Moral and economic conflicts in Adam Smith. Daniel Diatkine Université d’Evry, Phare 13th Summer school on Economic History, Philosophy, and History of Economic Thought Acqui Terme, 1-8 September 2010. Introduction, Smith’s struggles.
Moral and economic conflicts in Adam Smith
Université d’Evry, Phare
13th Summer school on Economic History, Philosophy, and History of Economic Thought
Acqui Terme, 1-8 September 2010
Smith writes that WON is a « violent attack” … “made upon the whole commercial system of Great Britain”. (Letter to Andreas Holt, october 26 1780, in Correspondence of Adam Smith.
Of course attacks against the commercial society were not uncommon in the eighteenth century. They were made by the adversaries of luxuries, for example by the neo republicans studied by Pocock and Skinner (as Ferguson), and also by Rousseau, to quote only the more famous. Of course, Smith is neither a neo republican nor a rousseauist. Smith’s enemy was more precisely what he calls, after Quesnay and Mirabeau, the mercantile system.
What is Mercantile System? For Smith, it is one of the two forms of the commercial society (or capitalist society). The other form is the System of Natural Liberty.
One of the many characteristics of the WON lies on the fact that Commercial society is a capitalist society, where a class, the class of merchant and manufacturers, or employers (to -day, I think that we can speak of capitalists as Turgot uses this term), plays an important, even eminent role. Actually, conflicts in WON do not concern individuals, they concern social classes. Notice that Smith’s question is very different from Marx’s one.
WON begins by opposing two societies, one without social classes and the other with social classes and social conflicts.
The society without social classes is called the primitive and rude state of societies. Smith supposes that American Indians are a good illustration of this state of societies, but it easy to show (Marouby 2004) that this state is purely a theoretical one, and much more familiar to economists. It is an economy with independent workers. There is division of labour, exchange and money. It is a market economy. Of course workers perceive wage, from themselves, they use tools and more generally stocks, but those tools and stocks are not capital.
For Smith, stocks are not capital per se. Labourers may save and accumulate stocks for future consumption, and they don’t accumulate capital. On the other hand, stocks become capital when, and only when, they are acquired by agents who want to accumulate in order to accumulate and not in order to consume to day or to morrow. In other words, it is the capitalists point of view, more precisely it is their want of accumulation without ending, which transforms tools and stocks into capital. For Ricardo, it seems that this point of view is the rational and therefore unique point of view. It is not the case for Smith.
So, in the advanced state, capitalists exist. It is why it is a capitalist economy.
“Among the savage nations of hunters and fishers, every individual who is able to work, is more or less employed in useful labour,”” … “Such nations, however, are” … “miserably poor”...“Among civilised and thriving nations, on the contrary, though a great number of people do not labour at all, many of whom consume the produce” …”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 conveniences of life than it is possible for any savage to acquire.”
I will show you that the attack against “commercial system’ is explained by the dangers of the mercantile system. And, by the way, I will show you that conflicts between employers and workers disappear in the system of natural liberty
The objectives of the Book I of the WON are simple:
1) To give an answer to the question of the compatibility between the growing of inequalities and the general improvement of conditions, the first theoretical problem, as I have mentioned.
2) To explicit the relations between interest of the social classes and general interest.
On this last matter the conclusion of the Book I is simple.
“Those who live by rent, to those who live by wages, and to those who live by profit.”…” are the three great, original, and constituent orders of every civilised society, from whose revenue that of every other order is ultimately derived.”
“The interest of the first of those three great orders”… “is strictly and inseparably connected with the general interest of the society.”… “ When the public deliberates concerning any regulation of commerce or police, the proprietors of land never can mislead it,” … “at least, if they have any tolerable knowledge of that interest. They are, indeed, too often defective in this tolerable knowledge”
“The interest of the second order, that of those who live by wages, is as strictly connected with the interest of the society as that of the first” … “But though the interest of the labourer 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 the 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.”
Secondly, and Smith insists on this point, the rate of growth is high in the North American colonies because “In everything except their foreign trade, the liberty of the English colonists to manage their own affairs their own way is complete.” Smith describes colonial institutions, and emphasizes the fact that there is no hereditary nobility. Again, American colonies are free from feudal past.
“There is more equality, therefore, among English colonists than among the inhabitants of their mother country. Their manners are more republican”.
In North America, wages are very high and land is cheap. So workers don’t remain dependent of a master for a very long time . They can establish themselves and became independent workers. So the conflicts between employers and workers are absent in North America.
Does this very idealistic view of North America imply that the system of natural liberty is achieved there? Clearly the response is No. Why?
The legislators are too far from North America. Colonists are not represented in the Commons, and it is, as it is well known the first reason of “the present disturbances in North America”. The thirteen colonies act as thirteen little republic, and little republic are divided into virulent factions. For this reason Smith concludes WON by a constitutional project, presented as an Utopia. The first effect of his plan concerns the generalisation of the British system of taxation to the all parts of the Empire. “This, however, could scarce, perhaps, be done, consistently with the principles of the British constitution, without admitting into the British Parliament, or if you will into the states general of the British empire, a fair and equal representation of all those different provinces,”
Some pages after, Smith concludes his expose:
Colonies “however, would, in point of happiness and tranquillity, gain considerably by a union with Great Britain. It would, at least, deliver them from those rancorous and virulent factions which are inseparable from small democracies, and which have so frequently divided the affections of their people, and disturbed the tranquillity of their governments, in their form so nearly democratical. In the case of a total separation from Great Britain, which, unless prevented by a union of this kind, seems very likely to take place, those factions would be ten times more virulent than ever.” …” In all great countries which are united under one uniform government, the spirit of party commonly prevails less in the remote provinces than in the centre of the empire. The distance of those provinces from the capital, from the principal seat of the great scramble of faction and ambition, makes them enter less into the views of any of the contending parties, and renders them more indifferent and impartial spectators of the conduct of all.” (Italics are mine)