Forrest Johnson and Harry Drabik both wrote interesting columns about the imbalance of power between management and labor in the Reader (Dec. 8). Interestingly, and to the dismay of many so-called "free traders", Adam Smith, writer of "An Inquiry Into the Nature and Causes of the Wealth of Nations", backs up Johnson and Drabik.
Smith opens with "The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniencies [sic] 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."
And much later in his book Smith writes, "It is the stock [materials, equipment, and workplaces] that is employed for the sake of profit, which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operation of labour, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin."
In this same paragraph, Smith writes that the interests of those running or investing in business are often not the same as those of society.
Smith was not some god delivering the truth from on high; he was only a shrewd observer of how things work and how they affect various interests. The next time somebody claims support of "free markets", ask him or her how much of "Wealth of Nations" they have read. As for me, I'm only about a quarter of the way through and might finish it by next summer.
You can watch for "Wealth on Nation" nuggets from time to time on my blog at http://magree.blogspot.com.
