powerful merchants in obtaining his initial academic appointment. Most people credit Smith's antagonism toward business as further evidence of his egalitarianism, although one writer noted that Smith's attitude might reflect personal resentment: "Some part of the intensity of Smith's attacks on businessmen may be . . . explicable at a personal level. A general distaste for the everyday reality of commercial society was likely to be manifest in a reclusive intellectual of modest means" (Coleman 1988, 162).

William Baumol (1976) collected numerous extracts intended to "prove" that Smith was a friend of labor by demonstrating Smith's hostility toward business. In reality, with a single exception, Smith did not write any of Baumol's collection of citations for the support of labor. Instead, he was either attacking corporate business, which enjoyed exclusive privileges, or denouncing the anticompetitive behavior typical of entrenched business interests.

The only exception in Baumol's collection is a paragraph that concerns the tendency of business to criticize high wages while remaining silent about high profits (Smith 1976, 1.ix.24, 115). Baumol's reference to this citation presents a puzzle. Edwin Cannan, editor of the edition that Baumol used for his references, pointed out an almost identical passage that occurs later in the book, although Baumol never cited it as evidence for his argument. The context of this second citation indicates that Smith again had in mind corporate business rather than business in general (ibid., IV.vii.c.29, 599).

My interpretation of Smith's attitude toward business is different. I will show that Smith did want higher wages as such. His underlying interest in this regard was his hope that higher wages would undermine workingclass culture and make the workers more like the petit bourgeoisie.
admin
Site Admin
 
Posts: 27268
Joined: Thu Aug 01, 2013 5:21 am

Re: The Invention of Capitalism: Classical Political Economy

Postby admin » Tue Feb 20, 2018 11:36 pm

Part 1 of 2

Chapter 9: The Revisionist History of Professor Adam Smith Smith's Ideological Context

Just as Hobbes attempted to persuade his readers that a sovereign was necessary to maintain political harmony (see Macpherson 1962, 89), Smith proposed that the market would ensure economic harmony. Unlike Hobbes, Smith did nothing to show how this "harmony" of wage labor originated. Had he based his analysis on history, he would have had to confront the bloody process of primitive accumulation.

Smith ignored such matters. He merely assumed that capital had already forced labor into a situation in which most workers had to choose between accepting wage labor or starving. In that context, wage labor appeared to be a voluntary affair. Once capital no longer had to rely as extensively on the initial extramarket compulsion to create wage labor, Smith could argue that contrived measures to undermine the self-sufficient household were unnecessary. With the establishment of an epoch in which "the silent compulsion of economic relations" had become more effective (Marx 1977, 899), capital could pretend that workers were willing partners in a mutually rewarding transaction.

Smith's theory of harmony was at odds with the popular understanding of his time that the existence of wage labor was bound up with some means of coercion (see Wiles 1968 for some exceptions); however, around 1760, people first began to mention the possibility that the system could rely on the incentive of wages rather than external compulsion (Coats 1958, 35; conversely, see Hobsbawm 1974).

Real wages in England between 1770 and 1800 were falling or, at best, stagnant (Deane 1957, 92), perhaps indicating that primitive accumulation had set the stage for silent compulsion. Of course, employers still used coercive practices to control workers. As late as 1815, the British government prohibited skilled English workmen from emigrating (Marx 1 977, 7 I 9)/ a matter of prime importance for employers of skilled labor. Josiah Wedgewood even wished to authorize the postmaster to open letters of "suspected persons" (cited in McKendrick 1961, 47). So pervasive was this selective reliance on market forces that no one saw anything unusual in proposals such as Wedgewood's.

Certainly, Smith is welcome to his illusions about the voluntary nature of the labor market; however, we have the obligation to scrutinize his falsification of the historical relation between labor and capital. In the course of this examination, we will see that Smith fashioned a marvelous fable of economic harmonies. Wordsworth (1802, 418) may have written of him as "the worst critic, David Hume excepted, that Scotland, a soil to which that sort of weed seems natural, has produced," but as a poet of economic harmony, Smith was second to none.

Smith's political economy, like most political economy at the time, was, first and foremost, an analysis of how people conducted their lives, especially insofar as this conduct reflected on morals and ethics (see Pocock 1971; Teichgraeber 1986). Indeed, part of Smith's charm was that he seemed to take a more personal, less abstract position in evaluating how people behave than others of his day.

Smith's actual goal was somewhat different from what most readers believe to have found in his work. At the very least, we have seen that he could hardly claim to be an "impartial spectator" of economic affairs. Instead, Smith's work represents a vigorous defense of the mores of one narrow segment of the population and an equally vigorous denunciation of all other values.

Smith's Bourgeois Role Models

Let us start with Smith's positive vision. Smith greatly admired the mores of the hardworking, but relatively unsuccessful members of the petit bourgeoisie. He knew that these people were not attractive to other sectors of society. In a rather strange passage that began with a discussion of fashionable tastes during the reign of Charles II, Smith (1759, V.2.3, 201) seemed to shift to a contemporary context:

A liberal education . . . was connected, according to the notions of those times, with generosity, sincerity, magnanimity, loyalty, and proved that the person who acted in this manner was a gentleman and not a puritan. Severity of manners and regularity of conduct, on the other hand, were altogether unfashionable, and were connected, in the imagination of that age, with cant, cunning, hypocrisy, and low manners. To superficial minds the vices of the great seem at all times agreeable. They connect them . . . with many superior virtues which they ascribe to their superiors; with the spirit of freedom and independence, with frankness, generosity, humanity, and politeness. The virtues of the inferior ranks of people, on the contrary, their parsimonious frugality, their painful industry, and rigid adherence to rules seem to them mean and disagreeable. They connect them both with the meanness of the station to which these qualities commonly belong, and with many great vices which, they suppose, usually accompany them— such as an abject, cowardly, ill-natured, lying, pilfering disposition.

Despite the unattractive features of petit bourgeois values, Smith hoped that by giving workers reasonably high wages, they would become socialized in their attempt to climb the ladder from artisan to small capitalist. In this sense, Smith saw the small capitalist and the prudent, hardworking artisan as part of a single bourgeois life cycle.

Smith, as usual, ran up against his confusion about wage labor. At times, he seemed to favor a world of petty commodity production, where nobody would be in the employ of another. For example, he wrote that "nothing can be more absurd, however, to imagine that men in general should work less when they work for themselves, than when they work for other people. A poor independent workman will generally be more industrious than even a journeyman who works by the piece" (Smith 1976, I.viii.48, 101). More frequently, Smith accepted that in a market society, "every man is rich or poor according to the . . . labour of other people . . . which he can command, or which he can afford to purchase" (ibid., I.v.i, 47). In this spirit, Smith noted that "the greater part of the workmen stand in need of a master to advance them the materials of their work, and their wages and maintenance" (ibid., I.viii.8, 83). Despite his antagonism to dependency, Smith enthusiastically accepted this impersonal form of command over labor. In this sense, he limited his opposition to dependency to the personal dependency typical of feudal relations.

We should note that, at this level of discussion, the notion of class is absent from Smith's analysis. Although wage labor was to be commonplace in Smith's ideal world, presumably all workers could be diligent enough that, sooner or later, they too would be independent or even capable of hiring their own workers. This idea might seem fanciful, by the nineteenth century it had gained wide acceptance (Foner 1970).

Smith's Petit Bourgeois Utopia

More agreement surrounds Smith than perhaps any other major economist, notwithstanding the controversial nature of his claims. Mainstream literature generally pictures Smith as a benign figure recommending greater reliance on the market. Even Marxist literature is usually charitable toward him, often taking comfort in Smith's description of the labor theory of value (see Meek 1963). What dissent there is, concerns the extent to which The Wealth of Nations represents an effort to promote free market ideology rather than objective economic analysis.

As we have seen, Smith is a far less attractive figure— one who was intolerant of all but a narrow swath of society. Smith expressed antagonism toward large capitalists, who in his view connive and conspire against workers. He called for the destruction of the nobility, and displayed an unpleasant contempt for the masses of workers and small farmers.

Only small capitalists and ambitious artisans won his unalloyed admiration. Smith (1978, 320) himself tells us that his ideal role models were "the bustling, spirited, active folks [or perhaps the better sort of mechanic], who can't brook oppression and are constantly endeavoring to advance themselves, [who] naturally join in with the democratical part of the constitution and favour the principle of utility only, that is, the Whig interest." This group would include skilled artisans, small merchants, and manufacturers, as well as supposedly self-made intellectuals like himself. Unlike the nobility who enjoyed rank and privilege as a birthright, or the poor who lacked the initiative to advance themselves, the petty bourgeoisie with whom Smith personally identified supposedly earned their status by dint of hard work.

Certainly the artisans and small merchants so well loved by Smith were not at all like Joseph Schumpeter's heroic entrepreneur. As Joseph Spengler (1959, 8) observes, "Smith's undertaker strikes one as a prudent, cautious, not overly imaginative fellow, who adjusts to circumstances rather than brings about their modification." With enough diligence and a little luck, these rather plodding, hardworking individuals, who carried out their trade in a commonly understood fashion, could accumulate a bit by saving, but they would be unlikely to achieve positions of prominence.

These artisans and small merchants represent the basis of what Bentham (1954, 442-43n) later called "practical equality— the sort of equality .. . which has place in the Anglo-American United States: meaning always those in which slave holding has no place." According to Smith's understanding of the British economy:

In the middling and inferior stations of life, the road to virtue and that to fortune, to such fortune, at least, as men in such stations can reasonably expect to acquire, are, happily, in most cases, very nearly the same. In all the middling and inferior professions, real and solid professional abilities, joined to prudent, just, firm and temperate conduct, can very seldom fail of success The success of such people . . . almost always depends upon the favour and good opinion of their neighbours and equals; and without a tolerably regular conduct these can seldom be obtained. (Smith 1759, 1.iii. 3.5, 63)

We can well imagine that many of these upwardly bound, generally selfemployed petit bourgeoisie experienced substantial difficulties. Where others could appeal to the good offices of a feudal lord or government official to assist in their enterprise, few of these petit bourgeois folks had influence in such quarters.

The Evolution of Smith's Stunted Utopia

In his disapproval of the direct social relations that characterized the associations among workers, and between the aristocracy and their dependents, Smith consoled himself that society naturally progressed through four stages, beginning with hunting and gathering and culminating in commercial society.

In the place of working-class and aristocratic behavioral patterns, a system of social relations based on the social distance of faceless contracting, as practiced among small merchants, would emerge. In this sense, Smith's denunciation of dependency blends in nicely with his notion of sympathy. As Jacob Viner (1972, 80) perceptively noted: "To understand the relationship of 'sympathy' of the 'sentiments,' to Adam Smith's economic view as expounded in The Wealth of Nations it is essential to appreciate the role Smith assigns in the operation of sympathy to what I will here call . . . 'distance,' in the spirit of the term 'social distance.'"

Smith (1759, ii, II, 3, 2, 86; see also Smith 1978, 539) offered a glimpse of the world that he wished to see, observing: "Society may subsist among different men as among different merchants, from a sense of its utility, without any mutual love or affection." In this world, personal relations count for little relative to market relations. For Smith (1976, 1.ii.2, 26), "In civilized society, [man] stands at all times in need of the co-operation and assistance of great multitudes [by way of the market], while his whole life is scarce sufficient to gain the friendship of a few persons."

Smith assumed that once his cultural prescriptions became universally accepted, aristocrats and workers alike would conform to the norms of the "hustling, spirited, active folks" whom he admired. I should note that Smith's unyielding antagonism toward the mass of workers, especially in the cities, seems inconsistent with his four stages approach to human betterment, in which commercial society would inevitably improve the populace. But then, despite Smith's eloquence, the world did not conform to his desires. Workers stubbornly retained their working-class culture. The gentry refused to acknowledge the achievements of people such as Smith and those with whom he identified. Alas, the meek have yet to inherit the world.

Donx Commerce

Although Smith was disappointed that the majority of his society did not share his values, he seemed to believe that somehow history was on his side. The same forces that drove his four stages theory would inevitably sweep aside the basis of the agrarian society of feudalism (see Meek 1976). In the process, the changing economic relations that Smith envisioned would undermine the commanding position of the aristocracy relative to that of the petty bourgeoisie. With the consequent rise of a modern commercial society, petit bourgeois values would take hold and dependency would inevitably decline. Accordingly, Smith informed his students:

Commerce is one great preventive of this custom [of dependency]. The manufactures give the poorer sort better wages than any master can afford. . . . The gentry of Scotland are no worse than those of England, but the common people being considerably more oppressed have much less of probity, liberality, and amiable qualities in their tempers than those of England. (1978, vi.8, 333)

Smith returned to this theme in The Wealth of Nations when he discussed how commerce contributed to the improvement of rural society. There he noted:

Commerce and manufactures gradually introduced order and good government, and with them, the liberty and security of individuals, among the inhabitants of the country, who had before lived almost in a continual state of war with their neighbours, and of servile dependence upon their superiors. (Smith 1976, III.iv.4, 412) Smith continued:

Foreign commerce and manufactures . . . gradually furnished the great proprietors with something for which they could exchange the whole surplus produce of their lands, and which they could consume themselves without sharing it either with tenants or retainers. All for ourselves, and nothing for the 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 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, (ibid., III.iv.10, 418-19)

Samuel Johnson (1775, 94) made a similar point:

Money confounds subordination, by overpowering the distinctions of rank and birth, and weakens authority by supplying power of resistance, or expedients for escape. The feudal system is formed for a nation employed in agriculture, and has never long kept its hold where gold and silver have become common.

Certainly, the deteriorating relations between lord and tenant accelerated the demise of aristocratic authority. Smith observed, "When luxury came in, this gave him [the aristocrat] an opportunity of spending a great deal and he therefore was at pains to extort and squeeze high rents from them. This ruined his power over them" (1978, iv.159, 262). In Rome, as well, "the power of nobles declined very fast when either commerce or luxury were introduced," owing to the growing antagonism between slave and master (ibid., iv.72, 227). Smith (ibid., 538) explained to his students: "Whenever commerce is introduced into any country, probity and punctuality always accompany it. These virtues in a rude and barbarous country are almost unknown."

Curiously, Smith mentioned that Hume was the only other writer who had taken this position, although as his modern editors note, his great rival, Sir James Steuart, as well as Lord Karnes, Adam Ferguson, and William Robertson, had also preceded him in connecting commerce and liberty (Smith 1976, III.iv.4, 4i2n). Moreover, at least at one point, Smith attributed the decline of the Scottish aristocracy to political rather than economic forces, arguing, "There was little trade or industry in Edinburgh before the union" (ibid., II.iii.12, 336). Consequently, he concluded, "By the union with England, the middling and inferior ranks of people in Scotland gained a compleat deliverance from the power of an aristocracy which had always before oppressed them" (ibid., V.iii.89, 944).

Smith and the Bizane Heroism of the Petit Bourgeoisie

The people with whom Smith identified crave recognition for their exploits. Sadly, other classes were unlikely to appreciate their notions of success, which were so thoroughly bound up in petty bourgeois norms. In frustration, Smith directed his hostility toward all those who differed from himself, certain that somehow the future belonged to his sort of people.

Smith strongly resented the low regard that well-off people had for the mores of lower-middle-class people with whom he identified. He knew that those of noble rank, taught to admire heroic virtues, would be unlikely to admire the scrimping and saving of a humble artisan. To do so would be to acknowledge the superiority of commercial society and the inferiority of aristocratic culture.

Smith (1978, 784) complained that, unlike the middle class, the well-todo had the opportunity to develop social graces, telling his students: "People of some rank and fortune . . . generally have a good deal of leisure, during which they may perfect themselves in every branch either of useful or ornamental knowledge of which they may have laid the foundation, or for which they may have acquired some taste in the earlier part of life."

Smith offered considerable insight into his perception of the distinction between lower-middle-class and aristocratic behavior in his Theory of Moral Sentiments. He devoted the last year of his life to rewriting this book (Smith 1759). The key materials cited here fall within the particular chapter that he revised most extensively. In this chapter, Smith (1759, 51) expressed his jealousy of his social betters, declaring:

The man of rank and distinction, on the contrary is observed by all the world. Every body is eager to look at him, and to conceive, at least by sympathy, that joy and exultation with which his circumstances naturally inspire him. His actions are the objects of public care. Scarce a word, scarce a gesture, can fall from him that is altogether neglected. In a great assembly he is the person upon whom all direct their eyes.

Here Smith did not attribute the powers of the aristocracy to their material influence over tenants and retainers. Instead, he referred to "a natural disposition to respect them" and "a habitual state of deference to those to whom they have been accustomed to look up as their natural superiors" (ibid., 53). Smith (ibid., 52) speculated: Our obsequiousness to our superiors more frequently arises from our admiration for the advantage of their situation, than from any private expectations of benefit from their goodwill." Then Smith posed the rhetorical question, How, then, can "the man of inferior rank hope to distinguish himself" (ibid., 54)? He cannot do it by imitating the behavior of the aristocracy, since "the coxcomb, who imitates their manner, and affects to be eminent by the superior propriety of his ordinary behaviour, is rewarded with a double share of contempt for his folly and presumption" (ibid.). After all, Smith asked, "Why should the man, whom nobody thinks it is worth while to look at, be very anxious about the manner in which he holds up his head, or disposes of his arms, while he walks through a room"? This man must adopt a different tactic. Smith suggested that he must win recognition "by more important virtues." He continued:

He must acquire dependents to balance the dependents of the great, and he has no other fund to pay them from but the labour of his body and the activity of his mind. He must cultivate these therefore: he must acquire superior knowledge in his profession, and superior industry in the exercise of it. He must be patient in labour, resolute in danger, and firm in distress. These talents he must bring into public view, by the difficulty, importance, and at the same time, good judgment of his undertakings, and by the severe and unrelenting application with which he pursues them. Probity and prudence, generosity and frankness, must characterize his behavior upon all ordinary occasion, (ibid., 5 5 )

Notice that Smith commended the prudent man to take on dependents, but that this sort of dependency was somehow superior to the dependency associated with the despicable nobility. Perhaps Smith saw no other way. He accepted the reality that "prudence . . . commands a certain cold esteem, but seems not entitled to any ardent love or admiration" (ibid., 216). Nonetheless, Smith (ibid., 213) observed that "the desire of being the proper objects of this respect [of equals], of deserving and obtaining this credit and rank among our equals, is, perhaps, the strongest of all our desires."

How else could the prudent man win admiration except by taking on dependents? This change in Smith's attitude toward dependency pales in comparison with the remarkable, or should I say, "fantastic" reversal, which follows. Without warning, Smith somehow endowed the prudent man with the heroic virtues typically associated with the nobility, while he rebuked the aristocrat for cowardice:

[The man without social stature] must at the same time, be forward to engage in all those situations, in which it requires the greatest talents and virtues to act with propriety, but in which the greatest applause is to be acquired by those who acquit themselves with honour. With what impatience does the man of spirit and ambition, who is depressed by his situation, look around for some great opportunity to distinguish himself? No circumstances, which can afford this, appear to him undesirable. He even looks forward to the prospect of foreign war, or civil dissension, and with secret transport and delight, sees through all the confusion and bloodshed which attend them, the probity of those wished-for occasions presenting themselves, in which he may draw upon himself the attention and admiration of mankind. The man of rank and distinction, on the contrary, whose whole glory consists in the propriety of his ordinary behaviour, who is contented with the humble renown which this can afford him, and has no talents to acquire any other, is unwilling to embarrass himself with what can be attended either with difficulty or distress. To figure at a ball is his greatest triumph, and to succeed in an intrigue of gallantry, his highest exploit, (ibid., 5 5 )

Smith's strange reverie tells us that something was amiss with the good professor. How could it be that Adam Smith, who was typically disdainful of heroic virtues, could suddenly transform his petit bourgeois role model into a hero? Could Smith have seen himself as such a hero? At least on one occasion, he did seem to cast himself into a heroic role. In The Wealth of Nations, a work that he described in a letter to Andreas Holt of 26 October 1790 as "a very violent attack upon the whole commercial system of Great Britain" (Smith 1977, 251), Smith proclaimed:

[If any one opposes the monopolist,] and still more if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest publick services, can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of famous and disappointed monopolists. (1976, V.ii.43, 471)

The Tortured Vision of Adam Smith

Why was Smith so violent in his denunciation of behavioral patterns that differed from those of the petit bourgeoisie? A psychohistorian might be inclined to paint a picture of Smith as an unworldly academic, lacking in social graces, resentful at being beholden to his social betters. Michael Balint's perceptive essay, "On Love and Hate," may be relevant here. It reads, in part:

We hate people who, though very important to us, do not love us and refuse to become our cooperative partners despite our best efforts to win their affection. This stirs up in us all the bitter pains, sufferings, and anxieties of the past and we defend ourselves against their return by the barrier of hatred, by denying our need for those people and our dependence upon them. (Balint 1965, 128)

Smith's own psychological writings offer a further clue to his attitude. According to his interpretation of human nature, the need to be correct is so powerful that even economic behavior is subordinated to it. In Smith's (1978, 352) words:

If we should enquire into the principle in the human mind on which this disposition of trucking is founded, it is clearly the naturall inclination every one has to persuade. . . . Men always endeavour to persuade others to be of their opinion even when the matter is of no consequence to them. If one advances any thing concerning China or the more distant moon which contradicts what you imagine to be true, you immediately try to persuade him to alter his opinion. And in this manner every one is practicing oratory on others thro the whole of his life. You are uneasy whenever one differs from you.

This obsession with being in control is associated with an overriding urge to dominate others. Recall that Smith had earlier recommended that persons of inferior rank acquire dependents of their own. Later, he wrote that "the love of domination and authority over others ... is naturall to mankind, a certain desire of having others below one, and the pleasure it gives to have some persons whom he can order to do his work rather than be obliged to persuade others to bargain with him" (ibid., 192; see also Smith 1976, m.ii.io, 388). Smith often dismissed the material hardships of poverty as unimportant, claiming that the real damage inflicted was the shame and mortification that it imposed on the poor. If correct, Smith's petit bourgeois heroes were truly impoverished.

Angry about the inability of the petit bourgeoisie to persuade the rest of society, Smith took his revenge in this brief literary flourish. In this flight of fancy, he transformed the resentment and envy of the petit bourgeois into a heroic spirit, although Smith normally acknowledged that most of the petit bourgeoisie were unsuited for military life (see chapter 8). Yet, as Smith (1978, 395-96) himself told us, "the disposition to anger, hatred, envy, malice, [and] revenge . . . renders a man . . . the object of hatred, and sometimes even of horror, to other people." He continued:

Envy is that passion which views with malignant dislike the superiority of those who are really entitled to all the superiority they possess. The man, however, who, in matters of consequence, tamely suffers other people, who are entitled to no such superiority, to rise above him or get before him, is justly condemned as mean-spirited.

Such weakness, however, is commonly followed by much regret and repentance. ... In order to live comfortably in the world, it is upon all occasions as necessary to defend our dignity and rank, as it is to defend our life and our fortune, (ibid.)

Envy might have been stronger in Scotland than elsewhere, if we can trust Samuel Johnson's (1774, 117) assessment:

The Scots, with a vigilance of jealousy which never goes to sleep, always suspect that an Englishman despises them for their poverty, and to convince him that they are no less rich than their neighbours, are sure to tell him a price higher than the true. When Lesley, two hundred years ago, related so punctiliously that a hundred hen eggs, new laid were sold in the Islands for a penny, he supposed that no inference could possibly follow, but that eggs were laid in great abundance. Posterity has since grown wiser; and having learned, that nominal and real value may differ, they now tell stories, lest the foreigner should happen to collect, not that eggs are many, but that pence are few.

Smith, like many other aspiring Scottish intellectuals, took pains to speak more like an English native (Muller 1993, 21-22). So, perhaps, Smith's ethnic background may have played a role. Still, we should be careful about pushing these ideas too far. As appealing as the individualistic explanation of Smith's motives might be, it is inadequate. Similar ideas repeatedly appear in the works of Hume and other writers. These thoughts were intimately related to the revolution in human affairs that was occurring at the time. In the apt phrase of Elizabeth Fox-Genovese and Eugene Genovese (1983, 98):

A traditional world view that subordinated the individual to the community and justified him or her according to social function yielded to a modern world view that subordinated society to the individual and justified social institutions as serving individual needs. The rights of the group and the obligations of the individual gave way to the obligations of the group and the rights of the individual.

Tocqueville (1945, 1:56) shrewdly noted one of the significant consequences of the new society that was evolving: "Democratic institutions have a very strong tendency to promote the feeling of envy in the human heart."

Smith and Populism

The resentment that Smith expressed bears a strong resemblance to populism. In general, populism appeals to people who feel that they are neither capitalists nor wage earners. Like Smith, populists feel threatened both by those above and below them in social status and usually blame their problems on the machinations of powerful elite groups. Populists frequently reject complex analyses of the world in favor of more simplistic solutions. The most common populist nostrums are paper money schemes or the break up of monopolies. Although laissez-faire is not usually associated with populism, it probably should be. As Noel Thompson (1977; 1984) has shown, the purportedly Ricardian socialists should be considered populists, or even better, Smithian anarchists.

I suspect that Smith's work earned much of his popularity because he expressed so eloquently what others deeply felt. Unlike many of the less educated populists, Smith was usually able to sublimate his rage into his charming theory of the invisible hand, in which competition and even aggression is channeled into harmonious actions that better the world. Frequently, cracks appeared in this fantasy, and the harsh reality of the world around him intruded. At such times, we can catch a glimpse of Smith's theory of primitive accumulation.

Smith's vision of the bizarre heroism of the petit bourgeoisie seems to reflect his own rage at those who refused to adopt the values that were so dear to him. Even if Steuart's language was brutal, I suspect that society has more to fear from the repressed emotions of someone like Smith. His metaphor of the invisible hand may be relevant in this regard. We may equate friendship with an open, outstretched hand, but an invisible hand has something sinister about it. In this spirit, Macbeth requested that the darkness of night, "with thy bloody and invisible hand," cover up the crimes he was about to commit [Macbeth 2.2). Or we could turn to Friedrich Nietzsche's eerie discussion of the invisible hand:

If I wanted to shake this tree with my hands I should not be able to do it. But the wind, which we do not see, tortures and bends it in whatever direction it pleases. It is by invisible hands that we are bent and tortured worst. ... It is with man as it is with the tree. The more he aspires to height and light, the more strongly do his roots strive earthward, downward, into the dark, the deep— into evil.

Adam Smith's Socio-Psychological Theories of Harmony

John Maynard Keynes (1938, 330) once remarked: "It is chiefly in the description of Adam Smith's intellectual progress and in the analysis of influences which went to make the Wealth of Nations that there may be room for something further." I suspect that Keynes was unaware of how much of an understatement he was making.

The section of Adam Smith's Lectures on Jurisprudence dealing with the subject of police gives us a most remarkable insight into his struggle to obscure the harsh reality of primitive accumulation, within the context of the theoretical structure of The Wealth of Nations. Smith (1978, 333) began this section by commenting that the state had an obligation to maintain the cheapness of commodities. He then went on to note that in spite of the rarity of some materials, advances in technology could make things much more affordable (ibid., 337). Such progress requires the enforcement of the law, which is necessary for the preservation of "that useful inequality in the fortunes of mankind" (ibid., 338). This unexceptional discussion seems to somehow have aroused Smith's curiosity about the equity of the law.

Are the poor merely victims of the law? Smith, as a social scientist, observed that laws were required to protect the rich from the poor (ibid., 208). This idea sat poorly with Smith, the ideologue.

Although Smith admitted to his Glasgow students of 1762-1763 that "the labour and time of the poor is in civilized countries sacrificed to the maintaining of the rich in ease and luxury," he apologized for this situation with the modest claim that the most disadvantaged members of society enjoy a far greater degree of "plenty and opulence" than they would in a "savage state" (ibid., 340, 338). In fact, he asserted, "An ordinary day labourer . . .has more of the conveniences and luxuries than an Indian [presumably Native American] prince at the head of 1,000 naked savages" (ibid., 339).

Smith here went further than Locke (1698, 314-15), who had merely asserted that the English worker "feeds, lodges and is clad" better than an Indian prince. Smith may well have come to this thought by way of Bernard Mandeville (1723, 26), who wrote that "the very poor Liv'd better than the Rich before." He then turned to another thought of Mandeville, who had observed that the production of a fine crimson or scarlet cloth requires a multiplicity of trades working together in its manufacture (Mandeville 1723, 356-57). The democratic Smith used the example of a blue coat of a worker rather than a scarlet cloth, but the thought remained unchanged nonetheless.

The unfortunate masses huddled in great cities would likely not have agreed with Smith's assertion that they had "more of the conveniences and luxuries" than an Indian prince. Neither would the Ojibwas who visited London in the 1840s. They reportedly told the English who attempted to engage them in conversation:

[We are] willing to talk with you if it can do any good for the hundreds and thousands of poor and hungry children we see in your streets every day. . . . We see hundreds of little children with their naked feet in the snow, and we pity them, for we know they are hungry. . . . [W]e have no such poor children among us. (cited in Tobias 1967, 86)

In general, Smith did not have much patience with such uncomfortable intrusions of reality. His goals were more ideological. Still, for some reason here, Smith let himself stray from his narrow ideological course. He returned to his idea of the relative affluence and comfort of his contemporaries, asking how the poor of his day could live better than a rich Indian prince? He mused:

But that the poor day labourer or indigent farmer should be more at ease, notwithstanding all oppression and tyranny, should be more at his own ease than the savage, does not appear so probable. Amongst the savages there are no landlords nor usurers, no tax gatherers, so that every one has the full fruits of his own labours, and should therefore enjoy the greatest abundance; but the case is otherwise. (Smith 1978, 339-41)

So here is the key: The poor laborer has more commodities, but also less leisure than the savage. Smith was aware of the importance of leisure in primitive society. Nonetheless, he ended his lecture without speculating about why the laborer would rationally choose to substitute commodities for free time. Smith did not even raise the possibility that this transformation may not have been voluntary.

In his earlier works, Smith had addressed the role of class in the evolution of leisure. He even had attributed the excellent poetry of primitive cultures to the enormous amounts of leisure that they enjoyed (Smith 1762-63, Lecture 2 1 , January 1 7 6 3 ) . In contrast, he noted that "In civilized nations, the inferior ranks of people have very little leisure, and the superior ranks have many other amusements" (Smith 1790b, 187; see also 1790a, 50). In any case, the elimination of his contemporaries' leisure does not seem to have aroused Smith's curiosity.

The next day Smith expanded upon his remarks from the previous lecture:

The labour and time of the poor is in civilized countries sacrificed to the maintaining of the rich in ease and luxury. The landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his exactions from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money. But every savage has the full enjoyment of the fruits of his own labours; there are no landlords, no usurers, no tax gatherers. . . . [T]he poor labourer . . . has all the inconveniences of the soil and season to struggle with, is continually exposed to the inclemency of the weather and the most severe labour at the same time. Thus he who as it were supports the whole frame of society and furnishes the means of the convenience and ease of all the rest is himself possessed of a very small share and is buried in obscurity. He bears on his shoulders the whole of mankind, and unable to sustain the weight of it is thrust down into the lowest parts of the earth from whence he supports the rest. In what manner then shall we account for the great share he and the lowest persons have of the conveniences of life? (Smith 1978, 340-41)

This last sentence is curious. In a prior lecture, Smith had asserted that the poor laborer was better fed, clothed, and housed than a savage. In this session, just as his students were hearing about the same laborer's "small share," Smith suddenly asked them to account for the "great share he [has] ... in the conveniences of life."

What follows is just as remarkable. Smith seems to have unconsciously stumbled onto the classical theory of primitive accumulation. Recognizing that the unfortunate agricultural laborers, who represented the majority of the workers in his society, find themselves compelled to work long hours for a meager existence, Smith swiftly fled from that subject.

At this point, Smith found comfort in his early theory of the division of labor. His next words to his students were, "The division of labour amongst different hands can alone account for this" (ibid., 341). However, the division of labor was completely irrelevant to the question at hand, namely, the condition of the poor laborer.

Perhaps his blue coat reminded him of Mandeville, who had earlier written of the division of labor (see Mandeville 1723, 284). In any case, we hear nothing more about the effect of the increased working day. Instead, Smith turned the attention of his audience to what he called a "frivolous" example, the pin factory. No wonder Schumpeter could complain of the lack of attention given to Smith's use of the division of labor. Schumpeter (1954, 107) emphasized, "Nobody, either before or after A. Smith, ever thought of putting such a burden upon division of labor."

In the concluding few lectures, we find a compressed version of The Wealth of Nations (see Stewart 1811, 275). In short, Smith seems to have developed his great work as an attempt to evade the logic of the classical theory of primitive accumulation.
Smith's Anthropology of Self-Betterment

Even in his imaginary account of the social division of labor, Smith fell into confusion regarding the forces that could overcome the inertia of traditional society. For example, he described a static state of affairs prior to primitive accumulation. He speculated that "in that rude state of society in which there is no division of labor, in which exchanges are seldom made, and in which every man provides enough for himself, it is not necessary that any stock [meaning capital] should be accumulated" (Smith 1976, II. 3, 277; see also Marx 1967, 2:140n).

Smith seemed to suggest that this rude state could persist even well into modern times. For example, he noted that in "the Highlands of Scotland, every farmer must be a butcher, baker and brewer for his own family" (Smith 1976, 1.iii.2, 31; see also Stewart 1855, 1:327-28).

Nonetheless, Smith speculated elsewhere that each society was inevitably bound to transcend the rude state because a social division of labor naturally evolves from agriculture. In this regard, he asserted:

[When industry is not] introduced ... by the violent operation ... of the stocks of particular merchants or undertakers, who established them in imitation of some foreign manufactures . . . , manufactures for distant sale . . . grow up of their own accord, by the gradual refinement of those coarser manufactures. . . . Such manufactures are the offspring of agriculture. (Smith 1976, III.iii. 19-20, 407-9)

Although Smith associated the social division of labor with a market society, he also taught that it preceded capital and market societies. He informed his students: "The compleat division of labour ... is posteriour to the invention of agriculture. . . . The smith, . . . the carpenter, the weaver and the tailor soon find it in their interest not to trouble themselves with cultivating the land" (Smith 1978, 584). He contended that even precapitalist societies, such as the Hottentots, developed a social division of labor because of the economies associated with specialization (ibid., 583-84; see also Meek 1977a, 52). Thus Smith, the anthropologist, discovered a historical motivation for the social division of labor that was not "the effect of any human policy" but rather "the necessary consequence of a natural disposition ... to truck, barter and exchange" (cited in Meek 1977a, 38; see also Smith 1976, 2711).

This sort of anthropological principle was not by any means novel. John Wheeler, in his 1601 Treatise on Commerce, had observed, "There was nothing in the world so ordinarie, and naturall unto men, as to contract, truck, merchandize, and traffike one with another" (cited in Appleby 1978, 94). Smith's merit was in pushing this principle further than anyone else.
admin
Site Admin
 
Posts: 27268
Joined: Thu Aug 01, 2013 5:21 am

Re: The Invention of Capitalism: Classical Political Economy

Postby admin » Tue Feb 20, 2018 11:36 pm

Part 2 of 2

Smith's Contradictory Anthropology of Class

On a more realistic level, Smith did not actually believe in the universality of his own anthropological principle. Instead, he held a contradictory anthropology based on class. For example, we have already seen that Smith posited one anthropology for the poor, when explaining the need to defend property against the passions of the working classes. Smith proposed another anthropology for the gentry, who remained aloof from the market by refusing to engage their savings in capitalistic ventures. Because the gentry did not share the middle-class passion for trucking and bartering, Smith launched a furious attack on them.

Smith was not unique in attacking the gentry for their disregard for market-oriented behavior. Indeed, as early as 1618, Francis Bacon had advised that prosperity requires that a nation not be overburdened by clergy or nobility, "for they bring nothing to stock" (cited in Appleby 1978, 115). Defoe (1724-26, 596), too, had charged that "the gentry have no genius to trade; 'tis a mechanism which they scorn,. . . they would not turn their hands toward business." Steuart (1767, 84) also felt that trading was beneath the gentry, although he was sympathetic to their behavior.

As we already noted, Smith attempted to provide a theoretical basis for his contempt of the gentry with his theory of unproductive labor. He contended that the creation of a shirt would only be considered productive if it were eventually purchased; if it came from the hands of a servant, the act of producing the shirt would be unproductive (Smith 1976, II. hi). Of course, poorer households that produced their own goods were also guilty of not engaging in productive labor.

By disconnecting his critiques of the gentry and the working classes from his anthropology of self-betterment, Smith managed to hide the class nature of his analysis of human society, thereby lending an illusion of universality of this principle. Smith could not consistently maintain this universalist fiction. When he addressed matters concerning the actual behavior of various groups, Smith switched to his class-based anthropologies, in effect refuting his pretension to a universalist anthropology.

In both of his anthropologies, Smith failed to make explicit the distribution of property. As Governor Pownall of Virginia explained to him, "Before a man can have the propensity to barter, he must have acquired something somewhat" (Pownall 1776, 338).

The Other Invisible Hand

Smith seemed to think that he could resolve the contradictions in his system by invoking a wonderful harmonizing property of the market. Accordingly, we read in The Theory of Moral Sentiments that "the rich . . . are led by an invisible hand to make nearly the same distribution of the necessaries of life which would have been made had the earth been divided into equal portions among all its inhabitants" (Smith 1769, 184-85).

Smith here said no more than Steuart (1767, 1:193), who had earlier written, "The most delicate liver in Paris will not put more of the earth's production into his belly than another: he may pick and choose, but he will always find that what he leaves will go to feed another." In fact, this version of the invisible hand leads to the same sort of equality that Steuart presumably envisioned when he dreamed of resurrecting the Spartan slave republic.

Smith's notion of the harmonious workings of the invisible hand does not resolve the confusion between his two anthropologies. To make this line of reasoning coherent, he should not have addressed the subject in terms of the "distribution of the necessaries of life," but rather with regard to the distribution of the means of production. After all, he himself had strongly emphasized the importance of "stock."

Even if Smith had been justified in ignoring the distribution of the means of production, he very well understood that consumption goods, in general, were not shared equally among all people. There, he acknowledged that although "the desire of food in every man is limited by the narrow capacity of the human stomach," other forms of consumption seem "to have no limit or certain boundary" (Smith 1976, 1.xi.c.7, 181). He had observed that in spite of the invisible hand, "for one very rich man, there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many" (Smith 1978, 670; see also Meek 1977c, n).

Smith finally did shift his attention from consumption to production in The Wealth of Nations. Instead of ensuring a kind of justice in the sphere of consumption, in this book the invisible hand works in the sphere of production, where "private interests and passions naturally dispose . . . [people] to turn their stock toward the employments which in ordinary cases are most advantageous to society" (Smith 1976, IV.vii.c.88, 630).

Unfortunately, Smith's assertion that the distribution of stock is advantageous for society remains little more than meaningless cant without some analysis of the effect of the arrangement of the ownership of that stock on the distribution of income. After all, we have already seen that Smith (ibid., I.viii.36, 96) himself had observed: "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."

Nonetheless, Smith's discussion of the invisible hand reveals a great deal about his method of analysis. On some level, he recognized the conflict between his class-based explanation of the evolution of the social division of labor and his alternative explanation framed in terms of market forces. Yet when dealing with class antagonisms, Smith continually muddied the issues rather than facing up to the full implications of class conflict.

The Political Economy of Vanity

In his effort to obscure further any disharmonious forces within capitalism, Adam Smith deployed a fascinating psychological analysis of wealth. In this context, he claimed not to value the accumulation of wealth on account of its contribution to prosperity. Consider how he dismissed the problem of poverty in The Theory of Moral Sentiments, where he speculated, "Avarice overrates the difference between poverty and riches" (Smith 1759, III.3.30, 149). Referring to the misfortunes that people suffer, Smith supposed that "the greater part of them have arisen from [people] not knowing when they were well, when it was proper for them to sit still and to be contented" (ibid., III. 3. 32, 150).

Smith counseled his readers to lead a life without luxury, even of the most modest sort:

How many people ruin themselves by laying out money on trinkets of frivolous utility? . . . Power and riches appear then to be, what they are, enormous and operose machines contrived to produce a few trifling conveniences to the body, consisting of springs the most nice and delicate, which must be kept in order with the most anxious attention and which in spite of all our care are every moment to burst into pieces, and to crush in their ruins their unfortunate possessor. They are immense fabrics, which it requires the labour of a life to raise, which threaten every moment to overwhelm the person that dwells in them, and which while they stand, though they may save him from some of the smaller inconveniences, can protect him from none of the severer inclemencies, can protect him from summer shower not the winter storm, but leave him always as much, and sometimes more exposed than before, to anxiety, to fear and to sorrow, to diseases, to danger, and to death, (ibid., IV. 1.5 -8, 180-83)

In short, people deceived themselves in working toward material success. In The Theory of Moral Sentiments, Smith (1759, I.iii.2.1, 50) wrote a chapter titled "Of the Origin of Ambition, and of the Distinction of the Ranks," beginning with the notion that "we pursue riches and avoid poverty" only to avoid the humiliation of poverty, although "the wages of the meanest labourer [can] supply the necessities of nature."

According to Smith, even the "meanest labourer" spends a "great part [of his wages] . . . upon conveniences, which may be regarded as superfluities, and that, upon extraordinary occasions, he can give something even to vanity and distinction" (ibid.). Again, in The Wealth of Nations, Smith reassured his readers that the wages of the English workmen were above this lowest possible rate (Smith 1976, 1.viii.28, 91).

Despite the folly of chasing after material success, the vain desire for ostentation ultimately served a noble purpose:

And it is well that nature imposes upon us in this manner. It is this deception which rouses and keeps in continual motion the industry of mankind. It is this which first prompted them to cultivate the ground, to build houses, to found cities and commonwealths, and to invent and improve all the sciences and arts which enable and embellish human life; which have entirely changed the whole face of the globe, have turned rude forests into agreeable and fertile plains. (Smith 1759, IV.1.9, 183)

That the concluding words of the citation were identical to his translation of a passage from Rousseau's Discours sur l'origine de l'inegalite, published in Smith's "Letter to the Editors of the Edinburgh Review," hints at the ideological nature of Smith's approach (see Smith 1755-56, 250). There, he was disputing Rousseau's contention that the acquisition of private property caused inequality.

In the very same paragraph in The Theory of Moral Sentiments in which Smith repeated his words about changing rude forests, he proposed his previously cited theory that the invisible hand would miraculously eliminate inequality. Again, we arrive at the conclusion that Smith's concern with workers' welfare had nothing to do with their material circumstances. For Smith, what counted was their mental state, which he hoped would eventually conform to that of the petit bourgeoisie.

How Fast Does the Social Division of Labor Evolve!

Smith (1978, 88) acknowledged to his students that the exclusive privileges of corporations had been able "to bring about . . . the separation of trades sooner than the progress of society would naturally effect." This last point may be interpreted as an aside noted down by a diligent student. Certainly, we find nothing of the sort in The Wealth of Nations for it would have conceded much ground to the theory of Steuart.

Smith did observe in The Wealth of Nations that a "particular manufacture . . . may sometimes be acquired sooner" by virtue of encouragement (Smith 1976, IV.ii.13, 458); but he alleged that such actions slow down the overall process of accumulation, thereby hindering the "natural evolution" of the social division of labor. Even if we grant that market forces alone could have gradually worn away traditional society, Smith provides no information about the pace of this transition in the absence of primitive accumulation. We might infer, however, that since the division of labor precedes agriculture, the social division of labor evolves at glacial speeds.

In addition, by implying that (i) the contemporary social division of labor was the result of mutually advantageous adjustments and (2) that this process is a continuation of social behavior that stretches back into prehistoric times, Smith presented the misleading inference that the creation of the social division of labor was a natural process, devoid of conflict. We are left with his fable about hunters and artificers of bows and arrows specializing according to their particular skills.

Indeed, a social division of labor may be seen in preagricultural societies. Harmonious cooperation can even be found among the flora and fauna (Engels 1954, 402-5; see also Wynne-Edwards 1962); however, merely to analyze the social division of labor as a natural history is to sacrifice all hope of understanding the mechanism that governs its evolution in human society.

Clearer thinkers such as Marx (1977, 335) and Edward Gibbon Wakefield agreed that we should more properly seek the origins of the differentiation among employments in slavery rather than purely technical explanations. One can even find such a suggestion in Smith's (1978, 196) own work.

True, market forces could eventually lead to a more elaborate social division of labor. A decline in self-sufficiency could create a home market for mass-consumption goods; yet such a home market begins from a very small base and could not reach a substantial size overnight. Are we to believe that those who stood to profit from the growth of capitalism would stand by and let the social division of labor precede at such a slow pace?

The mercantile school, in particular, did not care to wait for the natural maturation of a home market, preferring to tap the riches of world markets as soon as possible. To this end, they were willing to launch an immediate attack on the self-sufficient household as a first step in stimulating the production of commodities for export (Marx 1967, 3:785). As a result, the difference between the supposedly Smithian and mercantile paths was substantial. As Marx (ibid.) noted:

The characteristic feature of the interested merchants and manufacturers of that period, which is in keeping with the stage of capitalist development represented by them, is that the transformation of feudal agricultural societies into industrial ones and the corresponding industrial struggle of nations on the world-market depends on an accelerated development of capital, which is not to be arrived at along the so-called natural path, but rather by means of coercive measures. It makes a tremendous difference whether national capital is gradually and slowly transformed into industrial capital, or whether this development is accelerated by means of a tax which they impose through protective duties mainly upon landowners, middle and small peasants, and handicraftsmen, by way of accelerated expropriation of the independent direct producers, and through the violently accelerated accumulation and concentration of capital, in short by means of accelerated establishment of conditions of capitalist production. It simultaneously makes an enormous difference in the capitalist and industrial exploitation of the natural national productive power.

Arthur Young (1774, 298; cited in Deane 1957, 88; see also Young 1794, 436), the peripatetic agricultural writer who was unique in showing respect for Steuart, reflected the prevailing attitude when he characterized "trade and manufactures of . . . sickly and difficult growth; if you do not give them active encouragement they presently die."

Here again we confront the stark contrast between Steuart and Smith. For Steuart, trade first begins with government support of luxury exports. Gradually, inland commerce takes on more significance (Steuart 1767, 1:347-49). Smith, by contrast, saw the acceleration of domestic exchanges as a consequence of the expansion of internal markets. He associated this tendency with "natural" progress as opposed to the contrived commerce that Steuart identified as the motor force (Smith 1976, III.i.8, 380). As a result, Smith wrote as if he would have preferred to wait for the household economy to atrophy on its own as the market withdrew economic energies away from traditional activities.

Smith believed that agricultural society would naturally transform itself into an urban commercial society in short order. In truth, even the towns, which were central to Smith's theory of economic development, began as artificial units that were granted special privileges by the state (see Merrington 1976, 180-82). Later capital shifted much of its activity to places, such as Leeds, Birmingham, Manchester, where it could be less encumbered by traditional labor regulations. In these rural sites workers no longer passed through apprenticeships, but remained as low-paid underlings (Ashton 1972, 15-16, 94). In the northern colonies of North America, however, towns did seem to develop more like Smith had envisioned the process (see Bidwell 1916, 256-62), but despite his best efforts, the preponderance of the colonial experience flew in the face of Smith's theory of harmonious economic development.

Was Smith merely being disingenuous in pretending that market forces were sufficient to cause accelerated economic development? After all, Britain had colonial rivals who could profit from any possible lethargy in British development. Rosa Luxemburg (1968, 370), discussing the course of the transformation of colonial expansion, noted:

If capital were here to rely on the process of slow internal disintegration, the process might take centuries. To wait patiently until the most important means of production could be alienated by trading . . . [would be] tantamount to renouncing the production forces of these territories altogether.

Or was Smith once again providing ideological cover for the market society that he was witnessing?

The Natural Evolution of the Division of Labor

According to Smith, the progressive social division of labor should be understood exclusively in terms of the anthropological principle of the natural disposition of human beings. He counseled that we should prohibit any attempts to affect the division of labor through political action since such efforts were "evident violations of natural liberty" (Smith 1976, IV.v.b.16, 530). Consequently, they are "unjust and as impolitic as unjust" (ibid.).

On these grounds, Smith (ibid.) concluded, "It is in the interest of every society that things such as this kind [i.e., the creation of a new social division of labor] should never be forced or obstructed." Thus Smith (ibid., 466) also criticized drawbacks as destructive of "the natural division and distribution of labor in the society."

In 1749, Smith first presented the division of labor as unfolding naturally within the bosom of the countryside, claiming:

Little else is requisite to carry a State to the highest degree of opulence from the lowest barbarism, but peace, easy taxes and a tolerable administration of justice, all the rest being brought about by the natural course of things. All governments which thwart this natural course, which force things into another channel, or which endeavour to arrest the progress of society at a particular point are unnatural and to support themselves are obliged to be oppressive and tyrannical, (cited in Stewart 181 1, 322)

Again, in The Wealth of Nations, Smith (1976, IV.v.b.43, 540; see also II.iii.28, 341 ) repeated his claim that the "natural effort of every individual to better his own condition" was sufficient to guarantee economic development. According to Smith (1976, IV.v.b.43, 540), "This principle is so powerful . . . that it is alone, and without any assistance capable of carrying on the society of wealth and prosperity." Smith's theory of the orderly progress of society excluded the possibility that primitive accumulation may have played a role in economic development or that economic hardship for the masses may have been an expected outcome of economic progress.

Smith also theorized that the social division of labor could be understood in terms of the individual division of labor within the workshop; thus, the "separation of different trades and employments from one another seems to have taken place in consequences" of the advantages of the division of labor in the workshop (ibid., I.i.4, 15). This analogy formed the foundation of Smith's basic argument: Since within the workshop, a more refined division of labor is economical, surely people would choose to arrange their employments in a manner that would create a more progressive social division of labor.

Smith's theory of the natural evolution of the division of labor served a crucial purpose in his work. His teacher, Frances Hutcheson, had opposed the works of Bernard Mandeville at every opportunity. In one of Smith's early works, he followed his teacher's tradition, taking both Mandeville and Rousseau to task for "suppos[ing] that there is in man no powerful instinct which necessarily determines him to seek society for its own sake" (Smith 1755-56, 250).

Smith obstinately attempted to prove that capitalism would naturally evolve within a community of independent households. His hypothetical account of the history of the social division of labor is satisfactory as far as it goes. We can accept that petty commodity production could evolve from agriculture. Farmers can work on their own as shoemakers or weavers once their field work is done. Smith's reference to the division of labor in the workshop at first sounds even more substantial, but it substantially fails on one count: it never explains the sudden appearance of workshops where employers who own the means of production hire workers who have no capital of their own.

Unlike Steuart (1767, 1:109), who advocated extraeconomic measures to create "a free and perfect society which is a general tacit contract, from which reciprocal and proportional services result universally between all those who compose it," Smith was obliged to indicate how such a social division of labor would naturally evolve from market relations. Unfortunately, Smith failed miserably in this regard.

Stock and the Social Division of Labor

Smith did not consistently analyze the social division of labor in terms of the "separation of different trades and employments from one another." He also discovered a class-based principle to explain the phenomenon. This analysis centered on the concept of "stock" or, to be more precise, capital. In describing this second type of analysis, Smith (1976, II.intro.3, 277) boldly asserted, "The accumulation of stock must, in the nature of things, be previous to the division of labour." Within this context, people can no longer simply specialize in one or another occupation. Now a prior accumulation of stock is a precondition.

On its face, the assertion that stock (meaning capital) must exist prior to a division of labor seems to be utter nonsense. Smith (1978, 522) himself noted: "Til some stock be produced there can be no division of labour, and before a division of labor stock be produced there can be very little accumulation of stock." Are we to believe that people who were not engaged in market relations somehow plowed with their fingernails and cut wood with their teeth? As Mountiford Longfield (1834, 190) suggested: "Imagine a number of intelligent and industrious men, placed in a fertile country . . . utterly destitute of capital. With what difficulty could they eke out a miserable subsistence, possessing no tools except what they could fashion with their hands, and teeth, and nails." Of course, Smith could not have meant that people had no tools before the social division. For him, the term "stock" usually had a special meaning. It represented capital in particular, rather than tools and equipment in general. More specifically, Smith's stock referred to means of production held by a group of people who employed other people to use them.

Smith, however, is not consistent in this respect. In his lectures, he informed his students: "The number of hands employed in business depends on the stored stock in the kingdom. . . . Many goods produce nothing for a while. The grower, the spinner, the dresser of flax, have no immediate profit" (Smith 1978, 365). Since people produced flax and spun linen before capitalism, we can wonder how they were able to do so without stock. Yet, according to The Wealth of Nations, only an increase in capital was capable of bringing about an increase in production (Smith 1976, II.iii.32, 342).

Is Smith's confusion about the nature of stock here an isolated lapse? His friend, Turgot, whom nobody has to my knowledge accused of being an unworldly professor, used an almost identical line of reasoning in his Reflections on the Formation and Distribution of Wealth.

In the first two sections, Turgot indicated how diversity of land can lead to barter, but not wage labor. The institution of wage labor arises out of a natural history of commodities quite similar to Smith's. Wheat must pass from grain to flour to bread; cattle are raised, then their hides are tanned and made into shoes. "If the same man who cultivates on his own land these different articles, and who raises them to supply his wants was obliged to perform all the intermediate operations himself, it is certain he would succeed very badly" (Turgot 1766, 5). Consequently, "everyone profits" from a more refined social division of labor (ibid., 6). In the next paragraph, however, Turgot began by introducing us to a new individual, the "mere workman, who depends only on his hands and his industry . . . [who] has nothing but such part of his labour as he is able to dispose to others" (ibid., 7). Like Smith, Turgot neglected to explain exactly how the transition from an equal ownership of land with which he began his exposition to a situation in which some are reduced to the status of "mere workmen" is in the interests of these people. Such is the nature of political economy!

Jacob Viner (1965, 128-38) suggested that the parallelisms between Smith and Turgot may not have been coincidental, although Peter Groenewegen (1969) makes the case that they may have been. In any event, Smith went further than Turgot.

In conclusion, Smith's assertion about the priority of stock raised many questions. First, we might ask again, what then was the origin of this stock? Does it fall from the air? How do the means of production suddenly become stock? If it does not come from primitive accumulation, how is it that one group of people came to possess stock and another group has none? Unfortunately, Smith never offered any satisfactory answers.

The Origin of Stock

For Smith, the introduction of stock remained an unexplained event that somehow changed the entire nature of society. According to Smith, "As soon as a stock has accumulated in the hands of particular persons, some of them will naturally employ it in setting to work industrious people" (Smith 1976, 1.v.5, 65).

We might ask, why do the industrious people need these particular persons to set them to work? Smith's (ibid., I.viii.8, 83) answer was that "the greater part of the workmen stand in need of a master to advance them the materials of their work, and their wages and maintenance." Smith had the good sense not to include capital goods in his account, since many workers owned their own tools at the time (see Ashton 1972, 217).

Smith wrote nothing to indicate how this new principle suddenly becomes dominant. Obviously, the introduction of stock changed the world. Instead of picturing a society in which workers voluntarily chose their occupations, Smith (ibid., III.v.12, 362) even lumped together "labouring cattle" and "productive labourers" in his description of a world dominated by stock.

Admittedly, the conflating of laborers and cattle was not unique, as we saw in discussing Mirabeau. In addition, John Locke (1698, 307) had written, "Thus the Grass my Horse has bit; the Turfs my Servant has cut; and the Ore I have digg'd . . . become my Property," but Smith went much further.

In fact, Smith attributed so much importance to stock that we are told "stock cultivates the land; stock employs labour" (Smith 1976, V.ii.f.6, 849). What would possess a thinker of the stature of Smith to resort to such ridiculous reasoning?

No wonder the dumbstruck Piercy Ravenstone (1824, 38-39) exclaimed:

The word, capital, is sufficient to account for every thing. If nations grow populous, it is the effect of capital. If they direct their industry to the cultivation of their fields, it is capital lends them lands. ... If they build cities, and encourage manufactures, it is still the effect of capital. . . . Whence came the capital that creates all these prodigies? Adam left none to his children. . . . Capital like all the productions of man, has had a beginning; but how that which is the result of accumulation could act before accumulation took place, could be its cause is a problem.

Smith indicated another dimension to his befuddlement in writing about the origin of capital in his chapter on money in The Wealth of Nations. Here, he began with a historical treatment of money as a unit of account (Smith 1976, book 1, chap. 4). He seemed unable to move beyond that point; after a long series of anecdotes about ancient money, he ventured to promise to examine the rules that determine exchangeable value. Suddenly, he shifted to a paragraph on the difference between use values and exchange values (ibid., I.iv.13, 44). What followed, however, was a disappointing introduction to his superficial treatment of value as the sum of the component parts of wages, profits, and rent. Never once did he mention how he was able to justify his jump from the armor of Diomede to the wages of labor (ibid., I.iv.4, 39).

In the end, Smith's confusion about the origins of capital seems to have served a good purpose, since it put Marx on the track of his own theory of the so-called primitive accumulation.
The Two Principles of the Social Division of Labor

If effect, Smith proposed two principles regarding the social division of labor. In the first, occupational-based analysis, the social division of labor evolves because people voluntarily choose specialized occupations. The second, and contradictory principle regulating the social division of labor, divides society into classes, one of which is defined by the ownership of stock. Each principle has its own underlying anthropology. Each has its own intended use.

The division of the social labor process into occupations was a useful tactic to explain the harmony of the marketplace through the example of the mutually beneficial nature of barter among independent workers. The class-based analysis was conducive to recognizing conflict. Thus, for instance, the occupational-based analysis led Smith (ibid., i.ii.2, 26-27) to discover the socially desirable results of the self-interest of the butcher, brewer, and baker. In contrast, Smith's class-based theory inclined him to observe that the interest of capital in general "has not the same connexion with the general interest of society" (ibid., I.xi.p.10., 266).

Within the class-based analysis, we can no longer explain capitalist social relations by a "natural disposition ... to truck barter or exchange." Also, the second principle requires a different theory of value. As Edward Gibbon Wakefield (1835, 2:230-3 in) noted in his commentary on Smith's chapter "On the Profits of Stock" in The Wealth of Nations:

Treating labour as a commodity, and capital, the produce of labour, as another, then, if the value of these two commodities were regulated by equal quantities of labour, a given quantity of capital would, under all circumstances, exchange for that quantity of capital which had been produced by the same amount of labour; antecedent labour, as capital has been termed, would always exchange for the same amount of present labour.

On the whole, Smith's class-based theory was more consistent than his theory of occupational cooperation. Moreover, Smith presented the former as a system of administration to be implemented in practice, whereas he placed his occupational-based theory in the ideological sections of his famous work. Still, the contrast between an occupational-based and a class-based analysis of society, although not made wholly explicit by Smith, remains a great achievement.

Stock and the Transition to Wage Labor

Edmund Spenser (1591, 130) once wrote, "For why should he that is at libertie make himself bond? Sith then we are free borne, Let us all servile base subjection scorne." Had Smith dared to wrestle with Spenser's question, he would have written a greater book, but one that would have met the same fate as Steuart's work. Instead, Smith laid the groundwork for modern economic theory by focusing on exchanges.

Exchanges, in and of themselves, could not explain such a fundamental modification of the economic system as occurred with the introduction of stock (Marx 1967, 3:325-27). Yet Smith was unable to come to grips with the transition from the self-sufficient household to the capitalist mode of production. He could only come as close as barter, or even simple commodity production, but the leap to wage labor was beyond him.

Smith gave no indication that he in any way comprehended the move from the "rude state" to one in which people who were once able to live without "stock" now found themselves "stand[ing] in need of those particular persons," the capitalists, who are able to claim a reward for their "stock." He might have suggested that with population growth, the division and subdivision of farms leaves some people dependent on wage labor. Many historians might even be satisfied with such an explanation, but this force would be too slow to cause the rapid economic changes that were occurring. Besides, in Smith's laboratory, the Scottish Highlands, depopulation was the order of the day.

In any case, Smith never squarely faced the issue of the change in the mode of production, as the self-sufficient household gave way to wage labor. He presumably left his analysis of the specifics of the transition vague because he assumed that the institution of wage labor somehow came into existence prior to the initiation of the process of development.

Indeed, Smith frequently fell into confusion because he consistently failed to distinguish between the creation of petty commodity production, in which individuals produced goods on their own account for sale on the market, and the introduction of capitalism, where capitalists hired workers to do wage labor. Because Smith could not distinguish between these two phenomena, he often regaled his readers with contradictory assertions about the nature of the social division of labor. For example, we have just seen that in explaining the evolution of petty commodity production, the division of labor naturally evolved out of the rude state of society in which no stock existed. Yet, within the other theory, stock is the principal motor force.

Nowhere do we find Smith addressing the question, What changes could make people in the Scottish Highlands suddenly find it in their interest to abandon their self-sufficiency in order to accept wage labor? Even if such incentives did exist, how do we know that they would create a labor force fast enough to satisfy those who wanted to profit by hiring wage labor?

In short, Smith's theory of a natural evolution of the social division of labor was wholly inadequate. Rather than explaining the origin of stock, Smith would have us believe that capital somehow appeared from nowhere to demand a profit on its stock. The central question remains: How, then, do some people find themselves in the employ of others? Here, Smith fell silent, although a dramatic form of primitive accumulation was uprooting masses of people in Smith's own Scotland at the time. These people had no choice but to adopt a new occupation, often in far-off lands.

Taking Stock of Smith

Smith's assertion about the precedence of stock is relevant to our study of primitive accumulation. As mentioned earlier, Marx's English translators retranslated part of Marx's German translation of Smith's original accumulation into the phrase "primitive accumulation." In this passage, Smith had no intention of explaining primitive accumulation. Instead, he was emphasizing the importance of the division of labor in creating economic progress, although strictly speaking, Smith was referring to the social division of labor at this point.

No wonder Marx (1977, 48 6n) felt moved to charge that Smith did less "to bring out the capitalist character of the division of labor" than earlier writers such as William Petty and the anonymous author of Advantages of the East-India Tiade (on the authorship of this tract, see Barber 1975, 57n,see also Cannan 1929, 96-100; Rodbertus 1899, 78-79).

Among all the other later commentators, only Edward Gibbon Wakefield seems to have divined Smith's intentions. Wakefield (1835, 1:v) noted that Smith "appears to be composing, not a theory, but a history of national wealth." Wakefield correctly chided Smith for confounding the division of labor with the social division of labor (ibid., 30). He even insinuated that Smith was "not thoroughly acquainted with . . . this subject" (ibid., 21).

Smith was not as unacquainted with his subject as Wakefield charged. In fact, at times, Smith even seemed to be on the verge of coming to grips, perhaps unconsciously, with the concept of surplus value. Unfortunately, on such occasions, he plucked out his offending eye in a primitive ritual whereby the category of stock was deified.

In all fairness, Smith was not alone is confusing petty commodity production with wage labor. No major figure in classical political economy successfully distinguished between these two forms of production. Early commentators on political economy also generally overlooked the theoretical challenge posed by the transition to wage labor. Perhaps the closest to a recognition came from the question that von Thiinen posed: "How has the worker been able to pass from being the master of capital— as its creator— to being its slave?" (cited in Dempsey i960, 335; see also Marx 1977, 772n).

An anonymous Swedish pamphleteer with an eye for realism also noted, "Freedom of enterprise would lead to disastrous misfortune,all the small masters would be ruined because all would like to be masters and nobody a servant, all subordination and order will disappear" (cited in Magnusson 1987, 423). Such flashes of insight concerning the nature of primitive accumulation were rare. As Walter Bagehot (1880, 419) charged, "Political Economy does not recognize that there is a vital distinction between the main mode in which capital grows in England now, and the mode in which countries grew at first."

In addition, Bagehot (ibid., 361) observed:

The main part of modern commerce is carried on in a very different manner; it begins and ends at a different point. The fundamental point is the same: the determining producer— the person on whose volition it depends whether the object should be produced or not— goes on so long as he is satisfied. . . . But the determining producer is now not a laborer but a capitalist.

In other words, considering that Smith was engaged in producing a history of wage labor, he should have to account for the forces that would induce self-sufficient households to exchange labor power for wages. He never did.

Whatever his defects, at least Smith had the merit of pointing toward both the class-based and occupation-based theories of the social division of labor. Even so, Smith was primarily interested in creating a theory in which the role of class conflict could be obscured by a fable of harmonies. As a result, The Wealth of Nations emerged as an epic poem of a strange world where "things are in the saddle and ride mankind" (Emerson 1940).
admin
Site Admin
 
Posts: 27268
Joined: Thu Aug 01, 2013 5:21 am

Re: The Invention of Capitalism: Classical Political Economy

Postby admin » Tue Feb 20, 2018 11:37 pm

Part 1 of 2

Chapter 10: Adam Smith and the Ideological Role of the Colonies

The differences of circumstance between this and the old countries of Europe, furnish differences of fact whereon to reason, in questions of political economy, and will consequently produce sometimes a difference of result.— Thomas Jefferson, 1 February 1804 letter

Adam Smith's North American Laboratory

As we have seen, Adam Smith advocated high wages for the practical reason that he hoped that greater remuneration would convert workers to petty bourgeois values. His call for high wages also served the ideological purpose of proving that the interests of capital and labor were not at odds. In this theoretical effort, Smith relied heavily on evidence from his study of labor markets in the North American colonies (see Skinner 1976,78). Conditions there appeared to be ideally suited to support Smith's purposes.

From Smith's perspective, the experience of the colonies demonstrated how high wages could help capital to prosper. If Smith were correct in this respect, he could resolve significant contradictions in his theory. Specifically, he could show how a market society could develop harmoniously without the need for harsh measures, such as primitive accumulation.

Smith (1976, IV.vii.b.3, 565) claimed that profits in the North American colonies were "commonly very great." He concluded that people in the colonies prospered there because they enjoyed more natural liberty than did the people of Britain. In the colonies, high wages and high profits supposedly coexisted, presumably because that society was free of the feudal fetters that had held back British development (ibid., III.iv.19, 423-24). According to Smith (ibid., IV.vii.b.2, 565), "Every colonist gets more land than he can possibly cultivate. He has no rent and scarcely any taxes to pay. No landlord shares with him in his produce, and the share of the sovereign is commonly but a trifle."

Despite the paucity of data, Smith wrote about the colonies with unwavering conviction. Although he criticized the absence of distributive equity in the British wage system relative to that of North America, for example, the wages of skilled labor were actually approximately equal in both Britain and North America (see Habakkuk 1967; Cole 1968, 64). In this spirit, he declared, "The plenty and cheapness of good land are such powerful causes of prosperity, . . . the very worst government is scarce capable of checking the efficiency of their operation" (Smith 1976, IV.vii.b.12, 570; see also IV.vii.b.2, 564-5; IV.vii.b.17, 572).

Smith's Theory of Colonial Development

For Adam Smith to make his case that colonial conditions pointed the way for British development, he had to go beyond merely demonstrating that high wages promoted prosperity in a far-off land. The colonial experience might be nothing more than a curiosity if the colonies were simply an agricultural backwater with little in common with England.

To convince his readers that the colonial experience had any relevance to the British, Smith had to somehow explain how the colonies would go on to develop a sophisticated capitalist economy. In this respect, Smith faced a serious contradiction. Although the likelihood of an industrial future in the colonies would further his ideology, in reality, he wanted the colonists to remain backward by specializing in providing raw materials for the British to work up into finished goods. According to Smith's vision, the British would then export these finished goods to the colonies.

Here we come up against another contradiction in Smith's works: Even though Britain was to abandon much of its agricultural pursuits to the colonies, Smith maintained a strong Physiocratic bent that made him look favorably on agriculture. He taught that agriculture was "of all the arts the most beneficial to society" (Smith 1978, 522). He also insisted that agriculture "adds much greater value to the annual produce of the land and labour of the country, to the real wealth and revenue of its inhabitants" (1976, II.v.12, 364). He concluded, "Of all the ways in which a capital can be employed, it is by far the most advantageous to the society" (ibid., II.v.12, 364).

Despite the allegedly great advantages of agriculture, we might expect that Smith would have supported protection for agriculture in England, but he was not a firm defender of British agriculture. Instead, he predicted that "even the free importation of foreign corn could very little affect the interest of the farmer of Great Britain" (ibid., IV.ii.20, 461). England was too advanced to devote considerable energy to agriculture.

As a general principle, Smith insisted that nations with limited capital should always specialize in agriculture (see, for example, Smith 1976, n.v.n and 12, 363). He declared:

Agriculture is the proper business of all new colonies; a business which the cheapness of land renders more advantageous than any other. ... In new colonies, agriculture either draws hands from other employments, or keeps them from going to any other employments. There are few hands to spare for the necessary, and none for the ornamental manufactures. The greater part of the manufactures of both kinds, they find it cheaper to purchase of other countries' than to make it themselves. (Smith 1976, IV.vii.c.51/609)

Smith contended that such agricultural specialization benefited the colonies. He went so far as to claim that because colonial "wealth is founded altogether in agriculture" (ibid., III.iv.19, 423; see also III.v.21, 366), the colonies were enjoying an extremely rapid increase in prosperity (ibid., III.v.21, 366-67; III.iv.19, 422-23).

Smith's optimistic prognosis for the colonies seemed to fly in the face of his own theory of the division of labor. After all, the first sentence of The Wealth of Nations read: "The greatest improvements in the productive powers of labour . . . seem to be the effects of the division of labour" (ibid., 11). A few pages later, he added, "The nature of agriculture . . . does not admit of so many subdivisions ... as manufactures" (ibid., Li. 4, 16).

Still, Smith (ibid., III.v.12, 363) suggested that agricultural specialization allowed the colonial economy to prosper since the "capital employed in agriculture . . . not only puts into motion a greater quantity of productive labour than any equal capital employed in manufactures, but in proportion to the quantity of productive labour it employs." He reasoned that "land is still so cheap, and consequently, labour so dear among them, that they can import from the mother country, almost all the more refined and more advanced manufactures cheaper than they could make them for themselves" (Smith 1976, IV.vii.b.44, 582). Smith (ibid., III.i.7, 379) believed the colonists to be fortunate in this respect, claiming:

If the society has not acquired sufficient capital to cultivate all its lands, and to manufacture in the completest manner the whole of its rude produce, there is even a considerable advantage that the rude produce should be exported by a foreign capital, in order that the whole stock of the society may be employed in more useful purposes.

According to Smith's logic, where capital is scarce, society should specialize in agriculture, which is less capital-intensive than industry since a unit of capital in agriculture can set more workers in motion than a comparable unit in industry. Yet individual agricultural workers will not be as productive as industrial workers given that agriculture will have a less developed division of labor. Even so, agricultural development will still make sense because it will employ a greater mass of workers.

Unfortunately, for the colonial experience to lend support to Smith's ideology, he would have had to show how the natural course of development in the colonies would allow them to converge with the British economy. He never really broached that subject beyond his four stages theory, which asserted that agricultural economies would naturally evolve into commercial economies.

If the colonies were to industrialize, where would Britain obtain her raw materials? Did Smith expect that the transformation of the colonies into commercial society would cause Britain to revive some of its agrarian past?

The Free Trade Imperialism of Adam Smith

Reading Smith, one could almost believe at times that the colonists were getting the better of the British, who were left to shoulder the burden of the carrying trade (Smith, 1976, III.v.21, 366-67; see also III. i. 6, 379). Since the British took care of such a capital-intensive endeavor, the Americans were free to specialize in agricultural production. Smith maintained:

Were the Americans, either by combination or by any other sort of violence, to stop the importation of European manufactures, and by thus giving a monopoly to such of their own countrymen, . . . [and to] divert any considerable part of their capital into this employment, they would retard instead of accelerating the further increase in the value of their annual produce, (ibid., II.v.21, 367)  

Elsewhere, Smith (ibid., IV.ix.37, 677) admitted that under this arrangement, England would prosper, since "a small quantity of manufactured produce purchases a great quantity of rude produce . . . while ... a country without trade and manufactures is generally obliged to purchase, at the expense of a great part of its rude produce, a very small part of the manufactured produce of other countries." Smith (ibid., IV.ix.41, 680-8 1 ) linked this same idea to the benefits that foreign markets bring for the development of economies of scale in manufacturing, without associating this thought with the teachings of either Sir James Steuart or Josiah Tucker.

Instead, Smith appeared oblivious to the possibility that such economies of scale could set off a cumulative process in which the manufacturing prowess of the industrial economy becomes increasingly entrenched. Smith's silence in this regard is surprising. After all, his close friend, David Hume, had engaged in a strong debate with Josiah Tucker, who had maintained that such trade would allow Britain to develop an insurmountable industrial lead (Hudson 1992, 69ft.). Hume responded that cheap wages would permit the less advanced economies to converge with the more advanced.

Perhaps simply because Smith was attempting to make the case that wages would be high in the colonies, he let the matter pass in silence. Michael Hudson proposed another possibility. Hudson (1992) observed that Steuart as well as Tucker maintained that the less developed economies would be left in a state of permanent backwardness if they left their fate to the market. Hudson charged that Smith framed his work to evade as far possible the ideas of his rivals, who foresaw a polarized world economy.

In addition, Smith should have benefited from his experience in Scotland, which remained a supplier of raw materials even in the absence of mercantile prohibitions of native industry, such as those that had crippled Ireland. More than fifty years after Defoe (1724-26, 634-37) nrst criticized Scotland's position as a mere supplier of raw materials, James Anderson (1777, 395-97) found it necessary to repeat the same idea.

So little had changed that Defoe and Anderson produced an almost identical list of imports. Other than some textiles, Scotland was said to export no manufactured goods to England. Much of its imports were manufactured. Anderson (ibid., 397) complained that the situation in Scotland was, if anything, a more extreme dependence than that found in the United States: "An equal number of the inhabitants of North America, who hardly take any other articles from England but cloathing and hardwares, cannot consume more English manufactures than an equal number of the Scots do."

Unlike Defoe and Anderson, Smith did not see dependence in the Scottish economy. Among Smith's contemporaries, however, almost everyone believed that Scottish development would have to be administered. Smith's own patron, Lord Karnes, was a leading member of the Board of Trustees for Fisheries, Manufactures, and Improvements in Scotland, set up to rescue the "Highlands from its archaic backwardness" (Rendall 1978, 11).

Robert Wallace (1809,159) advocated a scheme to create a fishing village along the Scottish coast to promote the exploitation of the fishing resources. Earlier, Steuart (1767, 2:194) had als o supported this project. Smith and Bentham appear to have been virtually alone in their opposition to this proposal (Mossner and Ross 1977, 327; Rae 1895, 409). At least the industrious Jacob Viner (1965,92) could find no other indication of dissent.

Smith recognized no structural reason for the primitive conditions that he saw in Scotland. He attributed the lack of development in the Highlands to the absence of a division of labor. He complained that the highland farmer had not yet adapted to the modern division of labor. Instead, the farmer still doubled as "butcher, baker and brewer." As a result, the highlanders were not yet dependent on purchased commodities. Nonetheless, Smith had faith in the future of the Highlands. He speculated that improved roads alone would seem to be sufficient to modernize the area (Smith 1976, I.i.3, 32-33). However, Smith gave no indication that the Highlands could ever rival Britain as a manufacturing center. In fact, the region seemed destined to remain forever a dependent supplier of raw materials for British industry.

In light of his tacit approval of the economic dependence that he saw in the Highlands as well as the colonies, we might well credit Adam Smith, the teacher of economic administrators, with being the first theorist of free trade imperialism, although Dean Tucker might justifiably lay claim to this distinction (see Schuyler 193 1, 35-36). Even so, in reviewing our analysis of Smith in this section, we find that Smith was more or less consistent. An economy would supposedly best develop through a regime of specialization under free trade, eventually leading to prosperity.

Unfortunately, with Smith nothing is as simple as it first appears. To begin with, Smith had taken issue with Steuart, who identified foreign trade as the locus of development. In contrast, Smith held that the home market was central to economic development. According to this logic, the colonies should have aimed for self-sufficiency.

In addition, so long as the colonies adhered to Smith's recommendations, their military capacity would also be limited, since as Smith (1976, IV.i.30, 445; 1978, 196-97) noted, the financing of warfare through the export of raw materials is always inconvenient. Thus the colonies would remain a de facto appendage to England.

The Economics of Underdevelopment

Many farmers in the colonies achieved a degree of self-sufficiency, comparable to what Smith saw in the Scottish Highlands (see Bidwell and Falconer 1941, 126-31, 162-63; see also Peffer 1891; cited in Luxemburg 1968, 396-98); yet Smith insisted that even in the absence of government intervention, capitalism was perfectly capable of developing out of the local initiative and enterprise of the countryside.

Smith offered a confused account of the evolution of such an agrarian society. He proposed his four stages theory, according to which societies naturally evolve from hunting and gathering, to herding, then to agriculture, and finally to a commercial society but did not explain why this evolution was inevitable. Smith seemed to sense that this development came at a cost. For example, just before a discussion about the role of the colonies in the international division of labor, Smith went to some lengths to describe the "beauty," "tranquility," and "charm" of a rural lifestyle (1776, III.i.3, 378).

After noting that "man . . . seems ... to retain a predilection for this primitive employment," Smith's next paragraph abruptly begins with the idea that a social division of labor that includes industry is required for an efficient agriculture. One might be led to believe that the humanitarian British were about to sacrifice their idyllic existence so that the fortunate colonists might be allowed to live in harmony with nature. In any case, Smith offered no explanation of why people would voluntarily abandon their agricultural life. Instead, Smith merely dismissed the difficulty of developing an economy, offering even less than he did when he suggested that the provision of roads be sufficient to induce development in the Scottish Highlands.

On other occasions, Smith acknowledged that agricultural profits might not be high after all. Low profits, of course, would impede the transition to an industrial society. Smith (ibid., I.x.c.21, 142) himself wrote:

That the industry which is carried on in towns, is every-where in Europe more advantageous than that which is carried on in the country, without entering into any nice computations, we may satisfy ourselves by one very simple and obvious observation. In every country of Europe we find great fortunes from small beginnings by trade and manufactures, the industry which properly belongs to towns, for one who has done so by that which properly belongs to the country, the raising of rude produce by the improvement and cultivation of the land. Industry, therefore, must be better rewarded, the wages of labour and the profits of stock must evidently be greater in one situation than the other.

If profits are highest in the commercial and industrial activities that occur in the towns, presumably economies that specialize in such activities will have the potential to develop at a faster rate than agrarian societies. This phenomenon may help to explain the persistent backwardness that Smith found in the Scottish Highlands.

Additionally, Smith's theory of the division of labor suggests that the development of nonagricultural professions should accelerate the rate of productivity, even in the agriculture of advanced societies. Smith himself never took note of this factor, although we might read it into his work where he observed, "Without the assistance of some artificers, indeed, the cultivation of the land cannot be carried on but with great inconvenience and continual interruption. . . . The inhabitants of the town and the country are mutually the servants of one another" (ibid., III.1.4., 378). As a result, even agriculture might advance faster in more developed economies.

Smith (ibid., II.v.37, 374) also understood that agriculture was not the quickest path to personal affluence:

The profits of agriculture, however, seem to have no superiority over those of other employments in any part of Europe. Projectors, indeed, in every corner of it, have within these few years amused the public with most magnificent accounts of the profits to be made by cultivation and improvement of the land. Without entering into any particular discussion of their calculations, a very simple observation may satisfy us that the result of them must be false. We see every day the most splendid manufactures, frequently from a very small capital, sometimes from no capital. A single instance of such a fortune acquired by agriculture in the same time, and from such a capital, has not, perhaps occurred in Europe during the course of the present century. In all the great countries of Europe, however, much good land remains uncultivated, and the greater part of what is cultivated is far from being improved to the degree of which it is capable.

Alex de Tocqueville (1848, 551-53) observed a similar phenomenon during his sojourn in the United States:

Agriculture is perhaps, of all the useful arts, the one which improves most slowly in democratic nations. ... To cultivate the ground promises an almost certain reward . . . but a slow one. In that way you only grow rich by little and with toil. Agriculture only suits the wealthy, who already have a great superfluity, or the poor, who only want to live. . . . [T]he great fortunes ... are almost always of commercial origin.

The same phenomenon struck observers in situations as far away as nineteenth-century Japan (see Thomas Smith 1966, 66).

Moreover, where high profits do exist in agricultural societies, they accrue to commercial ventures, not agricultural proper. If agricultural societies were to break out of their backwardness, presumably those who reap profits outside of farming would have to invest in nonagricultural activities, which would eventually also modernize agriculture. However, in less developed economies, those who profit from doing business with farmers rarely invest in farming themselves.

Finally, the sort of development based on self-sufficiency tends to restrict capitalism to luxury markets (see Melotti 1977, 109). England developed its strong industrial base precisely because it was so successful in carrying out the process of primitive accumulation. With so many people left dependent on the market for their basic needs, British industry had a far greater mass market at hand than any other country. This advantage was crucial for the success of the Industrial Revolution in England.

In short, successful agrarian economies would have to follow a different course than Smith suggested.

Adam Smith's Mercantilism

In reality, to the extent that the colonies flourished, they did not do so because of free labor and voluntary commercial transactions. Instead, the key to economic growth in the colonies was the combination of unfree labor together with the advantages of a vast array of natural resources obtained through primitive accumulation on a continental scale. Smith himself never took account of the advantages of either unfree labor or primitive accumulation.

Nor did Smith acknowledge the significance of the measures that Britain took to impede development through the prohibition of important manufacturing activities and restrictions of imports. Instead, he took the position that the colonies proved that economic freedom was the surest route to progress.

Here we come to still another major contradiction in Smith's work: Although modern readers identify him with laissez-faire, Adam Smith, the theorist of economic administration, was not nearly the doctrinaire free trader that he is generally thought to be. He warned that "freedom of trade should be restored only by slow gradations" (Smith 1976, IV.ii.40, 469).

In financial matters, Smith also saw the need for government regulation. He called for the prohibition of the issue of small denominations of banknotes (ibid., II. ii. 91, 323; II. ii. 106, 329). In fact, Smith earned a strong rebuke from Bentham (1787a and 1790) for his acceptance of laws to prohibit usury (Smith 1976,11.^.14-15, 356-57).

Smith was also in favor of using various devices to promote industry in Britain. Although he recognized that some duties were justified to counterbalance taxes levied on domestic producers (ibid., IV.ii.30, 464), he favored duty-free importation of raw materials as an encouragement to industry. However, Smith often looked favorably on restrictions of the export of raw materials. To cite one instance, he criticized the low duty on linen yarn on the grounds that the work of spinners made up four-fifths of the labor used in the production of sailcloth (ibid., IV.viii, 4, 644). He did not make the case, as he might have, that spinning could have helped such people carry on their agricultural pursuits. Instead, he relied on a mercantilistic allusion to the creation of employment. Similar reasoning led to his recommendation of duties on the export of wool (ibid., IV.viii.26, 653). In addition, Smith advocated that "Premiums [be] given by the publick to artists and manufacturers who excel their particular occupations" (ibid., IV.v.w. 3 9, 523).

In fact, Smith's actual prescription for administration was very much at odds with his supposed ideology. Like any red-blooded mercantilist, Smith proclaimed, "the great object of political economy of any country is to increase the riches and power of that country" (ibid., II.v.31, 372). Not surprisingly, we find Smith's assertion about riches and power in the very same chapter of The Wealth of Nations where Smith recommended agricultural pursuits to the colonists.

Piecing together Smith's remarks suggests a pattern consistent with the thesis that he favored a system in which the colonies were to produce raw materials for the mother country to work up into finished products. In this light, Smith's plan for the colonies appears to be nothing more than a sophisticated brand of mercantilism.

In summary, Smith took a distinctly pragmatic approach to laissez-faire policies. In spite of his philosophical ruminations about the psychology of wealth and accumulation, Smith was an advocate of economic realpolitik. With respect to his work on international trade and development, Smith's interest lay as much with the nations of wealth as The Wealth of Nations. In this regard, T. Perronet Thompson, before departing to Africa as a colonial governor, wrote to his fiancee, "I am beginning my course of study for the time being of Adam Smith on the Wealth of Nations, as fitting a subject I guess for the Sierra Leone as can be devised" (Thompson 1808, 33). Quite so!

Smith's Theory of Harmonious Economic Development

We began by noting that Adam Smith had two objectives in analyzing the colonies. His practical program aimed at keeping the colonies as a supplier of raw materials for Britain. On a theoretical level, he intended to demonstrate that the coexistence of high wages and high profits in the colonies proved that the interests of capital and labor were identical.

Only one difficulty stood in the way of Smith's theory of the harmony of wage labor in the colonies. Assuming that profits in the colonies were high, Smith (1976, IV.vii. b.3, 565-66) observed, "This great profit cannot be made without employing the labour of other people in clearing and cultivating the land." This notion brings us back to the central puzzle that Smith refused to confront: Where would farmers find the help that they needed? Why would people accept a position as a farm worker producing a surplus for an employer when the same people could just as easily work on their own and enjoy all the fruits of their labor?

Smith, of course, never answered such questions. To do so would have required that he confront the harsh reality of primitive accumulation. Instead, he only asserts that in view of the scarce supply of labor, the employer "does not, therefore, dispute about wages, but is willing to employ labour at any price" (ibid.). In addition, because of the scarcity of labor, "the interest of the two superior orders obliges them to treat the inferior one with more generosity and humanity" (Smith 1976, IV.vii.b.3, 565).

The reference to the "generosity and humanity" of employers is not particularly informative. At first glance, it might seem to support Smith's contention about the harmony of classes, however, readers of his recently discovered Lectures on Jurisprudence can also learn that "the slaves in the American colonies on the continent are treated with great humanity, and used in a very gentle manner" (Smith 1978, 183), suggesting a very loose interpretation of the concept of humanity.

According to Smith, only where slave owners' wealth had progressed to the level of the lords of the sugar islands would slavery degenerate to a barbaric relation (ibid., 183-87). Following this line of reasoning, we could just as well use Smith's reading of colonial conditions to assert the essential harmony between slave and master.

Smith (1776, 1.ix.n, 109; IV.vii.c.51, 609) did note the ease with which workers could gain access to land. At one point, he even admitted that the conditions in North America were incompatible with wage labor:

In our North American colonies, where uncultivated land is still to be had for easy terms, no manufactures for distant sale have yet been established in any of their towns. When an artificer has acquired a little more stock than is necessary for carrying on his own business in supplying the neighbouring country, he does not in North America, attempt to establish it with manufacture for distant sale, but employs it in the purchase and improvement of uncultivated land. From artificer he becomes planter, and neither the large wages nor the easy subsistence which that country affords to artificers, can bribe him to work for other people than for himself. He feels that an artificer is the servant of his customers . . . , but that a planter ... is really a master, and independent of all the world, (ibid., ILT.i.5, 378-79; see also IV, vii.b.44, 582)

The colonial employers themselves certainly did not appreciate the environment of "generosity and humanity." Gabriel Thomas (1698, 33-34) wrote from Pennsylvania:

The chief reason why Wages of Servants of all sorts is much higher here than there, arises from the great Fertility and Produce of the Place,besides if these large stipends were refused them, they would quickly set up for themselves, for they can have Provision very cheap, and Land for a very small matter, or next to nothing in comparison of the Purchase of Land in England.

Indeed, high wages were a constant lament in that part of the world (see, for example, Dorfman 1966a, 1:44-47,63-64, 117,214; Bogart and Thompson 1927, 67, 82).

Not only was wage labor expensive, it was impermanent as well. The more wages that capital paid out to its workers, the sooner they accumulated enough money to become independent farmers. Even in England, Smith (1976, I.viii.46, 101) claimed that "in years of plenty, servants frequently leave their masters, and trust their subsistence to what they can make by their own industry." In the northern American colonies, the situation was much more serious.

As late as the mid-nineteenth century when the United States had become far more developed, two or three years of farm labor were said to be sufficient for a penniless worker to save enough to acquire the land and equipment needed to begin farming (see S. Williams 1809; Ogg 1906; cited in Bidwell and Falconer 1941, 118, 163), although Clarence Danhof (194 1) estimates that more time might have been required.

In Smith's day, wage labor was the exception rather than the rule in the colonies. The majority of workers were unfree, being either slaves or indentured servants. Those who had their freedom might be able to farm on their own after working for a short time. In that case, we come up against the substitution of household labor for wage labor, the very opposite of the movement that initially Smith set out to explain. Finally, those who did not care to accept wage labor, even temporarily, could subsist from hunting and trapping.

In short, Smith provided no insight into what forces might cause people to voluntarily choose wage labor. Certainly, he was unsuccessful in attempting to resolve his theoretical contradictions about wage labor with evidence from the colonies, where wage labor was the exception rather than the rule. Instead, his analysis of the colonial economy was pertinent to a discussion of self-provisioning or petty commodity production, but not an analysis of wage labor.
admin
Site Admin
 
Posts: 27268
Joined: Thu Aug 01, 2013 5:21 am

Re: The Invention of Capitalism: Classical Political Economy

Postby admin » Tue Feb 20, 2018 11:37 pm

Part 2 of 2

The Reaction to Smith

Time and time again, Smith had held out the market-oriented economy of the northern colonies as the prime example for the still partially mercantile English economy to follow. We might reason that, since Smith's theory was meant to praise the conditions in these colonies, the people who resided there would embrace Smith's work.

Indeed, much of Smith's perspective had been anticipated by his illustrious namesake, Captain John Smith, a century and a half before the appearance of The Wealth of Nations. The earlier Smith (1616, 195-96) had written of New England:

And here are no hard landlords to racke vs with their many disputations to Ivstice. . . . here every man may be master and owner of his owne labour; or the greatest part in a small time. If hee have nothing but his hands he may set up trade; and by industrie quickly grow rich.

However, the colonists never accepted the views of Adam Smith. In point of fact, although the English public largely ignored Steuart, his work was more popular in North America than Smith's. In describing the influence of Smith's book, Arthur Schlessinger (1986, 220) noted, "Though read and admired, it did not at once persuade." Joseph Dorfman (1966a, 1:242), whose monumental study of economic thought in the United States is unsurpassed, concluded: "All seemed to know Sir James Steuart. Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations would often be cited along with Steuart, but always within the framework of that variant of mercantilism to which the author adhered." Symbolically perhaps, the first American edition of The Wealth of Nations did not appear until 1789, eight years after Steuart's work (M. O'Connor 1944, 22).

I attribute Steuart's warm reception in North America to the continuing importance of nonmarket activities in the colonies. In general, Steuart's book was popular where capital had not yet matured. The Irish, French, and German editions all fared rather well (Sen 1957, 13). Similarly, English conditions explained Smith's eventual popularity in England, a nation where capital had already risen to ascendancy and the household economy had become less of a competitor than a useful complement in the eyes of capital. Smith offered a convenient justification for the prevailing path of economic development.

Admittedly, Smith might have exercised a wider influence in North America had he not classified the clergy as unproductive labor. Since the churches ran the schools and colleges in the colonies, academic administrators took offense at Smith's assessment of their clerical status. However, the schools were largely irrelevant, since their economic teaching was notoriously out of touch with the real business world (see O'Connor 1944).

The 1821 translation of Jean-Baptiste Say's Treatise helped win an eventual academic acceptance of Smith's ideas. This book, the first consciously composed textbook in economic theory (see Spiegel i960, 65; see also James 1965), omitted any mention of Smith's offending passages. More important, the successful application of primitive accumulation made the eastern seaboard of the United States become more like England.

Friedrich List, a vocal opponent of laissez-faire, for example, in a speech at the dinner given in his honor by the Pennsylvania Society for the Promotion of Manufacturers in 1827, expressed regret that he found Say's book "in the hands of every pupil" (cited in M. O'Connor 1944, 34). We should note that, although Say (1880, xlx) did follow Smith in many respects, he saw himself as going beyond Smith. Say told his readers, "We are, however, not yet in possession of an established textbook on the science of political economy, ... a work in which . . . results are so complete and well arranged as to afford each other mutual support, and that may everywhere, and at all times, be studied with advantage."

Political Leaders' Reading of Smithian Economics

The people charged with the responsibility of administering the colonies did not seem to have been well-disposed toward Smith's abstract ideas, which offered little help in solving the real problems that they faced. After all, the reality there was not as simple as either Captain Smith or Adam Smith suggested. In this spirit, Governor Pownall (1766) of Virginia provided Smith with an insightful critique of The Wealth of Nations.

Pownall, anticipating the language of Marx and Charles Fourier, understood that the object of economics was to analyze "those laws of motion . . . which are the source of, and give direction to, the labour of man in the individual; which form that reciprocation of wants and intercommunion of mutual supply that becomes the creating cause of community" (ibid., 337; also see Marx 1977, 92; Anikin 1975, 353). The parallel with Steuart is striking as well, although Pownall gave no indication of any familiarity with Steuart's work. As mentioned already, Pownall rejected Smith's reliance on speculative anthropology.

Pownall (ibid., 343) also recognized the relationship between the social division of labor and the "division of objects," that is, property. Finally, he emphasized the advantages of using administrative means to speed up the creation of markets and the accumulation of capital (ibid., 371). Pownall, however, was an administrator, and consequently, might have been instinctively more attuned to the doctrines of Steuart than those of Smith.

Still, Pownall was a representative of a nation engaged in profiting from mercantile policies vis-a-vis the colonies. What was the attitude of those who supported the revolution supposedly directed against the mercantile interests of England? Should not they be likely disciples of Smith?

True, Warren Nutter (1976) goes so far as to credit Smith with bringing Benjamin Franklin into the liberal fold, but as we shall see in the next chapter, this claim is questionable. Jefferson (1950-, 111) praised The Wealth of Nations as "the best book extant," although by 1817, he felt that Say's presentation was superior (Jefferson 18 17). James Madison (1962, 6:86) recommended to Jefferson that Congress purchase the works of both Steuart and Smith. In John Adams's (1819, 384-85) opinion, "the pith and marrow of science" were contained in . . . the great works of Sir James Stuart [sic], and of Adam Smith."

This weak testimony to the influence of Smith, cited above, must be taken with a grain of salt. After all, Adams was not an accomplished student of political economy. In the same letter in which he recommended the works of Steuart and Smith, Adams confessed himself unable to understand the Physiocratic school. Jefferson predicted that Ricardo's "muddy reasoning . . . could not stand the test of time" (cited in Spengler 1968, 7).

William Appleman Williams (1966, 145) judges Madison to have been greatly affected by Sir James Steuart. Madison (1962-, 502) himself lamented "the present anarchy of our commerce." To remedy the situation, he relied on the authority of Steuart's "anti-quantity theory of money" as a means of improving the organization of economic activity (Dorfman 1966a, 1:221).

A more accurate verdict on the perceived merits of Smith came from Fisher Ames (1854, 49; cited in Nutter 1976, 16), who remarked in 1789: "The principles of the [Wealth of Nations] are excellent, but the application of them to America requires caution."

Alexander Hamilton and Smith

Of all the founding fathers, Hamilton was most inclined toward the mindset of political economy. Scholars have noted certain parallelisms between the work of Hamilton and The Wealth of Nations (Gourne 1894; Mitchell 1957-62, 2:144, 146, 149; the editorial notes in A. Hamilton 1961, 10:1-240). William Grampp (1965, 134-36) even suggests that a reading of The Wealth of Nations was sufficient to wean Hamilton of his earlier mercantilist leanings. Smith's unimportant role in the development of Hamilton's thought is suggested by one source, who noted that Hamilton had actually prepared a critique of The Wealth of Nations during his term in the Continental Congress (Hamilton 1961, io:i; J. Hamilton 1879, 2: 514).

In fact, Hamilton's ideas were remarkably close to those of Steuart. Both thought that institutions other than the market were required to integrate the economy. Hamilton (1961, 7:70) approved of Steuart's popular monetary theories because they would "cement more closely the union of states." Indeed, Steuart used the same metaphor, calling upon statesmen to "cement" their society (1767, 2:191). Elsewhere, Hamilton (1961, 2:635, 402; see also 3:4, 29) praised debt and the army as cement for the union. In an address delivered in support of the proposed United States Constitution to the New York ratifying convention in 1788, Hamilton sounded almost like an echo of Steuart, proposing:

Men will pursue their interests. It is as easy to change human nature, as to oppose the strong current of the selfish passions. A wise legislator will gently divert the channel, and direct it, if possible, to the public good. (Hamilton 1961, 5:85; also cited in Cooke 1982)

Steuart's influence was readily apparent in Hamilton's Report on the Establishment of a Mint, which drew heavily on the work of his master (Hamilton 1961, 10:462). Although Hamilton did not explicitly acknowledge Steuart, an early draft did allude to him as "an English writer of reputation who appears to have investigated the point with great accuracy and care and who accompanies his calculations with their data which are confirmed by other authority" (ibid., 482).

In his most systematic study of the limits of the market, Hamilton (ibid., 3:76; see also 15:467) lashed out at those "who maintain that trade will regulate itself. He continued: "Such persons assume that there is no need of a common directing power. This is one of those wildly speculative paradoxes, which have grown into credit among us, contrary to the practice and sense of the most enlightened nations."

Hamilton's most noteworthy contribution to economic theory proper was his Report on the Subject of Manufacturers (ibid., 10:1-340). In spite of admittedly frequent appropriations of Smith's thought, the intent of the document was decidedly unsmithian (ibid., 7; see also Cooke 1967, 81). Hamilton (1961, 249) wrote of the division of labor, but his division of labor was Steuart's, not Smith's. He began with the assertion:

It has just been observed, that there is scarcely anything of greater moment in the economy of a nation, than the proper division of labour. The separation of occupations causes each to be carried to a much greater perfection, than it could possibly acquire, if they were blended.

To create an appropriate social division of labor, Hamilton (ibid., 251) called for the "separation of the occupation of the cultivator, from that of the Artificer," by "diverting a part of its population from Tillage to Manufactures . . . leaving the farmer free to pursue exclusively the cultivation of his land and enabling him to procure with its products the manufactured supplies requisite either to his wants or to his enjoyments" (ibid., 10:251, 216, 261-62).

Hamilton (ibid., 280) recommended that the state enact a continual tax that would act as "a Motive to greater exertion in any occupation." Like Steuart, he saw industry as engaging those "willing to devote the leisure resulting from the intermissions of their ordinary pursuits to collateral labours" (ibid., 253). In short, Hamilton (ibid., 266) rejected "the proposition, that Industry, if left to itself will naturally find its way to the most useful and profitable employment: whence it is inferred that manufacturers without the aid of government will grow up as soon and as fast, as the natural state of things and the interest of the community may require." Steuart could not have said it better.

The Practical Rejection of Adam Smith's Theory

Even when they proclaimed their adherence to their master's theory, Adam Smith's professed disciples often went to elaborate lengths to support the manipulation of the institutions of society so as to foster the growth of markets and the elimination of remnants of the preexisting mode of production (see Samuels 1966, 22-23; see also Samuels 1973; E. Thompson 1963, 82). Perhaps nowhere do we see this contradictory role more clearly than in the elaborate projects of Jeremy Bentham, especially his Panopticon (see Foucault 1979, pt. 3).

In the American colonies, Adam Smith indicated that something akin to a state of natural liberties might have existed. According to many accounts circulating in England, nature was exceedingly generous in the colonies. Thomas Hariot (1588, 1:343) estimated that "one man may prepare and husband so much grounde . . . with less than foure and twenty hours, as will yield him his victuall for a twelve month" on twenty-five square yards of ground. The author of a similar description of Virginia also reported grapes so plentiful that a single vine could fill a London cart, potatoes as thick as a child's thigh, and frogs large enough to feed six Frenchmen (see Marx 1964, 75-80).

A more reliable source, George Bancroft (1854, 1:234) wrote: "Labour was valuable; land was cheap; competence promptly followed industry. There was no need of a scramble,abundance gushed from the earth for all. ... It was 'the best poor man's country' in the world." The practical men of affairs were unwilling to stake their future on the market in the best poor man's country. Instead, they relied on a long-standing tradition of economic control to turn the tide in favor of employers.

A century earlier, the Massachusetts Bay Company had attempted to enforce wage ceilings (Bailyn 1955, 32). The colonial government had also limited landholdings of the poor in the Massachusetts Bay Colony, partly for the purpose of preventing what Governor Winthrop termed the "neglect of the trades" (cited in Goodrich and Davison 1935, 168). In seventeenth-century Virginia, the same object was achieved by the extensive claims staked by earlier settlers (see Morgan 1975, 218-23).

Given the independent spirit of workers in the colonies, capital understood that great profits required the use of unfree labor. Indeed, some Americans made great fortunes on the triangular trade that hinged on the sale of slaves. British leaders also realized that slaves created a strong market for English goods. In 1766, Pennsylvania was able to import 500,000 pounds worth of British goods while exporting only 40,000 back to Britain. Benjamin Franklin (1959, 13:133) told Parliament that the balance was made good through exports from the North American colonies to the West Indies.

Even in the northern colonies, the workers were mostly in a state of bondage, either as slaves or as indentured servants (Herrick 1926; A. E. Smith 1927, chap. 2). Moreover, much of the profits earned in the northern states were derived from the surplus originating on the southern plantations (North 1966, esp. 6, 68, 105). Northern capitalists profited from a host of other activities, such as sales, financial services, and shipping, all of which were directly related to the cotton trade. Almost all the wealthy families of the Northeast owed their fortunes to such lines of business (see Pessen 1973, chap. 4).

Some have suggested that this so-called cotton-thesis is too strong (see Rattner, Soltow, and Sylla 1979, 223-26). For example, a few authors dismiss the importance of plantations in explaining the prosperity that northern and western farmers owed to southern food deficits, since much of the produce arriving in the South was destined for New Orleans and other large cities (see Lee and Passell 1979, 146-5 1). Of course, such cities were also part of the cotton system. Moreover, workers in these southern cities were part of a complex set of linkages with the plantation economy.

Cliff Leslie once offered an ironic commentary on the dependence of slavery on the demands of "free enterprise." Although he intended a very different lesson, his ambiguous words can be read as a summary of my position:

It is said, indeed, that we owed to slavery the produce which supplies the principal manufacture of Britain. But the whole of this production was in truth credited to free industry. . . . The possibility of the profitable growth of so much cotton was caused by the commerce and invention of liberty. (Leslie 1888, 17)

Or, as Marx (1977, 925) bluntly observed, "The veiled slavery of the wageworkers in Europe needed the unqualified slavery of the New World as its pedestal."

Smith refused to acknowledge the mutualism between slavery and wage labor, simply assuming that the latter was clearly superior to the former. He should have realized that slavery neatly fits into the supply and demand analysis that he advocated so eloquently. When labor is scarce and the price it can command for its services is high, capital has good reason to prefer slavery (Domar 1970). The same logic explains the second serfdom in eastern Europe, which was characterized by the reinstitution of old feudal obligations following the period of labor scarcity after the Thirty Years' War (Dobb 1963, 57).

Instead, Smith merely asserted that the colonies provided proof of the success of "free labor." His account was subject to numerous objections, foremost of which was the centrality of unfree labor.

Smith never bothered to acknowledge these objections, since he was too zealous in promoting his ideology. In fact, he may have been more deceptive in his discussion of slavery than in any other aspect of his writing.

Adam Smith and Colonial Slavery

Smith recognized that the slave plantations made great profits. He commented, "It is commonly said, that a sugar planter expects that the rum and the molasses should defray the whole expense of his cultivation, and that his sugar should be clear profit" (Smith 1976, 1.xi.b.32, 173).

Characteristically, Smith did not mention that such profits reflected either the efficiency of slavery or the exploitation of slaves. Instead, according to Smith (1976, 1.xi.b.32, 173-74; in.ii.12, 389), a combination of price supports and temporary shortages in the European markets explained the high profits that sugar planters earned. Indeed, Smith (1976, m.ii.9, 387; I.vii.44, 99; Millar 1806, 261-82) generally went out of his way to diminish the benefits of slavery, which he described as "the dearest of any" system of production relations.

Yet Smith once seemed to infer by his own remarks that southern slavery also may have been profitable in spite of his theory about the costly nature of slave labor. He wryly observed that "the late resolution of the Quakers in Pennsylvania to set at liberty all their Negro slaves, may satisfy us that their number cannot have been very great" (Smith 1976, ni.ii.io, 388). Here Smith demonstrated a clear grasp of the logic of commodities, adding, "Had they made any considerable part of their property, such a resolution could have never been agreed to" (ibid.).

In reality, slaves were an inconsequential part of the labor force in Pennsylvania only because typical smallholders did not possess enough cash to purchase a slave for life; instead, they had to content themselves with indentured servants, whose labor could be obtained with a much lower initial outlay (see Kalm 1770-71, 1:388; America 1775, 121-22; see also Tully 1973; Main 1965, 33).

Thus, only two years after the publication of The Wealth of Nations, a suggestion to free the indentured servants of Pennsylvania elicited stern response from the legislature, which insisted that "all apprentices and servants are the property of their masters and mistresses, and every mode of depriving such masters and mistresses of their Property is a Violation of the Rights of Mankind" (cited in T. Hughes 1976, in).

In fact, "apart from the Puritan migration to the northeastern colonies, something between a half and two-thirds of all white emigrants to the Colonies were convicts, indentured servants or redemptions" (Rich 1967, 342). The benefits of convict labor were obvious at the time. Edward Gibbon Wakefield (1829, 127) cited an American author who pleaded in 1824, "Place us on an equal footing with New South Wales, by giving us a share of the benefits which must, more or less, accrue from . . . convict labour" (Suggestions).

Only a fool could have expected property owners in the South, where slaves made up a substantial proportion of the wealth (Wright 1978, 35), to have willingly shown more humanity. Planters in Georgia, the only southern state founded on the concept of "free labor," soon pleaded a hopeless inability to recruit enough wage labor. They insisted that "it is clear as light itself, that Negroes are as essentially necessary to the cultivation of Georgia, as axes, hoes or any other utensil of agriculture" (cited in P. Taylor 1972).

After the Civil War in the United States, slave labor became unavailable for all (see Ransom and Sutch 1977, 44-46). Partially because of a preference for leisure, and, also because black families profited from devoting much of their female labor to subsistence production (G. Wright 1978, 62), cotton production fell precipitously. This experience again demonstrated the narrowness of Smith's doctrine of wage labor.

Eventually, Smithian ideology actually resulted in major changes in social relations in one part of the world, the West Indies, the last bastion of British colonial slavery. Although slavery was officially abolished in 1834, blacks were kept in a state of virtual slavery for four additional years. John R. McCulloch (1845, 341) charged the British with hypocrisy on this count: Why officially abolish sugar slavery when British industry continued to depend on cotton slavery?

Even so, the British approached abolition quite cautiously, and with far more concern for the slave owners than for the slaves. For example, the government spent seven million pounds for famine relief in Ireland compared to twenty million to compensate slave owners for their loss of property. The Gladstone family alone received over 80,000 pounds for their 2,000 slaves (Newsinger 1996, 13).

The eventual implementation of an antislavery policy after 1838 had disastrous consequences for the slave-possessing classes. Marx (1974, 325-26) reported that The Times of November 1857 printed a cry of outrage by a planter that the freed slaves preferred self -provisioning to wage labor. As a result, sugar production plummeted. Annual production in the period 1839-46 was 36 percent below what it had been during the period 1824-33 (Temperley 1977; see also Harris 1988).

Smith's Distortion of the Political Economy of Slavery

Ironically, as Smith was asserting that slavery was uneconomical, Scottish salters and miners were still being held in a state of virtual slavery, even to the point of having to wear collars engraved with their master's name (Mantoux 1961, 74; Millar 1806, 289-92; Duckham 1969). Thomas Ashton noted that iron founders in South Wales were also tied to their employers for life (Ashton 1948, 112).

In keeping with his practice of maintaining almost absolute silence on the subject of rural poverty in Scotland in The Wealth of Nations, except for the hardships that stubborn cotters were supposed to have brought on themselves (Viner 1965, 101), Smith never once mentioned the existence of slavery in Scotland. He did cite Montesquieu's comparison of the Hungarian mines worked by wage labor with the inefficient Turkish mines worked by slaves (Smith 1976, IV.ix.47, 684).

Smith did compare the wages of colliers in Scotland and England without commenting on the unfree status of the Scottish miners, estimating that these workers earned approximately three times as much as common labor (ibid., I.x.b.14, 121). In addition, he estimated that the Scottish slave earned more than a British worker in comparable occupations (ibid., I.x.b.14, 12m), although this estimate is open to the complex objections that make most comparisons of this kind questionable (see E. Thompson 1963, chap. 6). Later scholars found that the Scottish mines did pay less (Nef 1932.2:190; Viner 1965, 115).

Recall that Smith (1978, 339) justified wage labor because the hired worker "has more of the conveniences and luxuries" than those outside of the labor markets. Indeed, Smith could have used this same argument to rationalize slavery as opposed to wage labor, just as Southern defenders of slavery frequently did.

Instead, Smith observed that Scottish slaves escaped to seek employment as wage workers in British mines in spite of supposedly lower earnings. For this reason, Smith concluded that the institution of wage labor for these Scottish workers would benefit all parties.

What could explain the existence of slavery in Scotland? According to Smith, it was, like the Game Laws, merely a vestige of earlier times— one that served no economic function. It was the result of the "love of domination and authority over others, which I am afraid is naturall to mankind" (Smith 1978, 192). However, in 1765, only a few years after Smith's lectures, British masters endeavored to turn the British system of "a yearly bond into a slavery as gross as that which was ... in Scotland" (Hammond andHammond 1919, 12-13).

Smith's reluctance to address the question of the status of the Scottish miners was surprising. The subject was a matter of considerable public interest at the time. In 1774, while Smith was busily at work on The Wealth of Nations, the Lord Advocate of Scotland, Sir Alexander Gilmore, prepared a bill at the instigation of the Earl of Abercorn and other coal masters ( Arnot 1955,8). The primary reason for its introduction was given in its preamble: "There are not a sufficient number of colliers, coalbearers, and salters, in Scotland, for working the quantity of coal and salt necessarily wanted" (cited in ibid., 8). As a secondary consideration, it intended to "remove the reproach of allowing such a state of servitude to exist in a free country" (ibid.).

For some time, the law proved itself highly ineffective in freeing the slaves, although the old system of bondage eventually lost much of its potency. Pitmen enlisted in the navy, or restricted their work to three or four days per week (ibid., 10). Even so, not until 1799 did the Scottish slaves officially receive their full freedom.

The immediate consequences of emancipation were not exactly what Smith had predicted. After 1799, wages steadily rose until the beginnings of the Napoleonic Wars. Only after the shock of demobilization occurred, coming on top of a strong influx of Irish immigrants, did the wage level sink back, falling to somewhere between 45 and 70 percent of its peak (Smout 1969, 434-35).

We might also have expected some discussion of slavery with respect to the tobacco trade. However, Smith never mentioned that the tobacco merchants' trade was based on slave labor.

Smith discussed tobacco on occasion, but he never hinted that the prosperity of his friends and patrons, the Glasgow merchants, depended on their monopoly of the trade (Smith 1976, II.v.32, 372-73; Smout 1969). In fact, the tobacco merchants became the chief partners of the first Glasgow banks, established in 1750. Between 1754 and 1764 tobacco imports doubled to 11,500 tons per annum (Soltow 1959).

Although Smith observed that the trade of Glasgow was said to have doubled in the fifteen years following the founding of the banks, he did so only to indicate the beneficial effect of such financial institutions (Smith 1976, II.ii.41, 297). After 1776, when the Glasgow merchants lost their access to tobacco, the town fell on hard times (Kindleberger 1976, 12), but Smith did not inform his readers of this situation in later editions of his book.

Smith's presentation was devious in one other respect. The leading authority on the subject of Scottish banks at the time was most likely Steuart, whose modern editor noted an "interesting" absence of reference to him at this point in The Wealth of Nations (Skinner 1966, xlii; see also Steuart 1966, bk. 4, pt. 2).

The Eclipse of Smith

We must make a distinction between Smith's role as an ideologist and his contributions to economic theory. In spite of the enthusiastic reception that Smith's ideology enjoyed, his revision of history proved to be an unworkable basis for the development of economic policy.

The one area where Smith may have exercised influence on policy earned him little credit. Specifically, some later commentators believe that Smith's recommendations on colonial taxation were responsible for the import duties that helped to spark the American Revolution (Fay 1956, n6; Smith 1977, letter 302; Winch 1978, chap. 7). For example, according to Jacob Viner (1965; see also Willis 1979, 522), "Smith's main activity during his stay in London . . . (November 1766) was work with Townshend on his disastrous taxation project."

In fact, the behavior of governments over the years seems to lend support to the thesis that the more they praise the ideals of Smith, the more apt they are to use their powers to intervene in the interests of capital. For example, in the period following Smith's ideological ascendancy, the British ruling classes passed a string of repressive legislation that ran counter to the Smithian values that the government espoused. These measures include the Combination Acts of 1799 and 1800, repeal of the justices' power to fix wages in 1813, the apprenticeship clauses in 18 14, as well as the Poor Law Amendment Act of 1834. All of these acts stand as irrefutable testimony of the use of the state to further the interests of capital (see Pollard 1978, 151).

The repeal of the Combination Act in 1824 was the most telling exception to the anti-Smithian legislative stance of the time. Parliament passed this law to reduce economic protests (see Hollis 1973, 102-15; Marx 1847, 170) and prove the correctness of the Wages Fund Theory to the working class (see Wallas 1919; Halevy 1956, 204-8). By 1830, Nassau Senior was ready to reestablish these restrictions on labor in an apparent admission of the failure of this unique experiment (see S. Levy 1970, 71-73).

By 1830, political economy had openly embraced Edward Gibbon Wakefield's theories, which directly contradicted those of Smith (see chapter 13). Indeed, except for a brief period when Smith's ideas flourished, political economy, reaching back from the theoretical prehistory of the mercantilist epoch to the triumph of the Wakefield school, was a continuous affirmation of the need for government action to sustain the interests of capital.

Adam Smith: A Recapitulation

Smith's ideas about colonies are useful in comparing his works with those of Steuart. Sir James's ideas are shocking to a modern reader. Smith's appear benign. Yet this appearance of benevolence is dangerous, since it deadens our critical facilities. The occasional references to the conflict between labor and capital throw us further off guard. Although we can read in Smith (1976, 1.viii.8, 83) that the interests of labor and capital are "by no means the same," we are within only a couple of pages of the story of labor in North America. This touch of realism makes us even more credulous by the time we reach the tale of the harmonious conditions of labor and capital in North America. Nothing could be more subtle.

From a broader perspective, in spite of Smith's obvious talents, his Wealth of Nations can be counted as less than a total success. All too often, he became entangled in his own ideology.

Concerns with both ideology and good government led Smith to call for a regime of laissez-faire; however, this accord was achieved only by ignoring reality. A lesser mind could have put together a flat, yet consistent story. Smith could not— perhaps because, on some level, he recognized the underlying reality he was trying to deny. He also failed as a result of the contrary nature of his conflicting objectives. On the one hand, he attempted to put together an ideology of class harmony, on the other hand, his theory of political and economic administration required an explicit analysis of class conflict.

Generally, his ideological perspective conflicted with his administrative principles. The one case where his two approaches to economics seemed to coincide was in his analysis of the colonies of North America (for a conventional view of Smith's analysis of the colonies, see Stevens 1975 ). Even there, as we have seen, Smith could not successfully meld his ideology with his practical recommendations.

Smith himself proposed numerous violations of laissez-faire theory, as we have seen (see Viner 1927, 229). Certainly, Jacob Viner (1928, 230) was correct in noting that Smith "displayed a fine tolerance for a generous measure of inconsistency."

I might also add that Smith's own life was not altogether free of contradictions. Did he sense the irony of the patron saint of free trade collecting a pension from a nobleman or a salary as a commissioner of customs? Did he feel a tinge of hypocrisy when he sought the appointment to the committee of the East India Company?

To see these inconsistencies in Smith's life does not prove that he was attempting to deceive his readers. As Peter Berger (1963, 109), a student of such mentality, has observed: "Deliberate deception requires a degree of psychological self-control that few people are capable of. . . . It is much easier to deceive oneself."

The Wealth of Nations is not merely a product of self-deception. It is a great book. Its greatness rests, in part, on Smith's treatment of his own contradictions, "which he does not solve, but which he reveals by contradicting himself " (Marx 1963-1971, pt. 2, 151). At times, his work becomes so absurd that it alerts us that we have come on a matter of importance.
admin
Site Admin
 
Posts: 27268
Joined: Thu Aug 01, 2013 5:21 am

Re: The Invention of Capitalism: Classical Political Economy

Postby admin » Tue Feb 20, 2018 11:38 pm

Part 1 of 2

Chapter 11: Benjamin Franklin and the Smithian Ideology of Slavery and Wage Labor

That few in public affairs act from a mere view of the good of their country, whatever they may pretend; and tho' their actings being real good to their country, yet men primarily considered their own and their country's interest was united and did not act from a principle of benevolence.— Benjamin Franklin, "Observations on My Reading History in the Library"

Benjamin Franklin and North America

The subject of North America fascinated Europeans during the period of classical political economy (see Whitney 1924, 370). Certainly, while Smith was writing The Wealth of Nations, North American colonial affairs were very much in the minds of the English. Between 1720 and 1784, about 10 percent of all books, pamphlets, maps, and prints published in London concerned these colonies (Bonwick 1977, 35; citing T. Adams 1971). Similarly, from 1774 to 1779, about 20 percent of all books and pamphlets printed in England were related to the colonies of North America (ibid.,see also Adams 1969).

In part, Europeans considered the North American colonies to be important because they represented a vision of their own past. "In the beginning all the world was America," wrote John Locke (1698, 319; see also Hobbes 1651, chap. 13; Meek 1976, 66-67, 1 i^-45; Meek 1977b, 30). In the words of William Robertson (1777, 50-54; cited in Rendall 1978, 1909 1 ), in his History of America:

Much discovery of the New World . . . presented nations to our view, in stages of their progress, much less advanced than those wherein they have been observed in our continent. In America, man had to subsist under the rudest norm in which we can conceive him to subsist. We behold communities just beginning to unite, and may examine the sentiments and actions of human beings in the infancy of social life.
Even Tocqueville saw Tacitus's Germans in the Native Americans (Tocqueville 1848, 328; see also 32).  

Not surprisingly, Adam Smith also took a lively interest in North America. Lois Whitney (1924, 370) pointed out that Smith owned at least thirty books on travel and collections of voyages to exotic regions. Like many others, Smith (1976, V.i.a.2, 689-90) saw Native Americans as living in a society that approximated the "rude state." Besides the numerous examples from the lives of the Native Americans in his Lectures on Jurisprudence, Smith speculated that the ancient Scots must have been like that people (Smith 1978, 239).

Of all the sources of information on colonial affairs, the most famous was Benjamin Franklin, whose opinions on this subject were said to be "a degree of credit little short of proofs of holy writ" (Knox 1769, 111; cited in Benians 1926, 252). After all, who in English society could match his knowledge (real or imagined) about primitive life?

Not surprisingly, Franklin had great influence. He was able to convince William Petty's son-in-law, Lord Shelburne, the powerful president of the British Board of Trade and later Prime Minister of England, that he was "one of the [three] best authorities for anything related to America" (Franklin 1959-, 14:325; see also the editor's cautionary note).

Benjamin Franklin's Opportunism

We are all familiar with Franklin's persona— a genial man of great wit and inventiveness. In real life, he was a much more complex character than the hagiographies of Americana would have us believe. No political economist, with the possible exception of Petty, was either as mercurial or as engaging as Franklin. Consequently, some biographical material will be useful in gaining a perspective on his prolific writings on political economy.

Franklin (1959-, 14:76-86) made his debut as a political economist in 1729, while still in his early twenties, with a splendid "application" of William Petty's Treatise of Taxes and Contributions (1662). Franklin seems to have been originally drawn to the subject of paper money by William Rawle's pamphlet on the same topic, which Franklin had printed in 1725 (see Fetter 1943, 472n). Whole paragraphs of Franklin's pamphlet on paper money appear to be lifted directly from Petty (see Wetzel 1895). Indeed, John Davis (1803, 2:25-36) alleged that, throughout his career, Franklin borrowed without proper attribution many of the words for which he was to become most famous.

The relative weights of Franklin's various works are difficult to assess because he used his pen more often to further his own interests rather than the truth. For instance, shortly after his first pamphlet appeared, the state of Pennsylvania rewarded him with a contract for printing the paper money, which he had so ably advocated in that work (Franklin 1964, 124). In later years, Franklin continued to write to advance his position in society rather than any principles.

Because of the shifting political winds, after the appearance of his pamphlet on paper money, Franklin expressed so many contradictory opinions that one scholar compared him to a chameleon (Eiselen 1928, 29). For example, he wrote pamphlets to argue against smuggling and for the maintenance of low wage rates, apparently with the hope of winning himself a more lucrative position with the British government (see Conner 1965,37; Franklin 1959, 15:14-16, 159-64; 16:162). During the late colonial period, he railed against restrictions on manufacturing in the colonies, with an eye to winning the favor of powerful British interests. Later, he promoted self-sufficiency for the newly emerging republic. Even his writings about the noble savage, which we will discuss later, served his own self-interest.

The difficulties of evaluating Franklin's activities are so pervasive that even his commitment to the colonial cause has been brought into question. According to Dennys DeBerdt, colonial agent for Massachusetts, Franklin "stood entirely neuter [with regard to the Revolution] till he saw which way the cause would be carried, and then he broke out fiercely on the side of America" (cited in Currey 1965, 148). A more hostile interpreter charged that Franklin's opportunism and greed led him to work as a double agent for the British during the Revolutionary War (Currey 1972). Whether or not we accept such a damning verdict, Franklin was an undeniable master of saying whatever would accrue to his own advantage.

Despite doubts about Franklin's intentions, as well as Joseph Schumpeter's (1954, 192) undoubtedly correct verdict that Franklin's work offers "little to commend for purely analytic features," Franklin still has an important place in the story of primitive accumulation as it developed within the context of classical political economy.

The Source of Adam Smith's Information on the Colonies

Given Smith's strong interest in North America and Franklin's reputation as an expert in the subject, we should not be surprised to find that Smith relied heavily on Franklin in his analysis of the colonies. We should expect that Smith would have been especially interested in what Franklin would have had to say concerning the indigenous people of the New World. Reading The Wealth of Nations, we find too much of a love of anecdotes from both ancient and classical sources to believe that Smith would not have questioned a visitor with so much firsthand information about the rude state of society. Whether the implications of such stories as Franklin had to offer concerning the colonies would register was another matter.

Even so, the proof of Franklin's influence is not conclusive. His name does not appear in The Wealth of Nations, but then neither does that of Steuart, whom Smith was challenging, nor that of Turgot, whose work was embarrassingly similar to Smith's own (see Viner 1965, 128-38). Smith (1976, 1.viii.23, 88 and III.iv.19, 4 2 3) did repeat statements similar to those made in Franklin's essays suggesting that the population of North America had doubled in twenty or twenty-five years. The most likely written source for such estimates would be Franklin's (1751) essays, Observations Concerning the Increase of Mankind (Franklin 1959, 4:22734) and the 1760 The Interest of Great Britain Considered (Franklin 1959-, 9:47-100), both of which Smith possessed.

In fact, Smith's own analysis of the prosperity of the North American colonies commenced with this discussion of population growth. Thus, both pamphlets are particularly relevant because of their possible role in shaping Smith's opinions concerning the relations between labor and capital in the economic development of North America.

Smith's editor, Edwin Cannan, overlooked Franklin as the source of Smith's estimate of North American population growth, proposing instead Richard Price as the source (see Smith 1937, 70, 393). Later editors, as well as Lewis Carey (1928, 126), dismissed Price on the basis of a letter written by Smith (1976, 88n): "Price's speculations cannot fail to sink into the neglect that they always deserved. I have always considered him a factious citizen, a most superficial Philosopher and by no means an able calculator."

We should not dismiss Price's significance just on the basis of this letter. After all, we know from our consideration of the relationship between Smith and Steuart that we should not be unduly hasty in taking Smith's statements at face value. In addition, since the judgment on Price is dated twelve years after the appearance of The Wealth of Nations, the evercontroversial Price could have fallen from grace long after 1773.

Cannan suggested a second possible source of Smith's information; namely Dr. John Mitchell's (1767), Agriculture, Population, Trade, and Manufactures (Smith 1937, 7on). An equally likely candidate would have been American Husbandry, believed by some to have also been written by Dr. Mitchell (American 1775; see also Review 1776; Carrier 1918, 48, 5253, 123).

The strongest claim for Franklin's role in the development of political economy can be traced to Franklin himself. A Mrs. Logan, widow of one of Franklin's friends wrote:

Dr. Franklin once told my husband that the celebrated Adam Smith, when writing his Wealth of Nations, was in the habit of bringing chapter after chapter, as he composed it, to himself, Dr. Price and other literati of that day, with whom he was intimate; patiently hearing their observations, and profiting by their discussions and criticisms. . . . Nay, that he has sometimes reversed his positions and rewritten whole chapters, after hearing what they had to remark on the subject before them, (cited in Carey 1928, 126)

Franklin's Contribution to "The Wealth of Nations"

Franklin and Smith met for the first time in Edinburgh in 1759 (Carey 1928, 115). As Lewis Carey (ibid.; see also Viner 1965, 42-45) pointed out, Franklin, as well as Richard Price, was indeed in London during the period 1773-75, while Smith was there working on his book. Franklin, Smith, and Price were all members of the Royal Society of London (Carey 1928, 118). Finally, both Franklin and Smith were both very close to Strahan, the publisher of The Theory of Moral Sentiments and a member of the firm that first published The Wealth of Nations (Fay 1956, chap. 9).

Although Smith had begun his book long before the period in question, Carey noted that Franklin would have good reason to be unaware of its extended period of gestation (Carey 1928, 119); moreover, the subjects upon which Smith was working during 1773-75 included the chapter "Of Colonies," written in October 1773, and the passages on American wages in the chapter, "Of the Wages of Labour" (ibid., 120).

By the early 1760s, Smith had already begun an early draft of The Wealth of Nations, in which he asserted that Pennsylvania and some of the New England colonies were wealthier than Virginia (Scott 1965, 363). Also, Smith used the Native Americans as an example of a society with an underdeveloped social division of labor. Unless these thoughts occurred only after meeting Franklin in 1759, we might expect that Smith would have been eager to take advantage of the eminent visitor's expertise.

We do get a hint, however, that, in spite of the cordial correspondence between Franklin, on the one hand, and Lord Karnes and Hume, on the other, something may have gone amiss during this visit. In reminiscing about the natural tendency to avoid disputation, Franklin ( 1964, 60) listed as exceptions: "Lawyers, University Men, and Men of all sorts that have been bred at Edinborough."

We have no direct evidence of Smith's esteem for Franklin; however, the opinion of his closest friend, Hume, may be indicative. In 1762, a few years after first meeting Franklin, Hume praised him lavishly: "America has sent us many good things: gold, silver, sugar, tobacco, indigo, etc.; but you are the first philosopher, and indeed the first great man of letters for whom we are beholden to her" (Franklin 1959-, 10:81-82). By 1774, Hume's attitude had changed. He asked Smith:

Pray what strange account are these we hear of Franklin's conduct? I am very slow in believing that he has been guilty in the extreme degree that is pretended, tho' I have always known him to be a very factious man, and Faction next to Fanaticism is of all the passions the most destructive of morality, (cited in Rae 1895, 267)

The incident to which Hume refers probably is the theft of the letters of the governor and lieutenant-governor of Massachusetts in which Franklin was implicated. Apparently, the colonists were beginning to doubt if Franklin was vigorous enough in the colonial cause to justify his pay as their agent in Britain. As a result of this scandal, Solicitor-General Alexander Wedderburn, a former student under Smith and a friend of Hume's, required Franklin to appear for examination before the Privy Council on 29 January 1774 (Carey 1928, 117). Franklin's actions in this affair may have cut short Smith's association with him, but probably not before he had the opportunity to supply Smith with much information on the impact of plentiful lands and high wages characteristic of the northern colonies of America (see Carey 1928, 123-25).

The material on the colonies is crucial to Smith's project in The Wealth of Nations because it is the only concrete example that Smith offered in his attempt to prove that labor could prosper without seemingly damaging the interests of capital. Consequently, it played an essential role in the creation of the Smithian ideology of the noncoercive nature of wage labor. Accordingly, we proceed carefully in evaluating Franklin's contribution.  

Notice that Smith judged Price to be guilty of the same sin as Franklin; Smith's use of the concept of Factiousness was highly subjective. As he wrote to Lord Shelburne, "For tho' a little faction now and then gives spirit to the nation, the continuance of it obstructs all public business and puts it out of the power of [the] best Minister to do much good" (Mossner and Ross 1977, 28).

The tone of a letter that Franklin (1905-7, 8:8) addressed to Price on 6 February 1780 implied that the two may have suffered a common ostracism stemming from their methods of supporting the cause of the colonists: "Your Writings, after all the Abuse you and they have met with begin to make serious Impressions on those who at first rejected the Counsels you gave; and they will acquire new Weight every day and be in high Esteem when the Cavils against them are dead and forgotten."

Despite the numerous hints and claims, the extent to which Franklin actually influenced Smith remains a subject of vague speculation. We will see that Franklin had his own theory of economic development, one which Smith failed to appreciate enough to incorporate into his own work.

Smith and the Ideology of the Colonial Relationship

Despite the probable correctness of Franklin's claim of influence on Smith, broad theoretical divergences separated the two authors. To begin with, Franklin had merely alleged that the English had no need to legislate against the development of colonial manufactures,Smith insisted that the English had no need of any colonial relationship whatsoever. For Smith, colonial ties placed an unnecessary burden on England, since the colonies would necessarily remain within the British orbit, with or without the formalities of colonial bonds, directly contradicting his previously discussed theory of colonial development. In this respect, he stood shoulder to shoulder with Dean Tucker (1776b, 30-31), although Smith's analysis was more devious. While Tucker believed that less advanced nations would remain economically backward, Smith maintained that the neocolonial arrangement would somehow be in the best interest of all parties (Hudson 1992).

Moreover, Smith, the ideologist, sought evidence for the harmonious coexistence of the factors of production in North America. He contended that the colonies offered proof that capital could flourish in the face of high wages. Franklin, in contrast, emphasized conflict between labor and capital, as expressed by the desire of workers to become independent farmers. In addition, Franklin's call for colonial independence was not necessarily intended to leave the colonies as an appendage to the British economy.

How are we to understand the differences between Smith and Franklin? We saw that Smith knew Franklin personally and was in possession of some of his writings. On one occasion, he criticized a scientific work of Franklin's that was bound together with the same two pamphlets of Franklin, which we have been discussing (Carey 1928, 122).

Smith would have difficulty in misunderstanding Franklin's meaning in these pamphlets. Although the wily American frequently contradicted himself, these particular pamphlets were unambiguous. Smith's own contradiction of Franklin's description might be explained by the Scotsman's recurrent confusions. For example, we discussed Smith's embarrassing bewilderment in analyzing his treatment of the noncoercive origins of wage labor.

The same symptoms of befuddlement pervade his discussion of the colonies. We have already alluded to this confusion in the section in which Smith recognized the necessity of wage labor as a prerequisite for earning great profits in colonial agriculture (Smith 1976, IV.vii.b.3, 565 — 66. Smith interpreted the high wages that the proprietors were forced to pay to be consistent with rapid capitalist development because they encouraged "population and improvement" (ibid.).

Of course, the population increase would require a long time. At least, such was the message of Franklin's pamphlets. Even the most optimistic observers of the North American colonies understood that wage labor would be restricted to those few industries in which employers could afford to pay high wages because of the special advantages of abundant resources or labor-saving technologies (see Hamilton 1961, 10:272 for one of the most favorable views of American circumstances; see also Raymond 1823, 242; McCulloch 1825, 136). Smith himself concurred. He saw the colonies as advancing only within the sphere of dependency— at least for the foreseeable future.

Smith's ideological analysis required him to explain why workers would willingly engage in wage labor. The first side of his dual formula of "population and improvement" suggested that wage labor would take hold as a result of Malthusian pressures, which would eliminate the very phenomenon of prosperity that he set out to explain. He seemed to rule out the other side in his recommendation that the colonies confine themselves to the production of raw materials, since the farmers that Smith envisioned would likely be self-employed rather than working for wages.

British Colonial Domination outside North America

Unlike Smith, Franklin was sharply critical of British colonial relations with lands closer to the mother country. In response to an English gentleman who wondered why North America did not rival Ireland in the export of beef, butter, and linen, Franklin (1959, 19:22) snapped back that "the Reason might be, Our People eat Beef and Butter every Day, and wear Shirts themselves."

Franklin may well have also shared his disdain for the Irish system with liberal friends, such as Smith and Hume. This hypothesis is all the more likely, since Franklin's fervent hopes for success in speculating on Ohio Valley lands were checked, in part, by powerful Irish landowners.

Following Josiah Child (1751, 134), who in his New Discourse of Trade argued against plantations by writing "that lands (tho' excellent) without hands proportional, will not enrich any kingdom," the English landowners wanted labor to be kept in the mother country, expecting that economic losses would result from the migration of their tenants to the American West. In particular, the president of the British Board of Trade, Lord Hillsborough, feared that further immigration from Ireland would reduce the profitability of his extensive Irish holdings (Franklin 195 9-, 13:414; Currey 1965, 221; Alvord 1917, 2:121; Plath 1939, 231).

By contrast, the Scottish gentry welcomed the exodus of their "free hands." Because the Scottish crofters had only recently lost their traditional rights to the use of the land (see S. Johnson 1774, 97), the lairds saw immigration as a means of solidifying their property rights to their grazing land, at least until the rate of emigration reached a point that threatened them with a shortage of workers (see Franklin 1959, 20:522-28). The greater tolerance for emigration in Scotland may also be partially explained by the less labor-intensive cropping system used there.

At the same time, the less thorough British conquest of Scotland gave the British less cause to concern themselves with the retention of the population. Unlike the case in Ireland, where the British divided the land amongst themselves, in Scotland, the British left ownership of the land in the hands of the traditional lairds.

Another major difference between the two cases may well have been the disposition of firearms (see Pettengill 198 1). As Defoe (1724-26, 667) noted, "The Highlanders not only have all of them fire-arms, but they are all excellent marksmen." Guns were not as common among the Irish poor.

In hindsight, we now know that the British were far more successful in subduing the Highlanders than the Irish. However, many of the most defiant Highlanders moved to the Appalachian and Allegheny regions of North America, where they engaged in numerous rebellions.

In contrast to Franklin, Smith never acknowledged the hardships that Britain imposed on the peoples of Ireland and Scotland. Recall that he attributed the poverty in Scotland to a stubborn adherence to traditional ways, thereby holding both the poor and the lairds culpable.

In Ireland, Smith was more generous to the gentry. There, he attributed the impoverished conditions of the populace to their rebelliousness. As he wrote to Lord Carlisle:

[Ireland] is ill provided with (coal and) wood; two articles essentially necessary to the progress of Great Manufactures. It wants order, police, and a regular administration of justice both to protect and restrain the inferior ranks of people, articles more essential to the progress of Industry than both coal and wood put together, (cited in Mossner and Ross 1977, 243)

Smith never elaborated on the role of force in the colonies. We have already discussed Smith's belief in a strong legal system to protect the property of the rich. We cannot be sure whether he believed that his recommendation for Ireland was a reflection of this general concern for the protection of property or if somehow Ireland was unique.

In sum, Smith's use of Franklin's writings was very selective. Some of what Franklin wrote about the North American colonies was consistent with Smith's theory of the harmonious relationship between capital and labor in the colonies. Franklin, however, displayed far more awareness of the depth of colonial conflict than Smith, except when referring to the North American colonies. Certainly, Franklin's imagery differs from what Smith proposed in making his case for the voluntary evolution of the social division of labor.

Franklin and the Bleak Prospects for Colonial Industry

Despite similarities between Smith's works and those of Franklin, they differed in significant respects. Consider the case of Franklin's Observations. This pamphlet was a masterful brief on behalf of colonial industry, calculated to win favor from both the English and the colonists. John R. McCulloch (1845, 253) saw this remarkable piece of argumentation as an "excellent specimen of the penetrating sagacity and compressed and clear style" of Franklin. Thomas Robert Malthus (1803, 8) hailed it as a forerunner of his own work, although it was not what we might consider Malthusian. Franklin even expressed a wish for an increase in the numbers of the "Body of White People on the Face of the Earth" ( Franklin 1959,4:234).

Franklin penned this work in response to the British Act of 1750, which prohibited the erection of additional slitting and rolling mills, plating forges, and steel furnaces in the American colonies (ibid., 4:225-26). At the time, some people had already noted the strategic importance of a strong British settlement, considering the ongoing struggle between France and England for control of the Continent (ibid., 4:224). Yet to argue for the potential vitality of the colonial economy solely on such political grounds would play to the worst fears of those who wished to nip their colonial competitors' potential in the bud.

Franklin did not question the right of the English to frame such legislation. Instead, he deftly sought to resolve the contradictory interests of Britain and the colonies by proving that the economic future of the colonies would be complementary to that of Britain. In this sense, his objective ran parallel to that of Smith. According to Franklin, the mother country had no need to impede industrial development in the colonies. The economy of North America would grow, but its growth would necessarily be agricultural. In this sense, his framework was Smithian, although Franklin went beyond Smith.

In contrast to Smith, who asserted that colonial regimes would naturally progress beyond the agricultural state, Franklin assured his English readers that the abundance of land would impose a natural handicap on the use of both slave and wage labor in the colonies, forestalling industrial development into the indefinite future.

Franklin's argument was internally consistent concerning the threat of colonial competition. The English were said to have nothing to lose and everything to gain from the granting of more freedom to the colonial economy. Still, one might question why colonists should be concerned about laws that compelled them to do what they would have done in the absence of any such legislation. To raise such a question would be to apply a standard that was foreign to such pamphlet literature. Franklin's intent was merely to dispel the immediate English fears about the colonial economy.

The same idea about colonial development recurs in Franklin's Interest of Britain Considered, written in 1760. The issue at hand was whether the English should claim Canada or Guadeloupe in consequence of the French surrender at Montreal in 1759. The debate was heated. Prime Minister William Pitt was in a quandary, wondering, "some are for keeping Canada, some Guadeloupe; who will tell me which I shall be hanged for not keeping?" (Alvord 1917, 1:19).

Franklin's contribution was again an exceedingly clever brief prepared on behalf of the American interests. To appear more convincing, he posed as an English writer, maintaining that Guadeloupe had little demand for English wares, since the majority of its inhabitants were slaves. In contrast, Canada would serve the English purposes much better by providing a ready market for Britain.

To reinforce his case, Franklin stressed the complementary, rather than the competitive, characteristics of the colonial mainland. Here we have another instance of Franklin adopting whatever measures were required to win a point.

Franklin consistently seemed determined to lull the English into complacency about the strength of the colonial economy for some time. For example, in 1766, after the British requested that the colonial governors supply them with a summary of their colony's industrial strength, Franklin advised his son, whom he had arranged to be appointed governor of New Jersey, to shade the truth. Franklin (1959, 15:77) wrote, "You have only to report a glass-house for coarse window glass and bottles, and some domestic manufactures of linen and woolen for family use that do not clothe half the inhabitants, all the finer goods coming from England and the like."

His son complied almost to the letter. Other governors followed suit. Similarly, Governor Moore of New York replied with a long description of the difficulty of retaining the employment of workmen who took up farming as soon as possible (see Rabbeno 1895, 73). Only North Carolina boasted of its fifty sawmills on a single river (ibid.), but that industry was hardly a threat to Britain.

Of course, colonial industry had not taken hold to any great extent by that time. The question was, would it do so in the future?

Franklin, Smith, and Slavery

In reality, the northern colonies were not nearly as idyllic as Smith's ideological presentation implied, but they still had many attractive features compared with the economies of western Europe. Even so, unfree labor was essential to the colonial prosperity, so much admired by both Smith and Franklin. Unfortunately, neither Smith nor Franklin alerted their readers of the contribution of the coercive relations of slavery to rapid colonial development.

Both agreed that slavery could never be efficient. In Franklin's (1959, 4:229) words, "Labour of Slaves can never be so cheap here as the Labour of working men is in Britain." Although this citation was in an admittedly unscientific pamphlet, it does reflect greater consistency concerning alternative modes of production than The Wealth of Nations, which it seems to have influenced. Whereas Smith argued that slaves were more costly to use than wage labor without reference to any particular historical situation, Franklin made the far more modest claim that slave labor in the colonies could not be so cheap as wage labor in Britain.

Even so, at least Franklin demonstrated that he understood that slaves could be advantageous in the colonial economy. He wrote: "Why then will Americans purchase Slaves? Because Slaves may be kept as long as a Man pleases, or has Occasion for their Labour, while hired Men are continually leaving their Master (often in the midst of his Business), and setting up for themselves" (Franklin 1959, 4:230).

This unusual lapse of realism concerning slavery did not come near to confronting the extent of unfree labor in the colonies. Although slavery did not exist to a great extent in the Northeast, indentured servitude was common. In addition, many in that region derived great profits from the slave trade. In addition, when manufacturing did mature there, it often found its markets in the regions in which slavery flourished.

In Franklin's adopted home of Pennsylvania, it was "white servitude" that planted in its "fertile soil . . . the seeds of a great industrial future" (Herrick 1926, 76). Was Franklin or Smith so naive as to believe that slavery and indentured servitude were irrelevant to the development of the American colonies?

Franklin found slavery in Smith's Scotland; Smith could only discover it in history or in the far-off Turkey of his day. Neither addressed the role of the temporary servitude of indentured labor, let alone the harsher lot that fell to the blacks, who suffered a lifetime of slavery in North America.

For example, Franklin's (1959, 4:227-34; see also Viner 1965, 113-14) "Conversation on Slavery," published in the London Public Adveitisei in 1770, seems to have played a significant role in preparing for the emancipation of the Scottish bondsmen who lived in a state of virtual slavery. Addressing himself to a hypothetical Scotsman, he wrote, "Sir, as to your observation, that if we had a real love of liberty, we should not suffer such a thing as slavery among us, I am a little surprised to hear this from you . . . in whose own country, Scotland, slavery still subsists" (cited in Viner 1965, 114).

Unlike Smith, Franklin expressed racist sentiments in Observations, although in later life he appeared to be unalterably opposed to the institution of slavery (see Carey 1928, chap. 4; Mellon 1969, pt. 1). In a later edition of that work, he had the good sense to alter the phrase "almost every Slave being by Nature a Thief" to "almost every Slave being from the nature of slavery a Thief" (Franklin 1959, 4:239.

Even though Franklin had a low opinion of slavery, before 1770 he gave few indications that North American producers could bridge the gap between household manufactures and industry based on wage labor. Franklin's antislavery position was politic in Quaker Pennsylvania at the time, yet he continued to hold it long after he could expect much gain from local political conditions. His later opposition to slavery may be the only example of a strongly held ethical position in his life.

Smith's silence on the subject of slavery is especially troubling, since he obtained much of his information about the colonies from the Glasgow tobacco merchants and planters who had returned from the colonies (Fay 1956, 264-66). Of course, Smith may have been disinterested in southern conditions, but he still should have understood the importance of the plantation for the rest of the economy.

Instead of trying to reconcile his contradictory assertions about slavery in The Wealth of Nations, Smith (1976, IV.vii.b.3, 565-66) irrelevantly interjected his opinion that "the progress of many of the ancient Greek colonies toward wealth and greatness, seems accordingly to have been very rapid." Edward Gibbon Wakefield (1834, 236; see also Wakefield 1829, 154) was quick to respond to that dodge: "In no Greek colony did anyone ever sell his labour; or anyone pay wages, high or low. . . . [The work was] performed exclusively by slaves."

Smith's allusion to slavery seems to reflect a subconscious recognition of the force required to ensure that workers allow employers to extract surplus value. Smith the ideologue never gave full expression to this semirepressed insight. Had he done so, The Wealth of Nations might well have conformed more closely to Benjamin Franklin's more realistic interpretation of colonial development.
admin
Site Admin
 
Posts: 27268
Joined: Thu Aug 01, 2013 5:21 am

Re: The Invention of Capitalism: Classical Political Economy

Postby admin » Tue Feb 20, 2018 11:38 pm

Part 2 of 2

Franklin on Wage Labor in the Colonies

Franklin's contention that manufacturing could not develop easily in the colonies rested on the idea that the abundance of land would preclude the ability to hire many workers. In Franklin's (1959, 4:228) words, "Land being thus plenty in America, and so cheap as that a labouring Man, that understands Husbandry, can in a short Time save Money enough to purchase a Piece of new Land sufficient for a Plantation, whereon he may subsist a Family," manufacturing based on wage labor would be uncompetitive in the foreseeable future.

Wages were sufficient for workers to establish themselves as farmers. According to Franklin (1782, 607-8):

Land being cheap in that Country, . . . hearty young Labouring men, who understand the Husbandry of Corn and Cattle, . . . may easily establish themselves there. A little Money sav'd of the good Wages they receive there while they work for others, enables them to buy the Land and being their Plantation.

Similarly, in writing about Guadeloupe, Franklin maintained:

[Until the colonies become more populous] this nation [Britain] must necessarily supply them with the manufactures they consume, because the new settlers will be employ'd in agriculture, and the new settlements will so continually draw off the spare hands from the old, that our present colonies will not . . . find themselves in a condition to manufacture even for their own inhabitants . . . much less for those who are settling behind them. (1959, 9:78)

At still another point, Franklin (ibid., 9:73) was even more emphatic about the hurdles that manufacturing faced in the colonies:

No man acquainted with political and commercial history can doubt [that] Manufactures are founded in poverty. It is the multitude of poor without land in a country, and who must work for others at low wages or starve, that enables undertakers to carry on a manufacture, and afford it cheap enough to prevent the importation of the same kind from abroad, and to bear the expense of its exportation. But no man who can have a piece of land of his own, sufficient by his labour to subsist his family in plenty, is poor enough to be a manufacture and work for a master. Hence while there is land enough in America for our people, there can never be manufactures to any amount of value.

In a promotional tract entitled Information For Those Who Would Remove to America, written in 1782, Franklin took a position much like that advocated by Smith. He stated that, when the state does subsidize individual industries:

It has rarely succeeded, so as to establish a Manufacture, which the Country was not so ripe for as to encourage private Persons to set it up. Labor being generally too dear there and Hands difficult to be kept together, every one desiring to be a Master, and the Cheapness of Lands inclining many to leave trades for Agriculture. (Franklin 1782, 610)

Franklin continued, "Some indeed have met with Success, and are carried on to Advantage; but they are generally such as require only a few Hands, or wherein the great Part of the Work is performed by Machines" (ibid.). In short, Franklin generally took the position that the colonies would have to remain agrarian until the time would arrive when the crush of population became too great to allow the common worker to become an independent farmer. The English, thus, had no reason to fear competition from the colonies.

In 1769, when Franklin (1959-, 16:209; see also Coxe 1794, 44243) communicated his approval of the colonial Resolutions of NonImportation, he rationalized the reliance on agriculture in the colonies:

For their Earth and their Sea, the true Sources of Wealth and Plenty, will go on producing; and if they receive the annual Increase, and do not waste it as heretofore on Gegaws of this Country (i.e., England), but employ their spare time in manufacturing Necessaries for themselves, they must soon be out of debt, they must soon be easy and comfortable in their circumstances, and even wealthy.

Franklin's espousal of the Physiocratic doctrine at this period sat well with his intense involvement in land speculation (Currey 1965, 89).

In conclusion, Franklin's ideas about wage labor were less confused than those of Smith. Both recognized that the availability of cheap land would impede the development of wage labor. Where Smith seemed to suggest that the colonies could prosper through a gradual transition from the production of raw materials to manufactures, Franklin appeared to understand that societies do not easily move to a new mode of production. He realized that independent farmers would not gladly adopt the role of low-paid factory workers.

Franklin on the Economy of High Wages

After the colonies won their independence, Franklin changed his analysis once again. Using data from The Wealth of Nations, Franklin (1783, 440) maintained that workers in the United States earned considerably more than in England. Perhaps echoing Adam Smith, he proclaimed that a "community cannot be pronounced happy, in which, from the lowness and insufficiency of wages, the labor class procure [sic] so scanty a subsistence, that, they have not the means of marrying and rearing a family" (ibid., 436).

In spite of his earlier theory that high wages would be detrimental to the development of modern industry, Franklin did not see high wages as a cause for alarm at this time. Nor did he find a conflict between happiness and competitiveness, arguing, "It is not the wages of the workmen, but the price of the merchandise, that should be lowered" (ibid., 437). For example, an increasingly refined division of labor can offset the high price of labor (ibid., 436).

Franklin (ibid., 438-39) did admit that "the high price of wages is . . . one of the reasons for the opinion . . . that it will be many years before the manufactures of the United States can rival those of Europe." However, here he rejected that perspective. In fact, high wages offered an economic advantage. According to Franklin: "High wages attract the most skillful and industrious workmen. ... A good workman spoils fewer tools, wastes less material, and works faster than one of inferior skills. . . . The perfection of machinery in all the arts is owing, to a large degree, to the workmen" (1783, 439). Franklin predicted that high wages would provide a permanent advantage, since for the newly independent colonists emigration would equalize wages across the Atlantic. In addition, prosperity in the new nation would raise demand for imports from Britain.

Franklin's Ideas Were in the Air

Franklin was not unique in understanding the relationship between lack of access to land and economic development. His Observations was published in 1755. The following year, Mirabeau published similar views on the importance of land scarcity in L'Ami des hommes. Mirabeau's brother was the governor of Guadeloupe, despite his objection to slavery (D. Davis 1966, 428). Whether or not Mirabeau received the idea from his brother or from Franklin is a matter of conjecture. Such ideas were certainly in the air.

Likewise, Adam Smith's contemporary, the anonymous author of American Husbandry, observed two decades later: "When land is difficult to be had or not good, owing to the extension of the settlements or to the monopolies of the country, the poor must be driven to other employments than those which depend on the land; manufacturing, commerce, fisheries, etc., must thrive in the natural course of things" (American 1775, 525). The leaders of the United States generally seemed to accept Franklin's verdict that the economic future of colonial manufacturing was modest. As Jefferson (1788, 260) wrote:

It is impossible that manufactures should succeed in America from the high price of labour. This is occasioned by the great demand of labour for agriculture. A manufacturer from Europe will turn to labour of other kinds if he finds more can be got by it, and he finds some emploiments [sic] so profitable that he can lay up enough money to buy fifty acres of land to the culture of which he is irresistibly tempted by the independence in which it places him.

John Adams (1780, 255) concurred:

Among men of reflection the sentiment is generally . . . that no power in Europe has anything to fear from America. The principal interest of America for many centuries to come will be landed, and her chief occupation agriculture. Manufactures and commerce will be but secondary objects and subservient to the other. America will be the country to produce the raw materials for manufactures,but Europe will be the country of manufactures, and the commerce of America will never increase but in a certain proportion to the growth of agriculture, until its whole territory of land is filled up with inhabitants, which will not be in hundreds of years.

A few years later, Madison (1787, 98-99) predicted that the extent and fertility of the western soil would, for a long time, give to agriculture a preference over manufactures.

Of course, Jefferson and Madison wrote as politicians rather than political economists. They feared an industrial future with a multitude of workers massed in large urban areas, steeped in lofty, revolutionary slogans about liberty and freedom.

Happy Mediocrity

Franklin's ideas were similar to those of Jefferson and many other revolutionary leaders in another respect. Many of his revolutionary contemporaries were also highly critical of class relations in England. In marginal comments on an anonymous pamphlet, The True Constitutional Meaning, Franklin (1959, 16:290) offered some private thoughts on this subject: "And ought the Rich in Britain, who have such numbers of Poor by engrossing all the small Divisions of Land; and who keep the Labourers and working People Poor by limiting their wages; ought these Gentry to complain of the Burthen of maintaining the Poor that have work'd for them at unreasonably low rates all their Lives?" Many observers in the United States agreed that European manufactures depended on dangerous concentrations of impoverished masses in the cities. Given this perspective, Franklin suggested that manufacturing would not take root until the country became more populated. He initially predicted that population would not become dense enough until the distant future.

A few decades later, in a 1799 tract titled The Internal State of America, Franklin speculated that North America had already reached the point where manufacturing might take hold. Reading the pamphlet in question, we can easily find suggestions that would have appealed to the author of The Wealth of Nations. He observed:

Whoever has travelled thro' the various parts of Europe, and observed how small is the Proportion of People in Affluence or easy Circumstances there, compared with those in Poverty and Misery; the few rich and haughty Landlords, the multitude of poor, abject, and rack'd Tenants, and the half-paid and half-starv'd ragged Labourers; and view here the happy Mediocrity, that so generally prevails throughout these States, where the Cultivator works for himself, and supports his Family in decent Plenty, will ... be convinc'd that no Nation that is known to us enjoys a greater share of human Felicity. (Franklin 1905-7, 10:120)

Similarly, in his promotional tract, Information for Those Who Would Remove to America, Franklin (1782, 604) asserted: "The Truth is, that though there are in that Country few People so miserable as the Poor of Europe, there are also very few that in Europe would be called rich; it is rather a general happy Mediocrity that prevails. There are few great Proprietors of the Soil, and few Tenants,most People cultivate their own Lands, or follow some Handicraft or Merchandise." According to Franklin (1905-7, 10:117), "The great Business of the Continent is Agriculture." Yet in the earlier tract, he concluded, "In short, America is the Land of Labour" (Franklin 1782, 607).

Other authors wrote in terms that sounded like Franklin. One contemporary writer commented, "Each man owns the house he lives in and the land with which he cultivates, and everyone appears to be in a happy state of mediocrity" (Weld 1800, 170). Similarly, Richard Price (1783; see also de Crevecoeur 1782, 40, 58, 89) asked: "Where do the inhabitants live most on an equality, and most at their ease? Is it not in those inland parts where agriculture gives health and plenty, and trade is scarcely known? Where, on the contrary, are the inhabitants most selfishly luxurious, loose and vicious; and at the same time most unhappy? Is it not along the sea-coasts, and in the great towns, where trade flourishes and merchants abound?" Franklin's contribution was more important for what it omitted rather than what it appeared to say. In presenting the advantages of the state of "happy mediocrity" in which workers could earn relatively high wages while capital profited, Franklin, along with Smith, painted a picture of relative harmony between labor and capital. In reading Franklin, however, we must always consider the context of his work.

Unfortunately, Franklin's celebration of happy mediocrity came at a time when this egalitarian age was quickly coming to an end. The period in which Smith was completing his Wealth of Nations witnessed a significant increase in the concentration of wealth in the northern colonies (Williamson and Lindert 1977). Although the prerevolutionary farmers in the North may have been relatively prosperous (see Sachs 1953), between 1700 and 1736 the number of landless whites had already risen from 5 to 12 percent (Mayer and Fay 1977, 44). The average size of landholdings per adult male had declined from approximately 150 acres in the early seventeenth century to 43 acres in 1786 (ibid.).

In short, like Smith, Franklin was engaged in an ideological project, albeit less a theoretical endeavor than that of Smith. Specifically, Franklin was aiming his later theory of economic development at consoling those who were disturbed by the growing disparity between conditions of the urban wealthy and the masses of farmers in the countryside.

Even though the growth of luxury was incompatible with a state of happy mediocrity, Franklin (1905-7, 10:121) counseled his readers not to be alarmed, since "upon the whole there is a continual accumulation."

Franklin also saw advantages in the finer things in life despite his famous advocacy of Spartan simplicity (McCoy 1980, 75 ). In a 26 July 1784 letter, Franklin (1905-7, 9:244) asked Benjamin Vaughan: "May not Luxury, therefore, produce more than it consumes, if without such a Spur People would be as they are naturally enough inclined to be, lazy and indolent?" He then told a story to illustrate his point:

The skipper of a shallop employed between Cape May and Philadelphia, had done us some small service for which he refused to be paid. My wife understanding that he had a daughter, sent her a present of a new-fashioned cap. Three years after, this skipper being at my house with an old farmer of Cape May, his passenger, he mentioned the cap, and how much his daughter had been pleased with it. "But," he said, "it proved a dear cap to our congregation." "How so?" "When my daughter appeared with it at meeting, it was so much admired, that all the girls resolved to get such caps from Philadelphia,and my wife and I computed that the whole could not have cost less than a hundred pounds." "True," said the farmer, "but you do not tell all the story. I think the cap was nevertheless an advantage to us; for it was the first thing that put our girls upon knitting worsted mittens for sale at Philadelphia, that they might have wherewithal to buy caps and ribbons there; and you know that industry has continued, and is likely to continue and increase to a much greater value, and answer better purposes." (ibid., 243-44)

Commercialization

The transition from Franklin's happy mediocrity (of free workers) to an increasing commercialization of agriculture was especially powerful in the regions that served large urban areas. For example, in southeastern Pennsylvania, the region Franklin knew best, the typical farm of 1790 was already marketing about 40 percent of its produce (Lemon 1967, 69). Franklin (1905-7, 10:118) himself noted that farmers still had little need for imported goods, but they found themselves with a surplus of goods to market.

Franklin (ibid.) expressed certainty that farmers were doing well, writing: "Never was the Farmer better paid for the Part he can spare Commerce. . . . The Lands he possesses are also continually rising in value with the Increase of Population; and, on the whole, he is enabled to give such good Wages . . . that ... in no Part are the labouring Poor so well fed and well cloth'd, and well paid as in the United States of America." Franklin gave no hint of the worsening distribution of income that accompanied these signs of prosperity. Rather, he insisted that the population as a whole shared in a general bounty, observing, "If we enter the Cities, we find, that, since the Revolution, the Owners of Houses and Lots of Ground have had their interest vastly augmented in value,Rents have risen to astonishing Height" (ibid.).

Franklin had always realized that commercialization would eventually lead to manufactures. As early as 1769, he had suggested to Lord Karnes, Smith's patron (Rae 1895, 31), that the true value of manufactures was to concentrate value so that "Provisions may be more easily carried to a foreign market" (Franklin 1959, 16:109). Elsewhere, he made use of a biblical allusion (John 6:12) to recommend manufactures on account of their ability to "gather up fragments (of time) that nothing may be lost" (Franklin 195 9-, 15:52; repeated in 21:173).

These transitional conditions explain how Franklin (ibid., 16:295), m 1769, in the paragraph following his comments on part-time domestic manufacturing in the aforementioned marginal notes on The True Constitutional Meaning, maintained: "But some Manufacturers may be more advantageous to some Persons than the Cultivation of the Land." Franklin expanded on the meaning of his note in an earlier discussion with Gottfried Achenwall, professor of jurisprudence at the University of Gottinger. According to Achenwall's (1767, 354) account, Franklin stated: "There is land enough for the rich and poor, and the former prefer the larger profits from trade to the small return from the land."

These citations indicate that Franklin believed manufacturing would remain a part-time adjunct to the independent farm, just as the protoMarxian model of primitive accumulation suggests. In his marginal notes to "The Constitutional Means for Putting an End to the Disputes between Great Britain and American Colonies," he remarked, "There is no Necessity for their leaving their Plantations,they can manufacture in their Families at spare Times" (Franklin 1959-, 16:295; see also Coxe 1794, 442). Franklin (ibid., 20:442-45 ) also observed that families who practice this sort of economy were the healthiest in the nation. Unless these jottings were meant to prepare Franklin for a public encounter, they probably represented his true beliefs.

Workers were also supposed to be doing well in this state of affairs. Franklin (1782, 608) wrote: "There is a continual Demand for more Artisans of all the necessary and useful kinds, to supply those Cultivators of the Earth with Houses, and with Furniture and Utensils of the grosser sorts, which cannot so well be brought from Europe."

In this economy, Franklin (1905-7, 10:118-19) took the position:

"These Workmen all demand and obtain much higher Wages than any other Part of the World would afford them, and are paid in ready money." However, Franklin did not publicly express the belief that America had developed enough to begin large-scale manufacturing. As late as 1782, he explained: "Great Establishments of Manufacture require great Numbers of Poor to do the Work for Small Wages; these Poor are to be found in Europe, but will not be found in America, till all the Lands are taken up and cultivated, and the Excess of People, who cannot get Land, want Employment" (Franklin 1782, 611). In unpublished notes, Franklin indicated both less favorable conditions for workers as well as a brighter future for manufacturing. For example, he left a marginal comment on The True Constitutional Meaning that alluded to the declining welfare of the independent farmer: "No Farmer of America, in fact, makes 5 percent on his Money. His Profit is only being paid for by his own Labour and that of his Children" (Franklin 1959, 16:294).

As the social division of labor became more elaborate, the opportunities for self-employment became less common, despite Franklin's contention that workers could easily become independent farmers. Franklin saw this evolution well before Smith had published his Wealth of Nations.

Thus, with rising land values and relatively low returns to subsistence farming, we are but a short distance from the institution of wage labor. To say as much does not indicate that Franklin saw America as replicating English conditions. Indeed, he took pride in the uniqueness of the colonial experience. Nonetheless, his analysis of commercialization is far closer to Steuart's than Smith's.

Franklin's Comparative Sociology of Wage Labor

At times, Franklin did express doubts that everybody would willingly participate in the process of commercialization. The Native Americans, for instance, were, for Franklin, proof of the "proneness of human Nature to a life of ease, of freedom from care and labour." He added that, although they understood the advantages that "Arts, Sciences, and compact Society procure . . . they have never shown any Inclination to change their manner of life" (Franklin 1959-, 4:479).

Not only the Native Americans who were educated in white society, but even whites taken prisoner by the Indians inevitably drifted back to the "primitive" society in preference to the civilized one (ibid.). On this same score, Madison fretted that American society as a whole might fall back into the "savage state" of the indigenous people (see Branson 1979, 241; see also de Crevecoeur 1782, 52; Morgan 1975, 65-66).

In a letter to Joshua Babcock, Franklin (1959-, 19:6-7) wrote: "Had I never been in the American colonies, but was to form my judgement of Civil Society by what I have lately seen [in the British Isles], I should never advise a Nation of Savages to admit of Civilization. . . . the Effect of this kind of Civil Society seems only to be, depressing the Multitudes below the Savage State that a few may be rais'd above it." Franklin seems to have been so pleased with this anthropological flourish that he repeated it in another letter written on the same day (ibid., 19:16-24).

Yet Franklin generally expressed a fondness for the values of the Native American (see, for example, ibid., 148-57), which contrasted sharply with his impatience with any white who would not labor diligently. He explained the happiness of the Native Americans by their few natural wants, which were easily supplied; whereas, the civilized community had "infinite Artificial wants, no less craving than those of Nature, and much more difficult to satisfy" (ibid., 4:482).

Likewise, Franklin applauded the simplicity of other precapitalist cultures. Two members of Captain James Cook's crew related to Franklin in 1771 that the inhabitants of New Zealand refused to accept Cook's presents, presumably because they would be unable to create them on their own. Franklin termed those people "brave and sensible" and exclaimed, "Behold a Nation of Philosophers! Such as him [meaning Socrates] we celebrate as he went thro' a Fair, How many things there are in the World that I don't want" (ibid., 18:210).

Cook himself wrote that:

they live in a warm and fine Climate and enjoy a very wholesome Air, so that they have very little need of Clothing and this they seem to be fully sensible of, for many to whome we gave Cloth &c to, left it carelessly upon the Sea beach and in the woods as a thing they had no manner of use for. In short they seem'd to set no Value upon any thing we gave them, nor would they ever part with any thing of their own for any one article we could offer them; this in my opinion argues that they think themselves provided with all the necessarys of Life and that they have no superfluities, (cited in Beaglehole 1955-67, 399)

In contrast, when missionaries distributed European goods to the Yir Yoront group in Queensland, Australia, the aboriginals accepted the gifts and soon lost their knowledge about their own traditional technology (Diener 1991, 77-78).

Despite his professed admiration for traditional societies, Franklin later took an active part in a proposed project to carry the benefits of civilization to New Zealand (Franklin 1959-, 20:522-28).

Fortunately, so far as Franklin was concerned, not everybody would resist engaging in a commercial society. In his pamphlet The Internal State of America, he asserted that "there seems to be in every nation a greater proportion of Industry and Frugality, which tend to enrich, than Idleness and Prodigality, which occasion Poverty; so that upon the whole there is continued accumulation" (Franklin 1905-7, 10:121). This notion would surely have appealed to Smith, of whom it has been said that he believed "there was a Scotchman inside every man" (Bagehot 1880, 343).

Franklin, however, had not always showed such confidence in the industry of the populace. In a valuable letter written to Peter Collison, he observed that when British workers came to the colonies, where "Labour is much better paid than in England, their Industry seems to diminish in equal proportion" (Franklin 195 9-, 4:479). Noting that the same did not hold true of the German immigrants, Franklin supposed that the variation had to be traced to the "Institution" (ibid.). The institution to which he referred was the Poor Laws, which lent support to the unfortunate.

Given this perspective, not just poverty, but grinding poverty would be required to ensure the accumulation of capital. Despite all the pious sentiments about the naturalness of a liberal wage rate, the hard-liners would seem to be correct after all, at least so far as Franklin was concerned.

In the very same letter in which he heaped lavish praise upon the Native Americans for their simple ways, Franklin called for the erection of workhouses, where the indigent would be "obliged to work at the pleasure of others for a bare subsistence and that too under confinement" (Franklin 1959, 15:148-57). Or, in the words of his alter ego, Poor Richard, "a fat kitchen, aleanwill" (ibid., 1:315).

In conclusion, although the relatively egalitarian society of the northern colonies provided a welcome comparison with England, Franklin realized that a certain degree of poverty was required to establish wage labor. He appreciated that the American wage rate was coming closer to the ideal of a "normal" or "natural" rate or wages under which capital could prosper without driving labor into utter destitution (see Thompson 1977). Smith, no doubt, shared a similar appreciation of colonial conditions.

Franklin versus Smith

Smith attempted to use the experience of the New World as an object lesson in the virtues of laissez-faire. Although Franklin often wrote as if he were in league with Smith, the wise Pennsylvanian actually instructed the New World to follow a course much more in tune with Steuart than with Smith. On closer inspection, Smith (1976, IV.vii.b.3, 566) would have been hard-pressed to find a vindication of his doctrine of "population and improvement" in Franklin's works. In other words, despite these suggestions of rustic tranquility, the United States was destined to follow the course of development that Steuart, rather than Smith, charted. As Franklin (1959-, 18:82) concluded:

Every Manufacturer encouraged in our Country, makes part of Market for Provisions within ourselves, and saves so much Money to the Country as must otherwise be exported to pay for the manufactures he supplies. Here in England it is well known and understood that whenever a Manufacture is established which employs a number of Hands, it raises the Value of Lands in the neighbouring Country all around it; partly by the greater Demand near at hand for the Produce of the Land; and partly from the Plenty of Money drawn by the Manufactures to that Part of the Country. It seems therefore, in the Interest of all our Farmers and owners of Lands, to encourage our young Manufacturers.

In fact, Smith's eulogist, Dugald Stewart cited Franklin's Smithiansounding story of the gift of the cap in describing Steuart's analysis of economic development. Stewart introduced the citation with the comment that Franklin's "trifling anecdote . . . places the whole of this natural process in a stronger light than I can possibly do by any general observations" (Stewart 1855, 2:154).

Like Steuart, Franklin saw industry as beginning as an adjunct to agriculture, then evolving toward a separation between agricultural and manufacturing pursuits, as the use of time became more intensive. Given the different conditions in which they lived, we should not be surprised that Steuart was somewhat more favorably inclined toward manufactures than was Franklin.

Despite Franklin's similarities with Steuart, some recent authors still place Franklin closer to Smith than Steuart. For example, Patricia James (1979, 106) recently speculated that Steuart's claim about the wholesomeness of cities was, in fact, a direct response to Franklin. Franklin, however, understood as well as Steuart, that an increasing population could push labor into accepting full-time employment in manufacturing. Otherwise, Franklin's work was decidedly inferior to Steuart's.  

William Grampp (1979) and Warren Nutter (1976) both stress Smith's influence on Franklin. Although we might And echoes of Smith in Franklin's later work, we have no evidence that Franklin ever seriously studied The Wealth of Nations, even though he did own the book, Smith's message, like many of Franklin's, was in the air at the time. We can safely conclude that Franklin's evolution was influenced less by Smith than by the conditions of the society in which he lived.

True, Franklin occasionally expressed sentiments that sounded Smithian, but we must always be on guard against taking Franklin at face value. In short, the case for Smith's influence on Franklin is slim to say the least.

For example, Franklin's contribution to Whateley's pamphlet "Principles of Trade" indicates a militant free-trading spirit (Franklin 1959-, 21:169-77). However, industry was more firmly rooted by 1774, when that work was written, than was the case when Franklin wrote his Observations and the Interest of Great Britain Considered. More importantly, the doctrine of free trade lent support to the colonial cause. Although this pamphlet was published pseudonymously, people soon learned who wrote such works.

Franklin's infatuation with a system of happy mediocrity was appropriate to the early stage of the accumulation process. It was comparable to Steuart's analysis of domestic industry. Later, as a satisfactory labor supply seemed to be put in place, Franklin supported a more conventional theory in which markets, utility, and luxury have more prominence. Even in this late period, Franklin's work still bore a marked similarity to Steuart's.

We know that Franklin did study Steuart. He made several pages of notes on chapter 11 of book 2 of Steuart's Principles (reprinted in Carey 1928, 144-46). (Unfortunately, the otherwise thorough editors of Franklin's works omitted these notes. One of the editors has assured me that they will be printed in a subsequent volume.) The choice of this chapter of Steuart's book is significant, since it contains Steuart's most coherent analysis of the transition to capitalist social relations from a system of self-sufficiency.

Smith gave no indication that he recognized this aspect of Franklin's work; however, Smith himself did all that he could to downplay the analysis of this transition. His selective appropriation of Franklin's analysis of North American development lends further credence to the thesis that Smith falsified the political economy of the wage relationship, a relationship that appears clearly in the writings of Franklin and Steuart.
admin
Site Admin
 
Posts: 27268
Joined: Thu Aug 01, 2013 5:21 am

PreviousNext

Return to Political Science

Who is online

Users browsing this forum: No registered users and 1 guest