The Wealth of Nations by Adam Smith
Started:
The original work describing capitalist economics. To stop capitalism, we have to understand it, right?
The titles of books and chapters are incredibly long in this work, so I often choose to shorten them here.
Table of Contents
Introduction and Plan of the Work ↑
This book only managed three paragraphs before saying something horribly racist. Smith sets up some simple background first: A nation gets its needs and luxuries from the labor of its inhabitants, either by directly making them or producing something to trade for them. He also makes the fairly straightforward observation that the amount of wealth an economy produces depends on both the "skill, dexterity, and judgment with which its labour is generaly applied" and the amount of labor being done (specifically, the proportion of workers to non-workers).
Then, he says this:
The abundance or scantiness of this supply, too, seems to depend more upon the former of those two circumstances than upon the latter. Among the savage nations of hunters and fishers, every individual who is able to work is more or less employed in useful labour, and endeavours to provide, as well as he can, the necessaries and conveniencies of life…. Such nations, however, are so miserably poor, that, from mere want, they are frequently reduced, or at least think themselves reduced, to the necessity of sometimes directly destroying, and sometimes of abandoning their infants, their old people, and those afflicted with lingering diseases, to perish with hunger, or to be devoured by wild beasts. Among civilized and thriving nations, on the contrary, though a great number of people do not labour at all, many of whom consume the produce of ten times, frequently of a hundred times, more labour than the greater part of those who work; yet the produce of the whole labour of the society is so great, that all are often abundantly supplied; and a workman, even of the lowest and poorest order, if he is frugal and industrious, may enjoy a greater share of the necessaries and conveniencies of life than it is possible for any savage to acquire.
So his point seems to be that "savage nations" are poor not because they are being exploited, or do not have access to the same technological advancements, but because they lack the "skill, dexterity, and judgment" that workers in the West have.
Off to a great start here.
His second thesis seems to be: "The number of useful and productive labourers…is everywhere in proportion to the quantity of capital stock which is employed in setting them to work, and to the particular way in which it is so employed." So, getting the maximum possible amount of labor depends on having resources and using them properly to convince people to work.
Then he explains what each book will go over. Nothing really notable there.
Book I: Productivity and Distribution ↑
Chapter I: Division of Labor ↑
Smith provides pin-making as an example of how division of labor improves productivity. He notes that if you chose any random individual, and asked them to make a pin, they would be very slow at it, maybe not even able to do one a day. But professional pin-makers, knowing how the process works and even dividing the labor into several steps as in an assembly line, are able to make twelve pounds of pins per day.
He also argues there is less room for division of labor, and thus for improved productivity, in agriculture. Wealthy nations, he says, generally do have better-cultivated lands than poorer ones, but the efficiency of their manufacturing industries tends to be the most notable. Corn is corn no matter where it's grown, but French silks are better than English, English hardware is better than French, and Poland is a backwater without any manufacturing industries at all.
Smith identifies three ways that division of labor increases productivity. The first is by increasing a worker's mastery of a specialized skill. If someone performs a single, simple task all day, every day, for years, they become very fast at it. (Smith makes no mention of the psychological effect this might have on the worker, of course, or the way it allows capitalists to mask skilled labor as unskilled and therefore pay less for it.)
The second is that a worker repeating the same task avoids spending time switching between tasks. However, he doesn't just argue that task-switching is unnecessary overhead! Switching tasks, he argues, is a place where workers can become lazy and waste time "sauntering." Much more efficient to avoid these natural moments of breathing space by working someone continuously at the same thing for hours.
The third and final reason is by inventing machines that speed up the process of manufacturing. These inventions not only accelerates adoption of the division of labor, he argues, but actually can only exist because labor was already divided. If someone does one thing all day for years, it absorbs most of their thoughts, and they'll naturally invent more effective ways of doing them. So, it seems he will address the psychological effect of treating workers like machines, but only to argue that it's a good thing and that it makes them more likely to invent new machines. He even tells a heartwarming (and not at all depressing) story of a child laborer who figured out a way to automate his job so he could go play with his friends.
He does also argue that by dividing "inventing machines" into its own job, society manages to invent more machines.
He concludes with what must have been the first articulation of the capitalist's favorite argument in favor of economic inequality: A single poor factory worker is so rich compared to people in poorer countries! Think of the enormous supply chain it took to create just one cheap coat for him. Sure, he's not as rich as a European prince, but he's better off than (and I'll just quote him directly here) "many an African king, the absolute masters of the lives and liberties of ten thousand naked savages."
Just had to make sure he ended off the chapter with something racist.
Chapter II: How Division of Labor Happened ↑
We start off with the famous idea from this book, that society is based not on mutual aid and compassion but on convincing others that doing what you want is in their interest. The famous quote:
It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens.
This is the most central and famous capitalist argument here. We are inherently selfish creatures, and capitalism is great because it bends our selfishness into cooperation! We couldn't exist in a society at all unless we had such a system. It's every man for himself otherwise. (Since this is just my notes and not an essay I won't go digging up all the evidence that humans aren't actually like this.)
He argues then that this natural self-seeking impulse is what leads to the division of labor.
In a tribe of hunters and shepherds, a particular person makes bows and arrows, for example, with more readiness and dexterity than any other. He frequently exchanges them for cattle or for venison, with his companions; and he finds at last that he can, in this manner, get more cattle and venison, than if he himself ewnt to the field to catch them. From a regard to his own interest, therefore, the making of bows and arrows grows to be his chief business, and he becomes a sort of armourer.
Notice how he tacitly assumes that the fletcher, under normal circumstances, only gets to eat whatever they hunt down themselves. This stands pretty much against what we actualy observe in these kinds of societies, which is that they tend to operate on a gift economy, or an "I'll get the next one" economy. Anyone who has ever had roommates understands this kind of system intuitively. You all simply supply what you can, share whatever supply there is, and you want to contribute because you care about your friends and feel indebted to them for the help they've given you.
Then again, I don't get the impression Adam Smith probably had very many friends.
He then makes the bold decision to say something I actually agree with!
The difference of natural talents in different men is, in reality, much less than we are aware of…. The difference between the most dissimilar characters, between a philosopher and a common street porter, for example, seems to arise not so much from nature, as from habit, custom, and education.
This runs extremely contrary to the typical capitalist view, which is that people rise to the top of the economic hierarchy in a meritocratic fashion. The modern concept of capitalism is that it sorts people into the niche they're most naturally suited to fill. Capitalists love to talk about IQ and work ethic and natural talent. And here is their own Adam Smith, the father of capitalism himself, saying, "No, actually it's just that people have different opportunities and life experiences and develop different skills because of that." Absolutely fascinating.
Chapter III: Division of Labor and Market Size ↑
Smith observes that in cities, where there are many opportunities for commerce and exchange, labor tends to be more divided. A country carpenter will perform all kinds of woodworking; a city carpenter will specialize in one particular kind. In the country, everyone is obligated to carry things; in the city, there are dedicated porters who carry things all day as their job.
He also spends a long time discussing the various virtues of water cargo over land cargo. Land cargo is much more expensive to transport, requiring the upkeep of horses, the carriage itself, and taking on the greater danger of highway robbery. (He, of course, makes sure to get in a shot about how this danger is due in part to having to pass through "many barbarous nations." Racist prick.) Ships, on the other hand, can carry large amounts of cargo much more efficiently, with less upkeep, and less danger. "Trade" (because let's be honest, that's a euphemism for what's about to be mentioned) between London and Calcutta would be more or less impossible over land, but is plentiful over sea.
Therefore, he argues, coastal areas tend to develop the benefits of divison of labor first. The wider opportunities for trade mean that specializing in nail-making suddenly makes sense, because you actually have a way to sell that many nails. He also observes that the first civilizations appeared around the coast of the Mediterranean. (I'll grant him a pass here; he had no way of knowing about the Indus River Valley Civilization or Norte Chico, and these were also coastal civilizations, with inland sections mostly along rivers.) Clearly then, water transport and communication is extremely important to the development of what he would recognize as a civilization.
He then argues that the inland parts of Africa and Asia are, and always were, in a "barbarous and uncivilized state." Here Smith is using an advanced technique of sociological analysis called "racism." That's the last thing he talks about in this chapter. So, in summary, he spends a paragraph or two explaining his fairly straightforward point about division of labor being more possible with widespread trade. And then, to pad out the length, he connects this to explain how great naval commerce is, and how it justifies his chauvinism. Real C-minus-level writing here.
Chapter IV: Origin of Money ↑
Nothing here that isn't in every modern American's basic history classes. "Early societies used the barter system, but oh what is the butcher supposed to do if the baker doesn't want meat? They can't trade if their interests aren't matched! So currency was invented, and they settled on precious metals for currency, and they invented mints to simplify the process of confirming the amounts."
This is, of course, at least partially wrong. We know from studying actual moneyless societies that currently exist that they don't struggle with barter, because that is obviously a terrible system. Instead, they operate on a gift economy, which I already talked about.
Then he talks for a really long time about the specific currencies that have existed and their history. Fair enough, man clearly has a special interest. More power to him there.
Finally, he says that he's going to spend the next three chapters explaining what exactly the "exchangeable value" of a commodity is, how that determines the price, and how the price changes based on various factors.