Regulating the Supply of Labor

There has been a growing movement to reinterpret Adam Smith and his book The Wealth of Nations.  Smith has long been heralded by libertarians and neo-liberals as the father of free market capitalism, but in recent years he has been cited in support of such progressive issues as raising the minimum wage, increasing taxes on the wealthy and limiting the rates of interest on loans.  As the many young people have begun to doubt the virtues of a capitalist system these arguments suggest that the worst features of a capitalist economy—unemployment, poverty and its effects—were not inherent in Smith’s original vision, and that it’s possible to imagine a more benevolent form of capitalism that is more sympathetic to the working class. 

But is that what Adam Smith really intended?

Smith certainly would not have supported a minimum wage since he opposed any attempt to regulate the price of goods or labor believing the free market was always more efficient.  He even denied that it was possible to determine what proper wages should be.

“Where wages are not regulated by law, all that we can pretend to determine is what are the most usual; and experience seems to show that law can never regulate them properly, though it has often pretended to do so.”

One passage, in particular, has often been quoted in support of a living wage, or at least a subsistence minimum.

Immigrant Family, Jacob Riis

“A man must always live by his work, and his wages must at least be sufficient to maintain him.  They must even upon most occasions be somewhat more, otherwise it would be impossible for him to bring up a family, and the race of such workmen could not last beyond the first generation.”

However, people who quote this passage overlook a caveat that Smith offers later on:

“But one half the children born, it is computed, die before the age of manhood.  The poorest labourers, therefore, according to this account, must, one with another, attempt to rear at least four children, in order that two may have an equal chance of living to that age.”

At first glance this passage seems to advocate for sufficient wages to support a family, but according to Smith, wages should be low specifically in order to promote a high rate of childhood mortality.

“[I]t is only among the inferior ranks of people that the scantiness of subsistence can set limits to the further multiplication of the human species; and it can do so in no other way than by destroying a great part of the children.” 

This is how the free market determines a minimum wage—through supply and demand.  If the number of workers competing for jobs exceeds the demand, then wages will go down until the supply of labor is reduced through attrition.

“It is in this manner that the demand for men, like that for any other commodity, necessarily regulates the production of men.”

In smith’s vision unemployment, poverty and mortality were not flaws in the capitalist system; they were design features.

The Historians Craft

President John F. Kennedy once said, “History is a relentless master.  It has no present, only the past rushing into the future”—or maybe he didn’t.  It’s hard to be sure.

That quote appears in literally thousands of books, articles, web sites and even lesson plans.  It seems to be particularly popular among history teachers.  Unfortunately, none of them identify where it’s from.  It doesn’t appear in Kennedy’s inaugural address, his “new frontier” speech or any of the speeches or remarks he made during his presidential campaign.   The language and style are consistent with other things that Kennedy said, but most of his quotes are much easier to track down.  Usually a simple search will turn up the original source.  So it’s surprising that this one quote is so illusive.  Of course that’s not really the point.

The point is that thousands of historians were willing to use a quote without bothering to confirm its source. 

At its best, history opens a window on other worlds and other perspectives.  It challenges our assumptions by introducing us to people who held different beliefs, and it invites us to see ourselves reflected in people who lived very different lives under very different circumstances. 

The study of history shows us the series of events, the trials and errors, that shaped our world, and by understanding these causes and effects we can construct models with which to confront future challenges—but there lies the historian’s trap.  There will always be a temptation to reinterpret historical events in light of current issues to justify a course of action or support an argument.

Often these reinterpretations are not deliberate.  Rather, historians allow their expectations or their preconceptions shape their perceptions.  Unfortunately, these reinterpretations then become the popular version of past events because they seem to confirm modern biases.  That’s probably why so many historians didn’t question the quotation from the start of this post: because it says what they wanted to believe.

History is not just about knowing what happened and when; it’s about understanding how events happened and why.  To do this we must understand the past on its own terms.  We must look beyond the series of historical actions and events to understand their underlying motives and assumptions.  We must analyze and evaluate historical texts to understand both their contents and their contexts, and we must recognize that the same words did not always mean the same things to different people at different times and places.

The past will sometimes offend us.  Different perspectives can be unsettling, especially when they challenge our own perceptions.  It can be difficult to sympathize with others when we disagree with their actions, but we must recognize the difference between results and intentions.  Understanding past mistakes can force us to question our own motives, but that’s how we learn to avoid repeating the same errors. 

The past can be challenging and also rewarding, but only if we can put aside our preconceptions and approach it on its own terms.  As President Kennedy once said, “History is a relentless master” (or did he?)