Having considered “man as a member of a state, as a member of a family, and as a man,” Smith turned to Police, which is “the second general division of Jurisprudence.” At that time the word “police” was only half-way on its voyage from Greece. It “properly signified the policy of civil government, but now it only means the regulation of the inferior parts of government, viz. cleanliness, security, and cheapness or plenty.” “Cleanliness,” ninety years before the first Public Health Act, was only “the proper method of carrying dirt from the street,” while the term “security” exactly corresponded with police in the modern sense, being defined by Adam Smith as “the execution of justice, so far as it regards regulations for preventing crimes or the method of keeping a city guard.”
But cleanliness and security, “though useful,” were “too mean to be considered in a general discourse” of the kind which Adam Smith was delivering. Accordingly, after briefly comparing the amount of crime then prevalent in Paris, London, Edinburgh, and Glasgow—a comparison favourable to Glasgow and London—and inferring that the establishment of commerce and manufactures is the best police for preventing crimes, he passes to the consideration of cheapness or plenty—“or, which is the same thing, the most proper way of procuring wealth and abundance.” Then follows in a hundred pages what Mr. Cannan has well called a rough draft of the Wealth of Nations, containing (with some noteworthy exceptions) the main arguments and many of the illustrations which appeared a dozen or more years later in the book. By the student who would trace the growth of an idea and the history of a theory the value of the report can hardly be exaggerated. In Mr. Cannan’s words, “it enables us to follow the gradual construction of the work from its very foundation, and to distinguish positively between what the original genius of its author created out of British materials on the one hand, and French materials on the other.”
When we consider that this course of political economy was necessarily brief, and could not possibly contain all the arguments and illustrations he had already hammered out in the great workshop of his mind, we are inclined to wonder not that the lectures, when compared with the full body of doctrine, show many gaps, but rather that they correspond so closely with the final treatise evolved after twelve or fourteen years more of meditation, study, and travel. When we reach the crowning year of Adam Smith’s life with its laureate wreath we shall have something to say upon later accretions, such as his colonial policy, his view of expenditure, and that intensely practical theory of taxation which taught so many wholesome lessons to contemporary and succeeding statesmen. Oddly enough, the lecturer began by supplying the very thing his critics have missed in the Wealth of Nations—a theory of consumption. He had therefore, if we combine the lectures with the treatise, mapped out in his mind the entire scope of economic science in its natural order. First there is the demand that leads to productive labour, the desire which is satisfied by and therefore induces toil. Then comes his central theme, the division of labour and the subsidiary topic of its distribution (almost ignored in the lectures), with an appendix on revenue or taxation.
Looking now only at the lectures, we find that of the hundred pages into which this first discourse on the Wealth of Nations falls, eighty, or four-fifths, are concerned with “cheapness or plenty,” in other words, with “the most proper way of procuring wealth or abundance.” Cheapness is synonymous with plenty, as dearness is synonymous with dearth. Water is only cheap because it is plentiful, diamonds are costly only because they are scarce. If we wish to find wherein opulence consists, we must first consider what are the natural wants of mankind which are to be supplied; “and if we differ from common opinions, we shall at least give the reasons for our nonconformity.” So he sets about his task with a theory of consumption simple, intelligible, and adequate. Food, clothes, and lodgings are the threefold necessities of animal life. But most animals find these wants sufficiently provided by nature. Man alone has so delicate a constitution that no object is produced to his liking. So he improves his food by cookery, and protects himself by fire, clothes, and huts from the inclemency of the weather.
But as man’s physical delicacy requires much more provision than that of any other animal, so does the same, or rather the much greater, delicacy of his mind. Such is the nicety of his taste, that the very colour of an object hurts or pleases. He is tired by uniformity, and loves variety and change. The Indians gladly barter gems for the cheap toys of Europe. Thus besides the threefold necessities of life a multitude of wants and demands spring up to which agriculture, manufactures, arts, commerce, and navigation are subservient; while the establishment of law and government, “the highest effort of human prudence and wisdom,” enables the different arts to flourish in peace and security.
Thus Smith arrives at the point from which the Wealth of Nations was to start. In an uncivilised nation, where labour is undivided, the natural wants of mankind are provided for. But as civilisation advances with the division of labour, the provision becomes more liberal, so that “a common day-labourer in Britain has more luxury in his way of living than an Indian sovereign.” The labourer’s comfort, indeed, is nothing to that of the noble. Yet a European prince does not so far exceed a commoner as the latter does the chief of a savage nation. “In a savage nation,” he added, with a prophetic glance at Marx, “every one enjoys the whole fruit of his own labour.” It is therefore the Division of Labour that increases the opulence of a country. This is the kernel of political economy, the inner keep round which this great architect of a new science has built a fortress strong enough to protect society and to preserve the fruit of men’s toil from the well-meaning unwisdom of their governments. Not that Smith was insensible to the hardness of economic laws, to the cruel inequalities of industry:—
“In a civilised society,” he reminds his class, “though there is a division of labour, there is no equal division, for there are a good many who work none at all. The division of opulence is not according to the work. The opulence of the merchant is greater than that of all his clerks, though he works less; and they again have six times more than an equal number of artisans who are more employed. The artisan who works at his ease within-doors has far more than the poor labourer who trudges up and down without intermission. Thus, he who, as it were, bears the burden of society, has the fewest advantages.”
Division of labour multiplies the product of labour and so creates opulence. He takes a pin manufactory as an illustration. If one man made all the parts of a pin it would take him a year, and the pin would cost at least six pounds. By dividing the process of manufacture into eighteen operations, each man employed can make 2000 pins a day. When labour is thus divided, a much larger surplus is left over and above the labourer’s maintenance, and of this surplus the labourer will get a share. “The commodity becomes far cheaper and the labour dearer.” The less the labour that can procure abundance, the greater the opulence of society. But coin is not a safe criterion of wages. Twopence in China will buy more than five shillings in the sugar colonies. By dividing labour you increase dexterity. A boy nailmaker will easily make 2000 good nails while a country smith unaccustomed to the job is making 400 bad ones. You also save time; for time is always lost in going from one kind of work to another. “When a person has been reading, he must rest a little while before he begin to write”; and a country weaver with a small farm will saunter as he goes from the loom to the plough. By fixing each man to an operation the product is sure to be increased. Again, the quantity of work done is much augmented by the invention of machinery. Two men and three horses can do more with a plough than twenty men with spades. The miller and his servant will do more with the water-mill than a dozen men with the hand-mill. Horse-power and water-power had been brought to the assistance of man by philosophic invention; and even fire had been called in to aid him by the mechanical and chemical discoverers. The lecturer was doubtless thinking of his colleague Joseph Black, and of James Watt, who was at this time working within the precincts of Glasgow College, and was just developing what Smith calls “the philosopher’s invention of the fire machine.”
Smith puts forward a queer idea—and he stood to it in the Wealth of Nations—that what gives occasion to the division of labour is not a perception of the advantage to be gained thereby, but a direct propensity in human nature for one man to barter with another. This love of barter is one of those natural instincts which distinguish us from animals. The division of labour and the material wealth of society are greatly perfected by improvements of communication which extend markets; for division of labour must always be proportioned to extent of commerce. “If ten people only want a certain commodity, the manufacture of it will never be so divided as if a thousand wanted it.” But where communications are bad the cost of transit hinders the distribution of goods. If roads are “deep” or infested with robbers, the progress of commerce is stopped. “Since the mending of roads in England forty or fifty years ago, its opulence has increased extremely.” Water carriage also effectively promotes public opulence; for five or six men will convey three hundred tons by water more quickly than a hundred men with a hundred wagons and six hundred horses can take the same weight by land.[16]
A distinction is drawn between the natural and market price of commodities. A man has the natural price of his labour when he has enough to maintain him during its continuance, to defray the cost of his education, and to compensate the risk of failure or of premature death. When a man can get this natural price he will have sufficient encouragement and will produce in proportion to the demand. The market is regulated by the momentary demand for a thing, by its abundance or scarcity. When a thing is very scarce the price depends upon the fortune of the bidders. “As in an auction, if two persons have an equal fondness for a book, he whose fortune is the largest will carry it.” The conclusion drawn from these and other arguments is that whatever “police” (i.e. policy) tends to raise the market price above the natural, tends also to diminish public opulence. The cheaper the conveniences of life, the greater is the purchasing power of the poor and the happier will a society be. Any policy which raises and keeps the market price of goods above their natural price, and so raises the national, as it were, above the international price, diminishes the nation’s opulence. This impoverishing policy took various forms, which admitted of a triple classification:—