Adam Smith was closer to Karl Marx than those showering praise on Smith today

By Eric
Toussaint, translated by Charles La Via in collaboration with Christine Pagnoulle.[1]
In the following citations, we discover that what Adam Smith wrote in the 1770s is not so distant from what Karl Marx and Friedrich Engels would write 70 years later in the famous Communist Manifesto.
According to
Karl Marx and Adam Smith – each in his own time – both
considered that it is the workers not the bosses/capitalists who produce value.
Workers create value, then, without in fact costing [their
capitalist bosses] anything: “Though the
manufacturer (i.e. the worker) has
his wages advanced to him by his master, he, in reality, costs him (the
capitalist) no expense, the value of
those wages being generally restored, together with a profit, in the improved
value of the subject upon which his labour is bestowed” [4]
In the
following passage,
What are the
common wages of labour, depends everywhere upon the contract usually made
between those two parties (workers and capitalists), whose interests are by no means the same.
The workmen desire to get as much, the masters to give as little as possible.
The former are disposed to combine in order to raise, the latter in order to
lower the wages of labour.
It is not, however, difficult to foresee which of the two parties must, upon
all ordinary occasions, have the advantage in the dispute, and force the other
into a compliance with their terms. The masters, being fewer in number, can
combine much more easily; and the law, besides, authorizes, or at least does
not prohibit their combinations, while it prohibits those of the workmen. We
have no acts of parliament against combining to lower the price of work; but
many against combining to raise it. In all such disputes the masters can hold
out much longer. A landlord, a farmer, a master manufacturer, a merchant,
though they did not employ a single workman, could generally live a year or two
upon the stocks which they have already acquired. Many workmen could not
subsist a week, few could subsist a month, and scarce any a year without
employment. In the long run the workman may be as necessary to his master as
his master is to him; but the necessity is not so immediate.
We rarely
hear, it has been said, of the combinations of masters, though frequently of
those of workmen. But whoever imagines, upon this account, that masters rarely
combine, is as ignorant of the world as of the subject. Masters are always and
everywhere in a sort of tacit, but constant and uniform combination, not to
raise the wages of labour above their actual rate. To violate this combination
is everywhere a most unpopular action, and a sort of reproach to a master among
his neighbours and equals. We seldom, indeed, hear of this combination, because
it is the usual, and one may say, the natural state of things, which nobody
ever hears of. Masters, too, sometimes enter into particular combinations to
sink the wages of labour even below this rate. These are always conducted with
the utmost silence and secrecy, till the moment of execution, and when the
workmen yield, as they sometimes do, without resistance, though severely felt
by them, they are never heard of by other people. Such combinations, however,
are frequently resisted by a contrary defensive combination of the workmen; who
sometimes too, without any provocation of this kind, combine of their own
accord to raise the price of their labour. Their usual pretences are, sometimes
the high price of provisions; sometimes the great profit which their masters
make by their work. But whether their combinations be offensive or defensive,
they are always abundantly heard of. In order to bring the point to a speedy
decision, they have always recourse to the loudest clamour, and sometimes to
the most shocking violence and outrage. They are desperate, and act with the
folly and extravagance of desperate men, who must either starve, or frighten
their masters into an immediate compliance with their demands. The masters upon
these occasions are just as clamorous upon the other side, and never cease to
call aloud for the assistance of the civil magistrate, and the rigorous
execution of those laws which have been enacted with so much severity against
the combinations of servants, labourers, and journeymen.”[5].
According to Adam Smith, this state of things motivates the capitalist
as follows:
“The consideration of his own private profit is the sole motive which
determines the owner of any capital to employ it either in agriculture, in
manufactures, or in some particular branch of the wholesale or retail trade.
The different quantities of productive labour which it may put into motion, and
the different values which it may add to the annual produce of the land and
labour of the society, according as it is employed in one or other of those
different ways, never enter into his thoughts.”[6]
Adam Smith argues
that there are three basic social classes: 1. landowners, who live by renting
their land; 2. wage earners; and 3. capitalists, who live off the profits they
make. Smith describes the class consciousness and class interests of these
three social groups in his own terms.
“The whole
annual produce of the land and labour of every country, or what comes to the
same thing, the whole price of that annual produce, naturally divides itself,
it has already been observed, into three parts; the rent of land, the wages of
labour, 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. These are the three great, original,
and constituent orders of every civilised society, from whose revenue that of
every other order is ultimately derived .” (…)
Speaking of the class that has its own private means, that
is the landowners,
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.
His
employers constitute the third order,
that of those who live by profit. It
is the stock that is employed for the sake of profit which puts into motion the
greater part of the useful labour of every society. The plans and projects of
the employers of stock regulate and direct all the most important operations of
labour, and profit is the end proposed by all those plans and projects. (…).
Merchants and master manufacturers are, in this order, the two classes of
people who commonly employ the largest capitals, and who by their wealth draw
to themselves the greatest share of the public consideration. As during their
whole lives they are engaged in plans and projects, they have frequently more
acuteness of understanding than the greater part of country gentlemen. (…).
The interest of the dealers, however, in any particular branch of trade
or manufactures, is always in some respects different from, and even opposite
to, that of the public.
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, and can serve only to enable the dealers, by raising their profits above
what they naturally would be, to levy, for their own benefit, an absurd tax
upon the rest of their fellow-citizens. 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 deceive and even to
oppress the public, and who accordingly have, upon many occasions, both
deceived and oppressed it.”[7]
Smith’s works contain other similar judgements, which
would give rashes to those politicians and ideologists who claim to be his
disciples: “Our merchants frequently
complain of the high wages of British labour as the cause of their manufactures
being undersold in foreign markets, but they are silent about the high profits
of stock. They complain of the extravagant gain of other people, but they say
nothing of their own. The high profits of British stock, however, may
contribute towards raising the price of British manufactures in many cases as
much, and in some perhaps more, than the high wages of British labour[8].” This statement
would be a heresy for the capitalists, who hold wage costs – always too high in
their opinion – responsible for inflation and the lack of competitiveness.
These concepts, which are as essential (if not more)
in the thought of Adam Smith as the famous invisible hand (only mentioned three
times in his work), are systematically forgotten by today’s dominant economic
thinkers.[9]
One of the fundamental differences
between
The
General Rules of the International Workingmen's Association 1864 (IWA[10])
written by Karl Marx express the basic substance of his position:
“Considering[11],
That the
emancipation of the working classes must be conquered by the working classes
themselves, that the struggle for the emancipation of the working classes means
not a struggle for class privileges and monopolies, but for equal rights and
duties, and the abolition of all class rule;
That the
economical subjection of the man of labor to the monopoliser of the means of
labour — that is, the source of life — lies at the bottom of servitude in all
its forms, of all social misery, mental degradation, and political dependence;
That the
economical emancipation of the working classes is therefore the great end to
which every political movement ought to be subordinate as a means;
That all
efforts aiming at the great end hitherto failed from the want of solidarity
between the manifold divisions of labour in each country, and from the absence
of a fraternal bond of union between the working classes of different
countries;
That the
emancipation of labour is neither a local nor a national, but a social problem,
embracing all countries in which modern society exists, and depending for its
solution on the concurrence, practical and theoretical, of the most advanced
countries;
That the
present revival of the working classes in the most industrious countries of
Europe, while it raises a new hope, gives solemn warning against a relapse into
the old errors, and calls for the immediate combination of the still
disconnected movements;
For these
reasons —
The
International Working Men's Association has been founded.
It declares:
That all
societies and individuals adhering to it will acknowledge truth, justice, and
morality as the basis of their conduct toward each other and toward all men,
without regard to colour, creed, or nationality;
That it acknowledges no rights without duties, no duties without rights.
[1]
Part 2 of this series “A Glance in the Rear View Mirror to Understand the
Present” will soon be published on www.cadtm.org
as “Neoliberal Ideology’s Thick Skin”
[2]
Adam Smith. 1776. An Inquiry into the
Nature and Causes of the Wealth of Nations. Book II, Chapter 3. http://www.adamsmith.org/smith/won-b2-c3.htm.
[4]
Adam Smith. 1776. An Inquiry into the
Nature and Causes of the Wealth of Nations. Book II, Chapter 3. http://www.adamsmith.org/smith/won-b2-c3.htm.
[5]
Adam Smith. 1776. An Inquiry into the
Nature and Causes of the Wealth of Nations. Book I, Chapter 8. http://www.adamsmith.org/smith/won-b1-c8.htm.
[6]
Adam Smith. 1776. An Inquiry into
the Nature and Causes of the Wealth of Nations. Book II, Chapter 5. http://www.adamsmith.org/smith/won-b2-c5.htm.
[7]
Adam Smith. 1776. An Inquiry into
the Nature and Causes of the Wealth of Nations. Book I, Chapter 11, Conclusion of
the chapter. http://www.adamsmith.org/smith/won-b1-c11-conclusion-of-the-chapter.htm.
[8]
Adam Smith. 1776. An Inquiry into
the Nature and Causes of the Wealth of Nations. Book IV, Chapter 7, Part 3. http://www.adamsmith.org/smith/won-b4-c7-pt-3.htm.
[9]
This is true of Alan Greenspan, for example, who in his autobiography The
Age of Turbulence, published in 2007, devotes seven pages of praise to
[10]
The International Workingmen’s Association (IWA), also known as the First
International, was founded in 1864 by Karl Marx and Friedrich
Engels among others. It united “anti-authoritarian” collectivists, such
as Mikhail Bakunin’s international movement, Marxist collectivists, and mutualists (followers of
Pierre-Joseph Proudhon). Political activists, unionists and cooperativists
worked together in this association. The First International was
dissolved after the failure of the Paris Commune in 1871.
[11] Written:
between October 21 and 27, 1864;
First published: in The Bee-Hive Newspaper,