Adam Smith, Wealth of Nations

Note: Just as a side that might or might not help: When I took an economic

history class the professor mentioned a bit how Marx was influenced by the

classical English political economists. Marx took some of the themes in

these men's works are found contradictions within them (at least from a

Marxist view point). In elements of Smith's works some of the groundwork

for Marx's ideas can be found. I will try to point out those that I see.

Hope this will help.

Book 1, Chapter 1

Smith contends that the greatest improvement in productive powers of labor,

the greater skill, dexterity and judgement in production has been the

result of the division of labor. The division of labor has been seen in

certain types of industries. Agriculture and smaller industries have less

of a division of labor than the large industries. The division of labor is

essentially a division and combination of the different operations of a

particular labor process. The division of labor is greatest when the trades

and jobs are broken down to a large degree and separated. This has the

effect of greatly increasing the productive powers of labor.

Agriculture is not broken down to a great degree because it is more

difficult to separate one task from another. The subdivisions of labor in

agriculture are less. Smith further postulates that the pace of

productivity in agriculture is slower because of the indivisible nature of

agricultural labor. It is in manufacturing that the division of labor

makes its greatest impact on productivity.

The division of labor has three consequences that lead to increased

productivity. The first is that the dexterity of each workman is

increased. By reducing people's job to one simple operation it allows the

employee to perfect and improve their ability to do the job. I guess

"practice makes perfect" would be the shortest way of describing this. The

second factor that leads to increased productivity is the time saved by not

having to change types of work. Mainly this prevents slothfulness that can

arise when a person changes jobs- 'dilly-dallying' perhaps. The third

factor is the invention of machines that facilitate and eliminate certain

types of labor. These inventions are facilitated because workers can focus

on one job and come up with better ways of doing it. This innovation can

also come from the people who make the machines. (Note: In the social

change section we read North- this could possibly show that the 'first

industrial revolution' was one of learning by doing and not technological

innovation.)

It is not only in manufacturing that Smith discusses the division of labor.

He also notes that there is an 'intellectual' division of labor. The

division of labor allows people to specialize in certain 'disciplines' and

consequently produce more.

Smith also notes that this division of labor should create greater wealth

at all levels of society. People are able to trade their products with

each other. Smith also notes that the clothes and items that people use

are the "joint labor of a great multitude of workmen." Production appears

to be social. "We shall be sensible that without the assistance and

co-operation of many thousands, the very meanest person in a civilized

country could not be provided, even according to, what we very falsely

imagine, the easy and simple manner in which he is commonly accommodated."

(pp. 17) The items that are produced increase the comfort and convenience

of everyone in society.

The similarity with Marx that I see is that there is the acknowledgement of

the social nature of the forces of production, but where he would diverge

from Smith is that they don't equally benefit then all. Hence is Marx's

idea of the contradiction of capitalism: that between the social nature of

production and the private appropriation that occurs. It is the social

relations that surround the material forces of production that provide the

contradiction.

Book 1, Chapter 2:

Smith asserts that the division of labor is the consequence of a propensity

in human nature. This propensity is to truck, barter, and exchange one

thing for another. Now Smith asserts that it is propensity in human

nature, but that it is most likely more a product of reason and speech than

anything else. People use other methods to get things from each other (not

in an instrumental fashion), such as friendship, but given the large amount

of people in society other forms have to be used. One such form is to

interest a person's self-love, since benevolence cannot be expected from

everyone. This is how cooperation and assistance can be obtained. "It is

by treaty, by barter, and by purchase, that we obtain from one another the

greater part of those mutual good offices which we stand in need of, so it

is this same trucking disposition which originally gives occasion to the

division of labor." (pp. 21) Exchange is a mode of cooperation that

society uses to support itself and the individuals within it. If people

didn't have this propensity then everyone would just provide for

themselves, but instead the division of labor arises because people do this.

Smith talks about people and their place in the division of labor. He

states that it is not so much out of the natural abilities of people that

people are placed within certain occupations. But rather it is more a

consequence of the division of labor that people find themselves in

different occupations. It is from habit, custom and education that people

find their place within the division of labor. Therefore the different

talents in society are tied back to the propensity in human nature for

exchange, and consequently the division of labor is reinforced by the

talents that are created by its own divisions. The differences are useful

for society. "The different produces of their respective talents, by the

general disposition to truck, barter and exchange, being brought, as it

were, into common stock where every man may purchase whatever part of the

produce of other men's talents he has occasion for." (pp. 23)

Note: Here these seems to be elements of the social nature of people,

which Marx also identifies. Whether Smith was an influence her I am not

sure. Also there seems to be a bit of a distinction between the relations

of the market place and those of individuals. The self-interest is needed

in the market place, but only in close relations are relationships

constructed on other things than self-interest. This could show some of

what Marx wrote about in his ideas of alienation- how people treat each

other as objects and in instrumental ways. Except Marx didn't make as

sharp a distinction between the market and civil society. Eventually the

instrumental relations enter into the familial and personal relations in

capitalism.

Book 1, Chapter 3

The division of labor is always limited by the extent of the market. If

there is not a market for the products than the occupations necessary for

the products cannot be created. Some of the limits on the division of

labor, via the market, are the size of a town, the location of the industry

(along the water or inland), whether it is in the country or the city, etc.

These aspects can limit whether separate occupations develop or whether a

particular type of occupation develops at all. It also helps to determine

the access to world markets. His discussion of water-carriage exhibits how

this helped develop a connection of world markets. The access to world

markets makes every division of labor possible, because every type of

commodity is needed. Smith discusses different countries and examples that

show how access to a water way to the ocean has been important in the

development of countries.

Book 1, Chapter 4:

The division of labor when established allows a person to only provide a

portion of their own support. They need to trade the surplus of their

labor's products for other products. So every person becomes a merchant to

a certain degree by their trading and society becomes a commercial society.

Smith looks at the different types of objects that were used as mediums of

exchange. Problems of course include how do you find a standard measure by

which to govern all types of exchanges. He notes that metals were often

used, but they presented two problems. The first was the problem of

weighing and the second was the problem of judging the value of the metal

itself. Different metals are more precious than others and deciding

whether they were pure or was not the easiest thing. A public stamp was

one way to guarantee the purity and quality of the money. Coins were then

developed to help guarantee the weight of the metal. Eventually money

becomes the universal instrument of commerce.

Tied to the exchange of money is value. There are two meanings of value.

The first is the utility of a particular object. The second is the power

of purchasing other goods which the possession of that object conveys.

These are respectively, use value and exchange value. Smith notes that

those that have the greatest use value frequently have little exchange

value- such as water. Those with the greatest exchange value have little

use value- such as a diamond.

Note: Marx used the concepts of exchange value and use value. Also what

you see is possibly where he got the contradiction in money. Money is able

to give things value that normally would not have value in terms of use.

The potential ability of money to transform what we see as valuable is

noted in the contradiction, or polar opposites of that use and exchange

values regard to be the most important.

Book II, Chapter 3:

Smith distinguishes upon two types of labor. Productive and unproductive.

Productive is labor that adds value to the subject that it is acted upon.

Unproductive labor is doesn't not do this. Manufacturing is an example of

productive labor and menial labor is not (such as house cleaning). He also

notes that with productive labor, the labor is stored up in an object.

Smith writes, "It is, as it were, a certain quantity of labor stocked and

stored up to be employed, if necessary, upon some other occasion." (pp.

270) Unproductive labor does not fix or realize itself in any particular

subject or vendible commodity.

The unproductive and productive labor is maintained by what a country

produces. If a smaller proportion of labor is productive than unproductive

then the productive capacity of a country will decline. Each year that

there is more unproductive labor, as opposed to productive labor, the

quantity that a country produces will decline. The revenue from this labor

is used to 1) replace capital used in production, and 2) to pay the owner

of the capital or the stock owner. All revenue, no matter what industry,

follows this basic pattern. The wages of people are lumped into the first

category- this is the maintenance of productive labor. The second can be

used to maintain either productive or unproductive labor. People only

employ capital to obtain a profit. What is leftover after replenishing the

capital #1 is profit #2.

Unproductive labor is maintained by 1) the annual produce that constitutes

a revenue in profit or rent (falls in category two) from land and 2)

revenue that is left over after the replacement of capital and laborers is

used to support unproductive means. Therefore the proportion between

productive and unproductive labor depends upon the proportion of the annual

produce is destined for replacing a capital and that which is revenue-

either as rent or profit.

The more money that is invested in capital the richer the country. The

countries that are wealthier have more productive labor. The more that

people invest in capital the more industrious the country is. The less

capital investment the poorer and more idle the towns are. "The proportion

between capital and revenue, therefore, seems everywhere to regulate the

proportion between industry and idleness. Wherever capital predominates,

industry prevails; wherever revenue, idleness." (pp. 277)

One method towards which capital accumulation can occur is through savings.

The way to be save is to exercise thrift. Instead of consuming

extravagant things, savings allows money to be employed as capital. For

Smith, every frugal person becomes a public benefactor.

Smith also notes that the quantity of money in a country should directly

reflect the value of the countries produce. If the value of what is

produced increases, then the quantity of money should also increase.

Unproductive labor is not the only reason for a decline in productive

labor. Inefficient industry is also responsible, but Smith notes that this

hardly predominates. The productive power of an agency is increased by

increasing the number of productive laborers or by increasing their

productivity.

Government is seen as bad when the taxation takes away from the revenues

and the consequent investment in capital.

Another aspect of Smith's writing is that frivolous spending is not seen as

good if it is done in unproductive labor. He refers often to nobility and

their waste by not spending on capital or durable goods. Durable goods are

useful because the rich tire of their goods and the intermediate classes

and the poor can use them.

Notes: So in terms of Marx there are a few things that I have noted. One

is that Smith has a concept of a labor theory of value. Value of an object

is created by the labor that is added to the object. Like Marx he talks

about an object having saved up labor. Unlike Marx, however, he talks

about the object of production as the subject. This is a reverse for Marx.

For Marx alienation is what makes the object of production the subject.

When a person produces both Adam Smith and Marx believe that the labor of

the person augments the object, however Marx sees that the subject of

production is the worker and not the object. Another interesting aspect

that I noticed is that the distinction between unproductive and productive

labor can by seen with in the Marxian framework as the battle between the

older and feudal society and the emerging bourgeois society. The feudal

society has lords and the court that do not work for a living and hire

people who do not produce anything. They spend their money on unproductive

things. The bourgeoisie on the other hand save their money and invest it

in capital and labor. This is the productive labor and contributes to the

accumulation of capital. Another thing that I noticed is that Smith

indicates that if capital investment does not occur (in productive labor),

then society will not be as productive. It will decline in productivity.

This is in line with Marx's idea that capitalism as a system must continue

to expand or it will suffer and contract. According to Marx capital must

be accumulated or the system will break down.