Sunday, February 02, 2014

The Wealth of Nations, Book 3

Book 3 of "Wealth" is titled "Of The Different Progress Of Opulence In Different Nations". This book comes across more as history than as economics, and actually doesn't seem to have a lot to do with its title. It's short, only 70 pages or so.

Smith's contention that agriculture is superior to manufacturing and trade underlies a lot of the narrative of this book. He favors systems where small landholders (yeomen) actually own the land, as this encourages them to invest their stock in improving the land. Feudal and serf-based systems he describes as being a form of slavery.

Very interesting was the fact that most towns and cities (burghs) were chartered by kings to oppose the power of the landed barons. Getting off the farm and into a city meant even more then than it does now: if a serf ran away from his land and his master couldn't find him for 1 year, then he was free of his master, and cities were the best place to hide for that year.

Most inheritance at the time was primogeniture: the oldest son inherited everything. It seems kind of backwards and primitive to me (disclosure: I am a 2nd son), but it totally makes sense as the only way a landed baron could keep his land, the basis of his power, together.

Sometimes you wander how conservatives can be so hard-hearted and wrong-minded. Some of Smith's reads of human nature are painful:

The pride of man makes him love to domineer, and nothing mortifies him so much as to be obliged to condescend to persuade his inferiors. -- hard to believe this book was published 14 years after "all men are created equal."
Another lesson on the English class system:
In England, besides, a lease for life of forty shillings a-year value is a freehold, and entitles the lessee to a vote for a member of parliament; and as a great part of the yeomanry have freeholds of this kind, the whole order becomes respectable to their landlords, on account of the political consideration which this gives them. -- "Money talks, bullshit walks." seems to be a recurring theme across the books.
More nice classism:
Through the greater part of Europe, the yeomanry are regarded as an inferior rank of people, even to the better sort of tradesmen and mechanics, and in all parts of Europe to the great merchants and master manufacturers.
The lords despised the burghers, whom they considered not only as a different order, but as a parcel of emancipated slaves, almost of a different species from themselves. The wealth of the burghers never failed to provoke their envy and indignation, and they plundered them upon every occasion without mercy or remorse.
Smith continues with his disdain for the landed gentry:
Merchants are commonly ambitious of becoming country gentlemen, and, when they do, they are generally the best of all improvers.
One contention he makes is that, before they were cities providing manufactured goods, landed barons could do nothing with the excess produce of their land but increase the number of their retainers, increasing their power by feeding more people. Once cities started manufacturing crap stuff, they could instead now trade their surplus produce for money and become consumers!
These gradually furnished the great proprietors with something for which they could exchange the whole surplus produce of their lands, and which they could consume themselves, without sharing it either with tenants or retainers.
And at this point, down went the number of retainers. So the free market, consumer society kind of snuck up on everybody:
A revolution of the greatest importance to the public happiness, was in this manner brought about by two different orders of people, who had not the least intention to serve the public. To gratify the most childish vanity was the sole motive of the great proprietors. The merchants and artificers, much less ridiculous, acted merely from a view to their own interest, and in pursuit of their own pedlar principle of turning a penny wherever a penny was to be got. Neither of them had either knowledge or foresight of that great revolution which the folly of the one, and the industry of the other, was gradually bringing about.
Here's some foreshadowing of our modern multinational corporations:
A merchant, it has been said very properly, is not necessarily the citizen of any particular country.
I had to look up several odd, archaic words in this book:
  • entails -- noun, a settlement of the inheritance of property over a number of generations so that it remains within a family or other group.
  • engrosser -- noun, basically a monopolist.
  • regrater -- noun, basically a commodity speculator.
  • forestaller -- noun, someone who stores commodities for a socially useful purpose, i.e., for times of shortage, rather than as an engrosser or regrater.
The next book appears to be a huge one, so I'll go over to some short stories for a break.

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