Excerpts from Adam Smith's, Wealth of Nations, 1776 Adam Smith (1723-1790) studied at the University of Glasgow, in Scotland and Oxford University, in England. Influenced by the concept of natural laws as the basis for understanding economies Smith wrote The Wealth of Nations. It is his most famous work and is still one of the most influential works on classical liberal economics. In this treatise, Smith argued that open economic competition, fueled by each individual economy player's self-interest, would result in a stable and prosperous economic system. He argued that with competition, an "invisible hand" would fix the natural prices for goods in any given market. Smith advocated free economic trade and tried to convince readers that European governments should no longer set and regulate prices for labor and manufacturing. Writing during the dawn of the Industrial Revolution in Great Britain, Smith also argued that all nations evolved through four phases of economic development and that those with industry and extensive commercial networks were superior to and more developed than those dependent on an agrarian economy. Book I, Chapter 1. Of the Division of Labor: THE greatest improvement in the productive powers of labor, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed, or applied, seem to have been the effects of the division of labor.... To take an example, therefore, from a very trifling manufacture; but one in which the division of labor has been very often taken notice of, the trade of the pin-maker; a workman not educated to this business, nor acquainted with the use of the machinery employed in it, could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving, the head; to make the head requires two or three distinct operations; to put it on is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some factories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them. I have seen a small manufactory of this kind where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight 22 Marxism v. Capitalism Activity (DUE Friday 3/23) 1. What is Marx's perspective on the concept of private property? 2.How does Smith's view of private property differ from Marx? 3.What was Smith's view of the role of government? 4. Why does Marx believe an increased role of government is necessary? 5.Why does Smith believe in a decreased role of government? 6.How would these two different interpretations of the economy affect the writing of history? thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day; that is, certainly, not the two hundred and fortieth, perhaps not the four thousand eight hundredth part of what they are at present capable of performing, in consequence of a proper division and combination of their different operations.... In every other art and manufacture, the effects of the division of labor are similar to what they are in this very trifling one; though, in many of them, the labor can neither be so much subdivided, nor reduced to so great a simplicity of operation. The division of labor, however, so far as it can be introduced, occasions, in every art, a proportionable increase of the productive powers of labor. The separation of different trades and employments from one another seems to have taken place in consequence of this advantage. This separation, too, is generally called furthest in those countries which enjoy the highest degree of industry and improvement; what is the work of one man in a rude state of society being generally that of several in an improved one. In every improved society, the farmer is generally nothing but a farmer; the manufacturer, nothing but a manufacturer. The labor too which is necessary to produce any one complete manufacture, is almost always divided among a great number of hands. How many different trades are employed in each branch of the linen and woolen manufactures, from the growers of the flax and the wool, to the bleachers and smoothers of the linen, or to the dyers and dressers of the cloth! This great increase of the quantity of work which, in consequence of the division of labor, the same number of people are capable of performing, is owing to three different circumstances; first, the improvement of the dexterity of the workman necessarily increases the quantity of work he can perform; and the division of labor, by reducing every man's business to one simple operation, and by making this operation the sole employment of his life, necessarily increases very much the dexterity of the workman; secondly, the advantage which is gained by saving the time commonly lost in passing from one species of work to another; is much greater than we should at first view be apt to imagine it. It is impossible to pass very quickly from one kind of work to another, that is carried on in a different place, and with quite different tools; ... and lastly, the invention of a great number of machines which facilitate and abridge labor, and enable one man to do the work of many.... It is the great multiplication of the productions of all the different arts, in consequence of the division of labor, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people. Every workman has a great quantity of his own work to dispose of beyond what he himself has occasion for; and every other workman being exactly in the same situation, he is enabled to exchange a great quantity of his own goods for a great quantity, or, what comes to the same thing, for the price of a great quantity of theirs. He supplies them abundantly with what they have occasion for, and they accommodate him as amply with what he has occasion for, and a general plenty diffuses itself through all the different ranks of the society. Observe the accommodation of the most common artificer or day-laborer in a civilized and thriving country, and you will perceive that the number of people of whose industry a part, though but only a small part, has been employed in procuring him this accommodation, exceeds all computation. The woolen coat, for example, which covers the day-laborer, as coarse and rough as it may appear, is the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with produce of the joint labor of a great multitude of workmen. The shepherd, the sorter of the wool, the many others, must all join their different arts in order to complete even this homely production. How many merchants and others who often live in a very distant part of the country! How much commerce and navigation in particular, how many ship-builders, sailors, sail-makers, rope-makers, must have been employed in order to bring together the different drugs made use of by the dyer, which often come from the remotest parts of the world! ** *** Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage, naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society.... ....As every individual, therefore, endeavors as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value, every individual necessarily labors to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.... .... What is the species of domestic industry which his capital can employ, and of which the produce is likely to be the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.... It is thus that every system which endeavors, either by extraordinary encouragements to draw towards a particular species of industry a greater share of the capital of the society than would naturally go to it, or, by extraordinary restraints, force from a particular species of industry some share of the capital which would otherwise be employed in it, is in reality subversive to the great purpose which it means to promote. It retards, instead of accelerating, the progress of the society towards real wealth and myhistorylab PEARSON PRENTICE HALL Capitalism Challenged: The Communist Manifesto (1848) Karl Marx and Friedrich Engels Karl Marx and Friedrich Engels. 1985. The Communist Manifesto. London: Penguin. Karl Marx (1818-1883) was born and educated in Germany. He earned his doctorate degree from the University of Jena in 1841, and was soon caught up in the atmosphere of social revolution in his homeland. Prussian authorities closed the newspaper Marx edited for its radical beliefs, and he was soon forced into exile in France. While there, Marx began to collaborate with Freidrich Engels, an upper-middle-class German who was a partner genuine concern for the working classes. Together, Marx and Engels wrote the Manifesto of the Communist Party in his father's textile mill in Manchester, England. Engels was unlike most factory owners in that he had a and had it published in 1848, the same year that political revolution was sweeping Europe. Designed primarily as a propaganda piece, the Manifesto outlined modern socialism. Marx believed that laws governed both scientific and historical events. In order to understand history and possibly predict the future, Marx relied on an economic interpretation and predicted that the unequal distribution of wealth between different social classes would finally lead to open class conflict – revolution – in which eventually the working classes would seize power and create a classless society. working class IN what relation do the Communists stand to the proletarians as a whole? The Communists do not form a separate party opposed to other working-class parties. They have no interests separate and apart from those of the proletariat as a whole. They do not set up any sectarian principles of their own, by which to shape and mould the proletarian movement. The Communists are distinguished from the other working-class parties by this only: 1. In the national struggles of the proletarians of the different countries, they point out and bring to the front the common interests of the entire proletariat, independently of all nationality. 2. In the various stages of development which the struggle of the working class against the bourgeoisie has to pass through, they always and everywhere represent the interests of the movement as a whole. The Communists, therefore, are on the one hand, practically, the most advanced and resolute section of the working-class parties of every country, that section which pushes forward all others; on the other hand, theoretically, they have over the great mass of the proletariat the advantage of clearly understanding the line of march, the conditions, and the ultimate general results of the proletarian movement. The immediate aim of the Communists is the same as that of all the other proletarian parties: formation of the proletariat into a class, overthrow of the bourgeois supremacy, conquest of political power by the proletariat. The theoretical conclusions of the Communists are in no way based on ideas or principles that have been invented, or discovered, by this or that would-be universal reformer. They merely express, in general terms, actual relations springing from an existing class struggle, from a historical movement going on under our very eyes. The abolition of existing property relations is not at all a distinctive feature of Communism. All property relations in the past have continually been subject to historical change consequent upon the change
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