Academic journal article Review of Social Economy

Adam Smith's Conceptualization of Power, Markets, and Politics

Academic journal article Review of Social Economy

Adam Smith's Conceptualization of Power, Markets, and Politics

Article excerpt

Abstract This paper argues that Adam Smith is a/the "founding father figure" of modem social/political economy as well as economics. Smith wrote extensively and insightfully on the subject of power, and thereby class and stratafication in society. This paper explicates four main types of power relations in Smith's analysis, notably drawing on the Wealth of Nations: wealth power, monopoly power, employer power, and political power. Smith's focus on power helps to differentiate his broader vision and rich discourse from that of many contemporary neoclassical writers and sharpens our appreciation for his contributions to social and political economy.

Keywords: wealth power, monopoly power, employer power, political power, invisible hand

INTRODUCTION

This paper examines and explicates Adam Smith's views on the subject of power in economy and society, notably in An Inquiry into the Nature and Causes of the Wealth of Nations (hereinafter, Wealth; Smith 1976 [1776]). The following exposition will focus, in turn, on wealth power, monopoly power, employer power, and political power. Although this taxonomy is a useful expository device, it should be kept in mind that, as a practical matter, the categories often overlap in Smith's argument, and power in one arena can be used to extend power in another. For example, a wealthy employer, by definition, exercises both wealth power and employer power. Monopoly may be a means to acquire greater wealth, wealth may foster political power, political power my reinforce wealth and establish or sustain monopoly; and so on. The final section concludes, by distinguishing between Smith's broader social/political economy and a power-free economics focused on a perfectly competitive vision of market exchange processes.

ADAM SMITH ON WEALTH POWER

"Wealth", Smith observes in Wealth (paraphrasing Thomas Hobbes), "is power". It may obtain, but "does not necessarily acquire or succeed to any political power, either civil or military." Wealth's possession, however, "immediately and directly conveys":

The power of purchasing; a certain command over all the labour, or over all the produce of labour which is then in the market. [One's] fortune is greater or less, precisely in proportion to the extent of this power; or to the quantity either of other men's labour, or, what is the same thing, of the produce of other men's labour, which it enables [one] to purchase or command.

(Smith 1976a: 35)

Smith could hardly have been clearer. Whatever the consequences for political power, the possession of wealth generates purchasing power, that is, power over the goods or labor of others. The extent of such power varies "precisely" with the size of one's "fortune" (or wealth, in today's language). As a corollary, inequality in the distribution of wealth is a major source of social power and causes inequality in the distribution of income and in control over labor.

In an early draft of Wealth, Smith summarizes the inegalitarian character of wealth, power, income, and labor as follows:

In a Civilized Society the poor provide both for themselves and for the enormous luxury of their superiors. The rent, which goes to support the vanity of the slothful Landlord, is all earned by the industry of the peasant. The monied man indulges himself in every sort of ignoble and sordid sensuality, at the expense of the merchant and the tradesman, to whom he lends out his stock at interest. All the indolent and frivolous retainers upon a Court, are, in the same manner, fed and clothed and lodged by the labor of those who pay the taxes which support them... with regard to the produce of a great society there is never any such thing as a fair and equal division. In a society of an hundred thousand families, there will perhaps be one hundred who don't labor at all, and yet, either by violence or by the orderly oppression of law, employ a greater part of the labor of the society than any ten thousand in it. …

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