corwin

TWoN: Chapter 4

Page 33: “Every man thus lives by exchanging, or becomes in some measure a merchant.” This is worth some time to look at.

1. Leave it to a theoretician of capitalism to see everyone as a merchant. A theoretician of a feudal monarchical society might just as well have said, “By having control over his home, every man becomes in some measure a lord.”

2. What distinguishes a merchant from other trades, is that he makes his livelihood from the profit of exchanging of goods none of which he has produced or contributed toward producing; yet according to Smith, exchanges are made of equal value for equal value, hence according to his own laws, not only is every man not a merchant, but merchants cannot exist.

3. Nethertheless, there is a powerful truth here, and I think the truth outweighs the quibbles I listed above: In a market economy, exchange is the foundation of existence for everyone. The capitalist must exchange or he has no incentive to produce; the worker must exchange his ability to labor for the goods owned by the capitalist or he will not be able to feed himself to return tomorrow.

He follows this with a brief history of the development of money from 1. something that everything else can be exchanged with 2. metals being useful for this. 3. Coins as an easy form of metal, originally marked to indicate a set weight and purity 4. The inevitable debasement of coins

Page 41: “The word VALUE, it is to be observed, has two different meanings, and sometimes expresses the uility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called ‘value in use;’ the other, ‘value in exchange.'” If this discovery–that double meaning of “value”–was originally discovered by Smith, it ranks as one of his most profound and important achievements.

TWoN Chapter 3

If division of labor is caused and stimulated by the power of exchanging, then the size of the market must limit the degree to which labor can be divided. In a small market, specialization will not develop–one thinks of the American frontier where each homestead had to be, in some measure, self-sufficient. The limiting of specialization will limit the growth of the economy (ie, the productivity of labor).

On page 28: “As by means of water-carriage a more extensive market is opened to every sort of industry then what land-carriage alone afford it, so it us upon the sea-coast and along the banks of navigable rivers, that industry of every kind begins to subdivide and improve itself.” What strikes me here is the relationship of technique–that is, transportation technology–to the impetus for other technologies. I had already known that the better the transportation (as a special form of communication) the more technologies will feed on and inspire each other accross cultures, but I hadn’t considered how the market plays into this. It would seem that, from the 16th Century to the 19th, improvements in transportation (roads, railways, &c) stimulated everything. Cool.

He sort of throws out, on page 29, “…the first improvements of art and industry…” Yes, of course, the development of art and the development of industry always have complex (and fascinating) interrelationships, but I hadn’t considered it in that way before; that is, that art would also be transformed by the same things that transformed industry.

On page 30 he discusses how much of culture and technology (and art!) originated around the Medditeranian, attributing it to the ease of transportation. He ignores a number of other factors that contributed to it (climate, soil, the presence of herd animals), but that doesn’t weaken the point that the ease of transportation along the coast and up and down the various rivers must have been an emormous stimulous.

TWoN Chapter 2

Here I run into a problem, right out of the gate. On page 22, we are told that the division of labor “is the necessary, though very slow and gradual, consequence of a certain propensity in human nature…the propensity to truck, barter, and exchange one thing for another.”

The claim is that the propensity to trade is a fundamentally human. “It is found in all men, and to be found in no other race of animal.”

In order to explain why I consider this wrong, it is necessary first of all to define trade. There are some who would define it narrowly: it requires explicit negotiation and agreement. Others might consider anything in which a party receives something from another while the second receives something from the first to be a trade; but Smith himself rejects this on page 23: “When an animal wants to obtain something either of a man or of another animal, it has no other means of persuasion but to gain the favor of those whose service it requires. A puppy fawns upon its dam, a spaniel endeavors by a thousand attractions to engage the attention of its master…”

It is clear that when Smith speaks of exchange, he is excluding such things as trading affection for material objects as some might claim a child does with a parent. But then, it is clear that trading is far from as universal as Smith claims. The Pygmy engages in trade with the nearby townspeople, but within his tribe, he simply shares with others in the tribe, whether they were part of the hunt or not, because that is expected. Those who are poor at hunting are teased, and often the butt of jokes; but receive no less goods than anyone else. My understanding (I speak under correction here) is that the same is true among the Australian Aboriginies. Morgan observed the same thing among the Iroquois of North America. I haven’t yet come across anything to indicate trading for necessities within any hunter-gatherer tribal group is the norm; and even trading for things other than necessities, within a tribe, seems rare from the little I’ve come accross.

So, then, if Smith is wrong about trade being a part of “human nature” (page 22, 1st paragraph), we have to look for origins of trade elsewhere than in the basic makeup of man. Does this cast his entire structure in doubt? I have no idea, not having read the rest of it yet.

I will say that it seems clear that division of labor and exchange are closely linked, each inspiring the other, so that as far as the rest of chapter 2 goes, there is much to be said for his arguments. He discussions certain sparsely settled areas (the Highlands of Scotland, for example) as requiring less division of labor than more densely settled areas, and argues that this will slow down the development of manufacture, which makes a great deal of sense.

TWoN Chapter 1

Smith attributes a great deal of the increase in the productivity of labor to division of labor, and presents a good case for it.; at least, I’m convinced. His comments on agriculture are intriguing. P12: “The nature of agriculture, indeed, does not admit of so many subdivisions of labor, nor of so complete a separation of one business from another, as manufactures.” It makes me wonder if this might change in the future; if a more rational and planned production might reduce this gap. That speculation aside, however, the point is inarguable and significant.

I also found convincing his discussion, pp 15-16, of how much more significant training and specialization (“dexterity”) are compared to innate skill. Of course, I may only have been convinced because it agrees with my prejudices.

On the top of page 16 is introduced the implication that the measure of labor is time. I agree here, too, but wonder if he’ll go into more detail later. Further on 16: “Men are much more likely to discover easier and readier methods of attaining any object, when the whole attention of their minds is directed towards that single object, than when it is dissipated among a great variety of things.” This fits very well with the idea of capitalism ushering in the age of specialization; my own belief is that this age will end when capitalism ends, but that is just more speculation. On pages 17-18 he quite rightly observes that some inventions have been the product of those who specialize in inventions and in machines, and, later, he hints at the importance of those who “are often capable of combining together the powers of the distant and dissimilar objects.”

He loses precision and credibility on page 19, when he tries to include his ideas of division of labor into pre-capitalist, and especially primitive communist societies. I would guess this has to do with the infancy of anthropology in his time, but it seems clear that, in fact, there is very little division of labor in hunter-gatherer societies (eg, cf Turnbull, The Forrest People).

His mention at the bottom of page 19 of sailors immediately made me think of the degree of specialization in an 18th or 19th century man-of-war, compared to the very little division of labor in, for example, a trireme or a proa.

Adam Smith, The Wealth of Nations

I’m going to need to take notes as I read this, so I figured I may as well do it here as anywhere else–especially because doing it here gives Smart People a chance to point out where I’m being stupid.

I’m using the Bantom Dell paperback edition, March 2003, edited and annotated by Doug Fraser, ISBM 0-553-58597-5

Introduction: The title is The Wealth of Nations. Later, I may have some thoughts about wealth, but what intrigues me right away is that in the very title he makes reference to nations–that is, to a very specific organization of the State, and one closely associated with the economy of commodity-exchange, as opposed to, for example, the Kingdom, the City-State, the Tribe, &c. I wonder, therefore, to what degree his intention is to talk about general economic laws, and to what extent he intends to limit his discussion to the specifics of a market economy.

In the introuction itself, the first sentence reads as follows: “The annual labor of every nation is the fund which originally supplies with all the necessaries and conveniences of life.” So then, what would later come to be called the Labor Theory of Value, appears here as a given. Is he going to establish this later, or is it merely assumed?

In the second paragraph, he is already entering into a discussion of the productivity of labor–in other words, he is setting aside (at least for the moment) the material wealth with which a given region is endowed, and instead concentrating on the degree to which labor can multiply that wealth. To my mind, this seems perfectly reasonable.

He returns to this with more force on page 3, although I’ve now run into the term “capital stock” in the sentence, “The number of useful and productive labourers, it will hereafter appear, is every where in propotion 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.” I think I’m going to have a real problem if I can’t figure out what he means by “capital stock.” Raw material? Capital in the sense of wealth for investment? Hope I figure it out.

Later on page 3 he makes the interesting point that Europe has concentrated (since the fall of the Roman Empire) on industry of the town as opposed to industry of the country. Here he refers to it as a matter of “policy,” which seems arbitrary absent discussion of the material causes of that policy, but I trust he’ll expand on that later.

On to Book One