Category: Steve

From the introduction to Book 2:

Page 221: “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 every thing for himself, it is not necessary that any stock should be accumulated or stores up beforehand, in order to carry on the business of the society . . .  But when the division of labor has once been thoroughly introduced, the produce of man’s own labor can supply but a very small part of his occasional wants.  The far greater part of them are supplied by the produce of other men’s labor, which he purchases with the produce, or, what is the same thing, with the price of the produce of his own.”

On page 222: “As the accumulation of stock must, in the nature of things, be previous to the division of labor, so labor can be more and more subdivided in proportion only as stock is previously more and more accumulated.”  Actually, this isn’t strictly true–in practice it is more a dialectical process, where “accumulation of stock” and division of labor feed  on each other, each driving and adding to the other.  However, I don’t think this will have a significant effect on the understanding of the substance of the following five chapters.

He divides stock into fixed and circulating, according to how profit is realized from it.  For example:

Page 226: “The farmer makes his profit by keeping the laboring cattle, and by parting with their maintainance.”  So the cattle (eg, horse or oxen used for plowing) are fixed stock, and the feed for same are circulating stock.

Further down the page I found something interesting, though not directly related to the subject: “It consists in the stock of food, clothes, household furniture, &c, which have been purchased by their proper consumers, but which are not yet entirely consumed.” (emphasis added)  In other words, here, very possibly for the first time, is the observation that a commodity has not expanded its use-value until it is destroyed.

In any case, this chapter divides stock–of an individual or a nation–first in fixed and circulating.  He also divides it into stock that goes to maintain the person or nation (ie, food for the immediate future, lodging, cloathing), and stock which is intended to create a profit.

As he discusses the fixed stock of a nation, he says the following on page 228: “Fourthly, of the acquired and useful abilities of all the inhabitants or members of the society.”  An important point, reminding me of Trotsky’s discussion of culture in the general sense–knowledge and technique acquired by a given society.  “Those talents, as they make a part of his fortune, so do they likewise of that of the society to which he belongs.”

Page 229: “Every fixed capital is both originally derived from, and requires to be continally supported by circulating capital.”  True and very important.  Later he discusses improvements in efficiency, ie, if a the amount necessary to maintain one’s capital can be reduced, this necessarily increases the profit, or the rent, or the amount available for wages.  Another thought springs from this:If, as Smith argues (and as seems irrefutable) any reduction in maintainance without reduction in produce is pure gain, and if, as Smith also insists on, all value comes from labor, then maintanance (as Marx would point out in a century) comes out of surplus value, the same place rent and profit comes from.

Page 230: “Thus the farmer annually replaces to the manufacturer the provisions which he had consumed and the materials which he had wrought up the year before; and the manufacturer replaces to the farmer the finished work which had wasted and worn out in the same time.  This is the real exchange that is aunnually made between those two orders of people, though it seldom happens that the rude produce of the one and the manufactured produce of the other, are directly bartered for one another . . .”  This is lovely, and very important.

Page 231: “It is the produce of land which draws the fish from the waters; and it is the produce of the surface of the earth which extracts the minerals from its bowels.”  Nice!

“In all countries where there is a tolerable security, every man of common understanding will endeavor to employ whatever stock he can command in producuring either present enjoyment or future profit.   If it is employed in procuring present enjoyment, it is a stock reserved for immediate consumption.  If it is employed in procuring future profit, it must procure this profit either by staying with him or by going from him.  In the one case it is a fixed, in the other it is a circulating capital.”

Page 216: “Every improvement in the circumstances of society tends either directly or indirectly to raise the real rent of the land, to increase the real wealth of the landlord, his power of purchasing labor, or the produce of the labor of other people.”

“All those improvements in the productive powers of labor, which tend directly to reduce the real price of manufactures, tend indirectly to raise the real rent of land.”

Page 217: Every increase in the real wealth of the society, every increase in the quantity of useful labor employed within it, tends indirectly to raise the real rent of land.”

“The whole annual produce of the land and labor of every country, or what comes to the samee thing, the whole price of that annual kproduce, naturally divides itself, it has already been observed, into three parts; the rent of land, the wages of labor, and the profits of stock; and constitutes a revenue to three different orders of people; to those who live by rent, to those who live by wages, and to those who live by profit.  There are the three great, original, and constituent orders of every civilized society, from whose revenue that of every other order is ultimately derived.”

He then discusses each of them, describing their characteristics: Of landlords, on page 218: “They are the only one of the three orders whose revenue costs them neither labor nor care, but comes to them, as it were, of its own accord, and independent of any plan or project of their own.  That indolence, wich is the natural effect of the easy and security of their situation, renders them too often, not only ignorant, but incapable of that application of mind which is necessary in order to foresee and understand the consequences of any public regulation.”

So, the spokesman of capital doesn’t think much of the holdovers from fuedalism.  No surprise there.  What does he think of workers?

“When this real wealth of the society becomes stationary, his wages are soon reduced to what is barely enough to enable him to bring up a family, or to continue the race of laborors [[Hey, Will, interesting use of “race,” no?]].  When the society declines, they fall even below this.  The order of proprietors may, j,perhaps, gain more by the prosperity of the society, than that of laborers; but ther eis no order that suffers so cruelly from its decline.  But though the interest of the laborer is strictly connected with that of the society, he is incapable either of comprehending that interest, or of understanding its connection with his own.  His condition leaves him no time to receive the necessary information, and his education and habits are commonly such as to render him unfit to judge even though he was fully informed.  In public deliberations, therefore, his voice is little heard and less regarded, except upon some particular occasions when his clamour is animated, set on, and supported by his employers, not for his, but their own particular purposes.”

I might note in passing that the Paris Commune marked the end of the time when the laborers voice would not be heard; but basically Smith makes a good case here.  What, then of the capitalists?  Is he about to explain how they are the ones we should all listen to?  I thought so.

Page 219: “Their superiority over the country gentleman is, not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest than he has of his . . . to widen the market and to narrow the competition, is always the interest of the dealers.  To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it

Page 220: “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 to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention.  It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deeive and even to oppress the public, and hwo accordingly have, upon many occasions, both deceived and oppressed it.”

What is interesting here is: Just who is the public, anyway?  He’s divided society into those who own land, those who own stock, and those who labor.  So, then, the public is…who?  If the overwhelming majority are those who labor, then that would seem to be the answer.

As for rent itself, he never showed a case where rent could be pulled from a place where there was no labor.  If there is labor, there is surplus value created by it; hence I think we can conclude that rent, like profit, is simply a way surplus value is divided.

Page 194: “In call new colones the great quantity of waste land, which can for many years be applied to no other purpose but the feeding of cattle, soon renders them extremely abundant, and in every thing great cheapness is the necessary consequence of great abundance.”

Page 197: “In the progress of improvement, the period at which every particular sort of animal food is dearest, must naturally be that which immediately precedes the general practice of cultivating land for the sake of raising it.”

He then discusses how certain animals (especially poultry and hogs) are at first raised purely on the excess, inedible byproducts of small farmers, until the increase in price made it profitable to grow things specifically for these animals to be raised.  “The great rise in the price of both hogs and poultry has in Great Britain been frequently imputed to the dimnution of the number 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, but which at the same time may have contributed to raise the price of those articles…”

Page 208: “A market which, from requiring only one thousand, comes to require annually ten thousand ton of fish, can seldom be supplied without employing more than ten times teh quantity of labor which had before been sufficient to supply it.  The fish must generally be sought for at a great distance, large vessels must be employed, and more expensive machinery of every kind made use of.”  This especially grabbed my interest because here, for the first time (I think), he refers to requirements of the market. Let us remember that, before capitalism (ie, before a market economy), the notion of a market having requirements would have been absurd.  People had requirements, some of which (though very few) could be met at the market.  The raising of the market to its own independant force, abstracting it, if you will, from the people who make it up, is a fundamental feature of capitalism, and Smith must be given the credit for identifying it, even if he has not (yet at least) made this point explicitly.

On page 210 he discusses the value of precious metals, changing as more fertile mines are discovered or become exhausted.  “Its nominal value, the quantity of gold and silver by which this annual produce could be expressed or represented, would, no doubt, be very different; but its real value, the reaql quantity of labor which it could purchase or command, would be precisely the same.”

Page 211: “It is the natural effect of improvement, however, to diminish gradually the real price of almost all manufactures.”  Hints here of what Marx, in a hundred years, would call the the falling rate of profit.  “In consequence of better machinery, of greater dexterity, and of a more proper division and distribution of work, all of which are the natural effects of improvement, a much smaller quantity of labor becomes requisite for executing any particular piece of work; and though, in consequence of the flourishing circumstances of the society, the real price of labor should rise very considerably, yet the great diminution of the quantity will generally much more than compenstate the greatest rise which can happen in the price.”

Page 216: “It was not then the policy of Europe to restrain, by high huties, the importation of foreign manufactures, but rather to encourage it, in order that merchants might be enabled to supply, at as easy a rate as possible, the great men with the conveniences and luxuries which they wanted, and which the industry of their own country could not afford them.”  This is another important–very important–observation.  In fuedal monarchial society, providing goods to landlords was a higher prority than the profits of those who sold the goods.  When the State enters the service of capitalism, this is reversed, and the need for profit becomes the most important factor.

Continued in next part