The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers (23 page)

A Different Division of Labor

In 1767, about four years after Smith first introduced his students to the pin factory, his friend and colleague, Adam Ferguson, published
An Essay on the History of Civil Society.
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Their mutual friend, Rev. Dr. Alexander Carlyle, reported on Smith’s displeasure with this publication: “Smith had been weak enough to accuse him of having borrowed some of his inventions without owning them. This Ferguson denied, but owned he derived many notions from a French author, and Smith had been there before.”
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Ferguson’s reference to the French author is important. Several detailed descriptions of pin production had been published in France. Although Smith never mentioned them, he used identical numerical examples and phraseology. His reliance on different French sources could explain the different estimates of per capita pin production in his lectures and his book.

Before this incident, Ferguson had given Smith every encouragement, both in person and in print.
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Moreover, Ferguson did not describe any pin factory. Like Smith, Ferguson does credit the division of labor with permitting increased production:

By the separation of arts and professions, the sources of wealth are laid open; every species of material is wrought up to the greatest perfection, and every commodity is produced in the greatest abundance.
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Ferguson did not dwell on the technological potential of the division of labor. Instead, his book detailed the sociological implications, showing the negative consequences of the division of labor:

In every commercial state, notwithstanding any pretension to equal rights, the exaltation of a few must depress the many. In this arrangement, we think that the extreme meanness of some classes must arise chiefly from the defect of knowledge, and of liberal education; and we refer to such classes, as to an image of what our species must have been in its rude and uncultivated state. But we forget how many circumstances, especially
in populous cities, tend to corrupt the lowest orders of men. Ignorance is the least of their failings.
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Besides creating class divisions, the division of labor undermines society:

The separation of professions, while it seems to promise improvement of skill, and is actually the cause why the productions of every art becomes more perfect as commerce advances; yet in its termination, and ultimate effects, serves, in some measure, to break the bands of society, to substitute form in place of ingenuity, and to withdraw individuals from the common scene of occupation, on which the sentiments of the heart, and the mind, are most happily employed.
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Finally, Ferguson, who had been the principal chaplain to the Black Watch brigade from 1746 to 1754, warned that the division of labor degrades the character of people who will be needed for the military.
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Ferguson’s real sin might well have been to use the pin factory in a way that contradicted Adam Smith’s libertarian vision.

Tough as Nails

Smith eventually retired to his birthplace, Kirkcaldy, to work on
The Wealth of Nations
. Although he may have relied upon secondary sources for his knowledge of the pin factory, he must have had firsthand knowledge of the production of Scottish nails. In the
Wealth of Nations
, only three paragraphs after describing the pin factory, Smith briefly turned to this industry.

The nail industry was concentrated in the neighborhood of Kirkaldy, where about 30 percent of the nation’s nail producers were located.
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Smith took note of the remarkable physical dexterity of the boys he watched making the nails, but his main point was that the division of labor was not as refined as in the pin factory.

Smith never mentioned that the great manufacturer, the Carron Company, had offered a bounty of one guinea to reward nail makers for moving their production closer to Kirkaldy. The company’s purpose was to have a ready market for its iron rods that would be shaped into nails.

In addition, Smith did not inform his readers that the Carron Company entered into a bargain with the Edinburgh poorhouse to apprentice pauper boys to make nails from the age of twelve until they reached twenty-one. Finally, although Smith may not have been aware of the problem, the manager of the poorhouse received a number of alarming reports of the poor treatment of these apprentices.
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Similarly, Smith’s picture of the pin factory was incomplete. One of his two major French sources offered an unattractive picture of the seemingly idyllic job of the pin makers:

We also make several observations on the pin maker’s trade…. This trade is very dirty and unhealthy. The brass rust, a greeny grey colour, affects workers differently depending on their role in the factory. The point makers are not robust, and die young of pulmonary ailments.
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In the end, Smith’s idealized workers were not just selling their time on the job, but their lives as well. Nonetheless, for Smith, these details about the nail workers were not worthy of mention, though he spun a story about the justice and efficiency of the pin factory that still resonates strongly among market enthusiasts.

A Different Kind of Pin Factory

The first integrated pin factory was the Dockwra copper works, founded in 1692. It produced about 80 tons of copper per year, perhaps as much as half of the entire industry. The company had no less than twenty-four benches for drawing wire (for making pins). From the start. Dockwra gave attention to the possibility of new methods.
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Eventually, the Warmley works, founded near Bristol in 1746, surpassed Dockwra. The Warmley works came to popular attention in
1770, when Arthur Young published
A Six Months Tour Through the Southern Counties of England and Wales
. Young was a prolific observer of agriculture, as well as economic life in general. His books were widely translated in European languages. This particular book was already in its third edition by 1772. A careful study of authorities used in parliamentary debates found that MPs cited Young far more than Adam Smith.
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Young described the process of integrated pin production at Warmley, which he recommended as “very well worth seeing.” His description began with how the molten metal was

poured into a flat mould of stone, to make it into thin plates, about 4 feet long and three broad. The plates are then cut into 17 strips and then again, by particular machines, into many more very thin ones, and drawn out to the length of 17 feet, which are again drawn into wire, and done up in bunches of 40s value each; about 100 of which are made here every week, and each makes a hundred thousand pins. The wires are cut into them, and completed here employing a great number of girls who with little machines, worked by their feet, point and head them with great expedition; and each will do a pound and a half in a day.

The heads are spun by women with a wheel, much like a common spinning wheel, and then separated from one another by a man, with another little machine like a pair of shears. They have several lapis calaminaris stones for preparing it to make the brass, of which they form a vast number of awkward looking pans and dishes for the Negroes, on the coast of Guinea. All the machines and wheels are set in motion by water, for racing, which there is a prodigious fire engine, which raises, as it is said 3000 hogsheads every minute.
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This system replaced the people who had turned wheels in the operation. The displaced workers represented one-sixth of the labor force.
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Smith’s Understanding of Modern Technology

In contrast to the importance given to the division of labor, Smith showed no appreciation of the growing importance of fossil fuels in increasing productivity. The Warmley works was still largely dependent on water power, but coal was used to lift water when the natural flow was insufficient. Despite the beginnings of the Industrial Revolution that centered in Scotland, Smith offered only a few scattered references to coal in his published work. These observations mostly concern either coal as a household fuel or the process of mining, without bothering to link coal to industrial production.

In one instance, Smith discussed the government’s policy of restricting exports of coal. The purpose of such legislation was to protect Britain’s emerging industrial leadership, but Smith never made that connection. Instead, he merely noted: “Coals may be considered both as a material of manufacture and as an instrument of trade.”
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Possibly the closest he came to acknowledging the productive potential of modern technology was a fanciful account of a boy who invented the steam engine “to save his own labour.”
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Even though James Watt was an instrument maker in his school, Edwin Cannan, a scholarly editor of
Wealth of Nations
, reported that Smith based his account on a misreading of a three-decades-old book.
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Something else seems to be at work here. In his unpublished works, Smith clearly connected economic progress with the development of modern technology. In the school year of 1762–63, while lecturing to his students, he began a long discussion about the pin factory that culminated in the heightened productivity of the steam engine.
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He used the same sequence, moving from the pin factory to the steam engine, in an early draft of
Wealth of Nations
.
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Smith repeated almost all of the ideas in these two early discussions in
Wealth of Nations
, except for the final transition to modern technology.

Then, in a remarkable letter to Lord Carlisle, just three years after
Wealth of Nations
appeared, while explaining why the Irish could not pose much of a threat to British industry, Smith explicitly prioritized social control ahead of the emerging Industrial Revolution:

I cannot believe that the interest of Britain would be hurt by it [free trade]. On the contrary, the Competition of Irish goods in the British market might contribute to break down in Part that monopoly which we have most absurdly granted to the greater part of our own workmen against our selves. It would, however, be a long time before this competition could be very considerable. In the present state of Ireland, centuries must pass away before the greater part of its manufactures could vie with those of England. Ireland has little Coal; the Coallieries about Lough Neagh being of little consequence to the greater part of the Country. It is ill provided with Wood; two articles essentially necessary to the progress of Great Manufactures. It wants order, police, and a regular administration of justice both to protect and to restrain the inferior ranks of people, articles more essential to the progress of Industry than both coal and wood put together.
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Seven days earlier, he had presented similar thoughts in a letter to Henry Dundas suggesting the importance of wood and coal for modern technology.
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If this subject was important enough to repeat in letters to influential people, why did it not appear in the book he had just published?

Smith’s reference to “the monopoly which we have most absurdly granted to the greater part of our own workmen against our selves” is also interesting. His observation anticipates the modern move toward outsourcing. But why would someone who advocated the promotion of the interests of industrious workers want to see them undercut by foreign competition?

The Primacy of Exchange

Smith’s relatively primitive description of the economy is useful in suggesting that the defining characteristic of an economy is the act of exchange rather than production. This approach allows Smith to depict a world where “social distance” rather than authority was the norm.
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Smith offered a glimpse of this world, observing, “Society
may subsist among different men as among different merchants, from a sense of its utility, without any mutual love or affection.”
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Production still existed, but exchange was central—not just because “the division of labour … must always be limited by the extent of the market.”
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Notice that the division of labor occurs prior to the process of production. Once the division of labor is in place, one has no need to consider production. At this point, every person—workers and capitalists alike—becomes a merchant, equally selling wares on a free and open market. In Smith’s words: “Every man … lives by exchanging, or becomes in some measure a merchant, and the society itself grows to be what is properly a commercial society.”
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In this world, Smith’s idealized merchant-workers prosper merely by demonstrating middle-class virtues, such as punctuality and trustworthy behavior. These merchants will compete with one another, but they must do so by following the rules at the same time as they demonstrate respect for one another.

Class antagonism, exploitation, and domination have no place in this imaginary world of exchange that Smith created. Workers existed as exchangers rather than as proletarians. Smith’s merchant-workers all belong to the same community as their employers. A parallel imaginary progressive lifecycle of labor allows a large portion of the working class to become employers themselves in the not too distant future.

Smith was not alone in presenting such an idealized version of social mobility. As one historical study of British culture during Smith’s day found:

Another way eighteenth-century culture tried to instill an inner work-compulsion in the poor was to promise success for industry and dire punishment for idleness. Of course, success above a mere survival level was rarely available to members of the laboring classes, since they were seldom paid enough to allow them to rise in the world.
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