Labor: How Private Enterprise Today Gets Capitalism Wrong

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The annual labor of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, and which consists always either in the immediate produce of that labour, or in what is purchased with that produce from other nations.

Adam Smith, The Wealth of Nations

The opening lines of most works are often the most important in terms of underlying message. This was the lesson illustrated many years ago by a professor of mine as we studied Machiavelli’s, The Prince. Indubitably, whether ones reads the tract as genuine or satire, the message Machiavelli conveys is the acquisition of power. Here is the first sentence from chapter 1 of his work:

All states, all dominions that have held and do hold empire over men have been and are either republics or principalities.

From the first line, alone, we understand Machiavelli is discussing the ways in which dominions are held over the masses of people, and the specifics of this dominion/power is the subject of the rest of the work. Even his dedicatory letter that precedes his first chapter speaks of the way in which one may acquire their own power (favor) with a prince:

It is customary most of the time for those who desire to acquire favor with a Prince to come to meet him with things that they care most for among their own or with the things that they see please him most.

Similarly, Adam Smith speaks of an underlying theme in his most famous – and surprisingly unread – work, The Wealth of Nations. That first line indicates to the reader what “the wealth of nations” really is: labor. Without labor, there would be no produce, nothing to trade, and nothing in which to invest; indeed labor is the most fundamental unit of both wealth and economies. Without labor, there would be no wealth.

It is disheartening, then, to see that in the United States laborers – those who perform the labor – are not only vilified but denied its significance as an economic force; that laborers, i.e suppliers, are being stripped of their right to negotiate with the buyers of their commodity in the labor market. Today, corporatists-capitalists and “free-market” proponents speak of the evils of unionized labor – how it makes business hard to function, how it drives the cost of goods up, how it’s wrecking the economy as a whole, and is a socialist institution threatening the very existence of American enterprise. But Smith, father of Capitalism, the ideological inspiration for this country’s economic model, couldn’t disagree more with such sentiments.

Smith was a moral philosopher by training; he was an economist insofar as he used he philosophical inclination to look at economics and best methods of economic organization. As such, he was primarily concerned with human beings. But Smith was no utopian, he knew people were motivated by self-interest (for the most part). So he devised his system based on observations about people and industry, but that had infused into it moral elements in order to make it just and equitable. Most people are rarely familiar with the morality that Smith infused into Capitalism but it suffuses the work, throughout. For example, he was concerned about workers rights and well-being, promoted public education, a welfare system, a progressive tax system, and on and on. And he was acutely aware of the exploitation that could be wrought by financially powerful interests. But these elements of his philosophy are rarely mentioned, if not ignored altogether.

This begs the question: “Why?”

Is it because the morality of such systems is hard to quantify mathematically and as such keeps the economic theory of capitalism unscientific? It’s possible to argue that point but anyone familiar even with the basics of economic theory know that while there are some good working models, economics is hardly a “hard,” science, the ways physics, chemistry, or biology are; in fact, much of it remains theory (lower case “t”). This is why Alan Greenspan, Federal Reserve Chairman at the time, was unable to see the lead up to the economic meltdown as it was happening in front of him (despite warnings from other economists and forecasters) – because the real-world data contradicted the theory of how it should have played out. The same goes with advertising – dominant economic theory asserts that consumers will seek information that will allow them to make the best purchase of a good/service of all the options presented; but advertising is a direct undermining of that information-seeking because it appeals not to a sense of understanding of the product but of feelings about a product upon which advertisement plays.

The answer may, ironically enough, be answered by Smith himself: self interest. Like advertising, if consumers had all the information they needed they would make the best purchase possible, or more than likely: none at all. This would make it hard to persuade a consumer into buying an inferior product or good (Remember: we live in an economic society who’s credo is “buyer beware”). In fact, it is likely consumers would consume less than they do because they would be informed of the fact that companies want them to buy products, even if they do not need them – this would definitely affect a nation conditioned to consume, and whose consumption constitutes 70% of its annual GDP. Similarly, if laborers in an economy were aware of just how important they were, it’d be less likely that businesses could exploit their labor so brazenly.

Does this sound cynical? Then I would remind the reader of the history of labor movements in this United States – there was a time when children worked; when adults worked to scrape by a meager living (and still do – most households fund their living with revolving debt, for example); when American immigrants were unabashedly and shamefully exploited (and still are – see: Mexicans); when working conditions were unsafe and often led to worker deaths; when the only weekend was a half-day on Sunday, and the work-day was 12 hours or more; when monopolies existed and the government had to break them apart. And let’s not forget the ultimate exploitation – that which gave America a head start as an economic powerhouse: slavery. The exploitation of labor is a part of American history, although, it is seldom discussed; and it continues to this day Another example: do major corporations outsource manufacturing jobs in the U.S. to foreign countries because they can’t turn a profit? or is it because they want to selfishly increase their profits as much as possible by paying foreign labor a fraction of what it takes to pay a U.S. worker living wages (a practice that Smith was opposed to)?

Whatever the explanation, it is no secret that Corporations are rapacious profit-seekers and that they disproportionately influence the markets (and the government that makes the laws that govern the rules of the market place). And, though, this is just one of many examples of the incongruity, it is clear that the U.S. version of “Capitalism” is not Adam Smith’s version. And this discrepancy is costing labor in the U.S. significantly.

This train of thought begs another question: if several major tenets of the original Capitalism are stripped away, is what remains still Capitalism? It reminds me of a question about identity that another professor asked class one day: “What is essential in a thing? What parts of the whole are necessary in order for the whole to still be considered that essential thing? For example: a table. If we remove one leg, is it still a table? If we remove, two? three? if we remove all four legs, is it still a table?”

Are there enough legs left of Smith’s philosophy in today’s Capitalism to be truly considered Capitalism? And what do we do about the mistreatment of the wealth of our nation? Let us labor together to discover the answers.