Adam Smith is regarded as the father of capitalism. His book, The Wealth of Nations, published in 1795, had a tremendous influence on the world to this day. Today, South-Africa mainly has a capitalist economy. Companies use this argument to argue against wage increases workers and unions ask for.
Flip Buys decided to take a serious look at Smith’s “bible of capitalism”, and discovered that companies use Smith’s arguments very selectively. He believes there is another side of Smith, and he looks at a few arguments to support our members in wage negotiations with capitalist companies. He do this in a fictitious “interview” with Smith. Smith’s own words are printed with quotations and are exact extracts from The Wealth of Nations.
Good morning Prof. Smith, thank you for agreeing to this interview. I hope you had a pleasant journey all the way from the past. We need your wise counsel, because some companies in our country use your ideas to refuse our members a proper increase. What is your general view on compensation for workers?
“No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe and lodge the whole body of the people should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed and lodged.” 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”.
Question: We are fighting for decent wages for workers. People think that you will always choose the side of the rich business owners. Do you think that they are always fair?
Adam Smith: “Despite my friendship with some merchants and manufacturers, I sometimes have a cool loathing of this class. “Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labour”.
Question: But they always complain that higher wages are bad for the economy. Don’t you agree?
Adam Smith: “Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price … of their goods …. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.
To complain of it [the liberal reward of labour] is to lament over the necessary effect and cause of the greatest public prosperity”.
If the economy grows, the workers must also share in the fruits”.
“The demand for those who live by wages … naturally increases with the increase of national wealth, and cannot possibly increase without it”.
Question: Do I understand you correctly that what is good for business is not always good for the country?
Adam Smith: “The interest of the dealers in any particular branch of trade or manufacture, is always in some respects different from, and even opposite to that of the public”.
Question: Big business in South Africa forms a powerful lobby and tries to influence acts of Parliament. Any comment?
Adam Smith: “The proposal of any new law or regulation of commerce which comes from merchants and manufacturers, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined … with the most suspicious attention”.
Question: Weren’t you ever worried about the power of big companies, especially monopolies?
Adam Smith: Definitely. “People of the same trade seldom meet together … but the conversation ends in a conspiracy against the public”.
Question: What do you think of the privatisation of government functions?
Adam Smith: “The government of an exclusive company of merchants is, perhaps, the worst of all governments for any country whatever. Those companies have in the long run proved, universally, either burdensome or useless”.
Question: What is you view of government taxes?
Adam Smith: “There is no art which one government sooner learns of another, than that of draining money from the pockets of the people”. But there must be an extra tax on members of the government, because “they were generally disposed to reward both themselves and their immediate dependents rather more than enough”. This would always be a very popular tax!
Question: What duty does government have?
Adam Smith: “First, the duty of protecting the society from the violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it …; thirdly, the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain”.
Question: What do you think of politicians?
Adam Smith: “They have little modesty; are often assuming, arrogant and presumptuous; great admirers of themselves, and great contemners of other people … Their excessive presumption, founded upon their own excessive self-admiration, dazzles the multitude … The frequent, and often wonderful, success of the most ignorant quacks and imposters … sufficiently demonstrate how easily the multitude are imposed upon by the most extravagant and groundless pretensions”.
“The violence and injustice of the rulers of mankind is an ancient evil, for which, I am afraid the nature of human affairs can scarce admit of a remedy”.
Question: We have a major problem with violent crime in South Africa. What are your views on this issue?
Adam Smith: I am truly sorry to learn about that. Without safety there can be no economy, no workers and no wages. “The peace and order of society is more important than even the relief of the miserable”. Without that, unemployment and poverty will surely increase. “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice …”.
“Commerce and manufactures can seldom flourish long in any state which does not enjoy a regular administration of justice in which the people do not feel themselves secure in the possession of their property, in which the faith of contracts is not supported by law, and in which the authority of the state is not supposed to be regularly employed in enforcing the payments of debts”.
Question: Don’t you think capitalism is based on self-interest? Some top businesspeople in South-Africa live as if you gave them license to only look after their own selfish interests. You supported charities on a large scale.
Adam Smith: Yes, I think self-interest plays an important role. “You expect your dinner not from the benevolence of the brewer, the butcher or the baker, but from their regard to their own self-interest”.
But self-interest is not everything. In my book, Moral Sentiments, I stated that: “How selfish so ever man may be supposed, there are evidently some principles in his nature which interest him in the fortune of others, and render their happiness neccessary to him, though he derives nothing from it”.
However, I am concerned about super profits. “Profit is always highest in the countries that are going fastest to ruin”.
Question: What do you think of laws that prohibit poor people from getting a job because of their skin colour?
Adam Smith: “The patrimony of a poor man lies in the strength and dexterity of his hands; and to hinder him from employing this strength and dexterity … is a plain violation of his most-sacred property”.
Question: Are you in favour of leave for workers, or do you believe in continuous work?
Adam Smith: “Great labour, either of mind or body, continued for several days together, is in most men naturally followed by a great desire of relaxation … It is the call of nature, which requires to be relieved by some indulgence, sometimes of ease only, but sometimes too of dissipation and diversion”.
Question: Some people say you are partly responsible for turning workers into robots as some workers must perform the same functions again and again. Let’s face it – you have been the first to promote the division of labour.
Adam Smith: “No, I always believed in meaningful work, and was always worried about the results of excess in the division of labour. “The man whose whole life is spent in performing a few simple operations … generally becomes as stupid and ignorant as it is possible for a human creature to become”. “The real purpose of division of labour is to make a smaller quantity of labour produce a greater quantity of work”. “This specialisation is the source of economic growth”. However, you must do everything in your power to ensure that people have meaningful work which offers them the opportunity to grow and develop.
Prof Smith, thank you for joining us and for sharing your timeless insights with us.
Deur Flip Buys