Adam Smith and Collective Bargaining

Adam Smith, for all the considerable flaws in his thinking, wasn’t stupid. He understood the class conflict inherent to the economic system he was describing.

What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, 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.

He also understood that this wasn’t an even match-up. Under 18th Century capitalism, not only were most workers living hand to mouth, organizing was expressly forbidden by law. It’s pretty clear that Smith thought this was an unfair state of affairs.

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.

Of course, workers organized and fought anyway, were beaten, killed, thrown in prison, and vilified in the capitalist press. But their “masters,” the owners of the factories, organized themselves as well. These organizations operated with the consent of the law to do what it is masters always do, the very aspect that unites them as a class: lower the wages of the workers. But this operated out of sight.

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.

“As ignorant of the world as of the subject” is a phrase I’ve had occasion to deploy more than a few times today. Smith realized that part of the invisibility was ideological. Implicit to the capitalist system was that owners would try to pay their workers as little as possible, so it didn’t seem worth remarking upon. He also saw how this secrecy was a great asset to owners, who could maneuver out of sight until they were in a better position to thwart worker aims. So they worked behind closed doors.

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.

The Wealth of Nations, Book 1 Chapter 8

So Smith would have understood what is happening in Wisconsin right now, and he would have expected most news to look like this. The “masters” are trying to revert back to those glory days when workers had no right to organize because it will allow them to better lower those workers’ wages. Why? Not to balance the budget, but to shift wealth — in this case, public funds — into the hands of those in the ruling class. And Adam Smith knew what the result of that was:

Many would not be able to find employment even upon these hard terms, but would either starve, or be driven to seek a subsistence either by begging, or by the perpetration perhaps of the greatest enormities.

Or as Krugman says:

The whole budget debate, then, is a sham. House Republicans, in particular, are literally stealing food from the mouths of babes — nutritional aid to pregnant women and very young children is one of the items on their cutting block — so they can pose, falsely, as deficit hawks.