Did Adam Smith really say that?

Econocat has finished reading the great man’s “An Enquiry into the Nature and Causes of the Wealth of Nations” and there are some pretty strange things in it.

What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little as possible. The former are disposed to combine in order to raise, the latter in order to lower the wages of labour. It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms.

He then goes on to bemoan the acts of parliament of the time that forbade combining to raise the price of work, ie unions. And Margaret Thatcher used to carry this book around in her handbag? So what else did this proto-Marxist say?

…..the interest of manufacturers and merchants, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public…The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention.

There is a maxim that I have observed in modern politics. That is: everyone will find a political reason to support something that suits their economic interests; it’s something any economic historian will tell you. This maxim does not come from Marx, but essentially from Smith. And let’s face it; Smith would be baffled by capitalism’s latest evolution, Neoliberalism. He wouldn’t recognise it at all, transaction intensive economies, 24/7/365 trading, outsourcing (or rather, the extremes to which it is taken today) and the influence of financial markets on the productive sector. Smith recognised the free market economy for what it is – a form of social organisation that does a reasonable job of channeling human nature into efficient economic outcomes (Btw “efficient” is a word Econocat uses very carefully when applied to economics, but that’s a subject for another post). He doubted the motives of merchants and industry, as should we all.

Finally, I can’t resist adding this quote (Smith was first and foremost a moral philosopher; economics was a secondary and almost accidental occupation):

It is thus that the general rules of morality are formed. They are ultimately founded upon experience of what, in particular instances, our moral faculties, our natural sense of merit and propriety, approve or disapprove of. We do not originally approve or condemn particular actions; because, upon examination, they appear to be agreeable or inconsistent with a certain general rule. The general rule, on the contrary, is formed, by finding from experience, that all actions of a certain kind, or circumstanced in a certain manner, are approved or disapproved of.

In other words, morality, which can quite reasonably be called objective, is a social construct, not imposed from on high.Thank you Adam.

Coming up over the weekend; why, despite my ever so slightly left of centre politics, Econocat has little time for unions. Also a bit more on this “Neoliberalism” thing I keep gabbing off about.

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