CHAPTER III

OF LABOUR AND CAPITAL

§ 1. Labour the Dominant Conception in the "Wealth of Nations."

THE dominant conception in Adam Smith's whole treatment of the Wealth of Nations is unquestionably labour. The opening sentence runs : "The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, and which consist always either in the immediate produce of that labour or in what is purchased with that produce from other nations."

Even List is forced to admit that this passage shows how clearly Adam Smith in general perceived that the condition of nations is principally dependent on the sum of their productive powers. The first book deals avowedly with the causes of the improvement in the productive powers of labour and the distribution of the produce amongst the different ranks and conditions of men in the society. The second book discusses in particular the relations of labour and capital, whilst in the third and fourth the influence on industry of political and economic systems is considered. In Adam Smith's

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own words the object of these first four books is to explain in what has consisted the revenue of the great body of the people, or what has been the nature of those funds which in different ages and nations have supplied their annual consumption. The "annual produce of the land and labour" is an expression that is of as frequent occurrence in Adam Smith as the corresponding (and much more misleading) term the "national dividend" in writers of the present day.

The term "annual" indicates the continuous consumption and reproduction of the wealth, and the repetition of the term "labour" emphasises its fundamental importance.

§ 2. Of Productive and Unproductive Labour.

It would be easy to show by the citation of particular instances that labour is used by Adam Smith in the most extended sense. There are, in his view, two kinds of labour-productive and unproductive; each necessary to the welfare of the society, and each with a multitude of varieties. "There is one sort of labour which adds to the value of the subject upon which it is bestowed; there is another which has no such effect. The former, as it produces a value, may be called productive, the latter unproductive." Typical of the former is the labour of the manufacturer which fixes and realises itself in some vendible commodity. It is, as it were, a certain quantity of labour stocked and stored up be employed if necessary on some future occasion.

1 Cf. the expression festgeronnene Arbeitzeit of the Socialists.

1 to

That subject, or what is the same thing, the price of that subject, can afterwards, if necessary, put into motion a quantity of labour equal to that which had originally produced it. Typical of unproductive labour is the labour of the menial servant which does

not fix or realise itself in any vendible commodity. His services generally perish in the very instant of their performance, and seldom leave any trace of value behind them for which an equal quantity of service could afterwards be procured.

The distinction as drawn is quite clear and distinct; it answers to common usage, and calls attention to an important difference in the uses of labour.

§ 3. Importance and Variety of Unproductive Labour.

And Adam Smith, immediately after this account of unproductive labour, hastens to explain that the labour of some of the "most respectable orders in the society" is unproductive of any value "fixed and embodied in a vendible object." Their labour is technically unproductive, "because their service how honourable, how useful, or how necessary soever produces nothing for which an equal quantity of service can afterwards be procured."

army

In accordance with this view Adam Smith says that the sovereign, with all the officers of justice and war, who serve under him, the whole and navy are "unproductive" labourers. And yet, according to the same Adam Smith such labour is essential to the very existence of the state. Unproductive

labour of this kind, in general, has a money value
itself (though it does not create a value), and one
of the great merits of Adam Smith is that he applies
his theory of wages to "unproductive
unproductive" as well as
to "productive" labour, as, for example, when he
compares the wages of the curate with those of the
journeyman; and considers the connection between
efficiency and reward in the case of education, the
church, and the various learned professions.

Adam Smith is always intensely realistic, and the nations with which he deals are not composed only of "productive" labourers in the technical sense, but of other orders and sorts and conditions of men, who are at least of equal importance to the full national life.

Adam Smith's broad use of the term labour may be further illustrated by his application of the principle of division of labour to the class of men who are called philosophers or men of speculation.

"In the progress of society philosophy or speculation becomes like every other employment the principal or sole trade and occupation of a particular class of citizens. Like every other employment it is subdivided into a great number of different branches, each of which affords occupation to a peculiar tribe or class of philosophers."

It follows, at once, from this analysis of labour that the welfare of the nation as a whole is not to be considered solely from the point of view of "productive labour" in the narrow sense of the term. Still less is it to be considered solely from the point

of view of "accumulated values," which is the principal criticism so perversely and unjustly directed by List against Adam Smith. In his treatment of labour of every kind, Adam Smith is always a humanist; never a materialist.

§ 4. Capital-Sustaining and Auxiliary. Although, as already stated, the dominant conception in the Wealth of Nations is labour, it is also shown that, from the beginnings of society, labour has required the aid of capital.

Many thousands of pages have been written on the meaning of capital, and even now new definitions are being attempted and new criticisms directed against the old. The main result of all this controversy seems to be that the term capital covers different ideas, both in economic theory and in the language of the market-place. Accordingly in using the term capital it is most important to take care that by the context, or by special use of adjectives, any ambiguity should be avoided.

Adam Smith, as usual with him in dealing with complex conceptions that have varied in the course of economic development, applies the historical method. His meaning becomes perfectly clear because he appeals to real nations in different stages of development in all periods and all the world over.

Capital is treated in the first place from the point of view of the assistance it affords to labour. Capital is required to sustain labour during the period of "waiting" for the results.

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