It is very curious that Smith should have failed to make the best possible use of this theory. Its full significance was lost upon him. The theory of division of labour alone was sufficient to dispose of the whole Physiocratic system. Nevertheless, in the last chapter of Book IV we find him still valiantly struggling to disprove the conclusions of the Physiocrats, by the aid of arguments not always very convincing. Forgetting his principle of division of labour, he even adopts a part of their thesis and finds himself entangled by the invalid distinctions which they had drawn between productive and unproductive workers. He simply gives another definition and describes as unproductive all works which “perish in the very instant of their performance, and seldom leave any trace or value behind them for which an equal quantity of service could afterwards be procured.”[142] All these services, which comprise the labours of domestic servants, of administrators and magistrates, of soldiers and priests, of counsellors, doctors, artists, authors, musicians, etc., Say classed together as “immaterial products.” By restricting the term “productive” to material objects only, Smith gave rise to a very useless controversy on the nature of productive and unproductive works—a controversy that was first taken up by Say and revived by Mill, but which to-day seems to be decided against Smith, thanks to a more exact interpretation of his own doctrines. It is, indeed, quite clear that all these services constitute a part of the annual revenue of the nation, and that “production” in a general sense would be diminished if some persons did not exclusively devote themselves to the performance of such tasks.
After criticising the Physiocratic distinction drawn between the wage-earning classes and the productive, Smith immediately admits that the labour of artisans and traders is not as productive as that of farmers and agricultural labourers, for the latter not only return the capital employed by them together with profits, but they also furnish the proprietor with rent.[143]
Whence this hesitation on the part of Smith? Where did he come by the idea of the special and superior productivity of agriculture? An attempt to account for it may prove interesting, and it will help us to give Smith his true place in a history of economic doctrines.
Notwithstanding his recantation, Smith was never quite rid of Physiocratic influence. Writing of the Physiocratic system, he described it as perhaps “the nearest approximation to the truth that has yet been published.”[144] So indelible was the impression which the Physiocrats left upon him that both they and their doctrines, even when the latter are directly opposed to his own, are always spoken of with the greatest respect. The most important evidence of their power over him is the thesis just mentioned which he attempted to defend, namely, that between agriculture and other industries lies an essential distinction, because in industry and commerce the forces of nature are never brought into play, whereas in agriculture they always collaborate with man. “No equal quantity of productive labour employed in manufactures can ever occasion so great a reproduction. In them nature does nothing; man does all; and the reproduction must always be in proportion to the strength of the agents that occasion it.”[145] We almost think we are dreaming when we read such things in the work of a great economist. Water, wind, electricity, and steam, are they not natural forces, and do they not co-operate with man in his task of production?
Considerations such as these were allowed to pass quite unheeded, and Smith persisted in his error because he believed that this new doctrine furnished him with an explanation of rent, that strange enigma which had puzzled English economists for so long. How was it that while other branches of production gave a return only sufficient to remunerate the capital and labour employed, agriculture, in addition to these two revenues, yielded a supplementary income known as rent? It was because “in agriculture nature labours along with man: and though her labour costs no expence, its produce has its value as well as that of the most expensive workman.” Thus “rent may be considered as the produce of those powers of nature, the use of which the landlord lends to the farmer.”[146] Had Smith arrived at a true theory of rent this recourse to the natural powers of the soil to furnish an explanation of the proprietor’s revenue would have been quite unnecessary, and in all probability he would not have so easily accepted the idea of the special productivity of the soil. But this false conception of nature has persisted in economic theory, and in it Smith thought he saw an additional reason for adhering to those errors which the Physiocrats had first induced him to commit.[147]
Apart from his personal attachment to the Physiocrats we must also remember that Smith more than shared their predilection for agriculture.
Nothing can be more incorrect, though it is frequently done, than to regard Smith as the prophet of industrialism and to contrast him with the Physiocrats, the champions of agriculture. When the Wealth of Nations appeared in 1776 the economic transformation known to history as the Industrial Revolution, which consisted in the rapid substitution of machine production for the old domestic régime, had as yet scarcely begun. Hargreaves and Arkwright had doubtless some inventions to their credit. The one had produced the spinning jenny in 1765, and the other had perfected the water frame in 1767, improvements that had given considerable impetus to the cotton trade. James Watt,[148] who was known to Smith, took out a patent for a steam-engine in 1769. But these inventions were as yet quite novel, and required time before they could modify the industrial system. The more important among them, Crompton’s “mule”[149] and Cartwright’s weaving machine, were as yet of the future. These dates are significant; they prove conclusively that the Industrial Revolution had scarcely begun when Smith’s great work appeared. Moreover, several of the more important themes treated of in the Wealth of Nations may be discovered in the course of lectures which Smith delivered at Glasgow about 1759, so that it is quite impossible to establish anything like an exact connection between the Industrial Revolution which was just beginning and the ideas embodied in the Wealth of Nations. One cannot even say that Smith was particularly enamoured of the manufacturing régime—apart from the mechanical advance which it implied. For, as Marx says,[150] the characteristic trait of English economic life, despite the undisputed advance that industry was making at that time, was commercial rather than industrial.[151] Especially was this true of Glasgow, where Smith made most of his observations. Glasgow then was an essentially commercial town, principally engaged in the importation of American tobacco.[152]
Far from constituting a prophetic manifesto of the new age, Smith’s work reveals even to the most superficial reader a thorough abhorrence of traders and manufacturers. All his sarcasm is reserved for them, all his criticism levelled at them. While the interest of landed proprietors and workers appears to him always to accord with a country’s general interest, that of traders and manufacturers “is never exactly the same with that of the public,” the manufacturers having “generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.”[153]