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Chapter VSM Analysis: Wages of Labour
Chapter Summary
This chapter examines the determination of wages in different economic conditions, establishing that wages are fundamentally the natural recompense for labour. Smith traces how the original state where labourers retained the full produce of their work was disrupted by private property in land and capital accumulation, which introduced deductions for rent and profit. He demonstrates that wages are determined by the contract between masters and workmen, with masters generally having the advantage due to greater financial resources and legal support for their combinations. The chapter identifies key factors affecting wages: the funds available for maintaining labour, the demand for labour relative to supply, and the overall economic condition of the nation. Smith argues that wages are highest in nations experiencing rapid economic growth rather than those already wealthy, using North America as an example of high wages despite lower absolute wealth. He concludes that the liberal reward of labour is both a symptom and cause of national prosperity, encouraging population growth and industriousness, while low wages indicate economic stagnation or decline.
Entities Extracted
- wages of labour: The natural recompense for work, constituting the produce of labour before deductions for rent and profit.
- landlord: The owner of land who demands rent as the first deduction from labour's produce.
- master manufacturer: The employer who advances capital and claims profit as the second deduction from labour's produce.
- combination of workmen: Collective action by labourers to raise wages, often involving violence but generally unsuccessful.
- combination of masters: Tacit agreement among employers not to raise wages, which Smith identifies as the natural state of things.
- funds for maintaining labour: Financial resources for wage payments, consisting of surplus revenue and surplus stock.
- menial servants: Domestic workers employed by those with surplus revenue beyond family maintenance needs.
- journeymen: Independent workmen employed by master craftsmen with surplus stock for production.
- lowest rate of wages: The minimum wage necessary to maintain workers and enable family formation.
- stationary country: A nation with long-term economic stability but low wages, exemplified by China.
- thriving country: A nation experiencing rapid economic growth with high wages, exemplified by North America.
- labouring poor: The majority of society living by wages, including labourers, journeymen, and servants.
- progressive state of society: The condition of economic advancement that Smith argues is optimal for all social orders.
- piece-work wages: Compensation based on output rather than time, encouraging diligence but sometimes causing overwork.
- cheap years: Periods of abundance that increase independent work and moderate labour application.
- dear years: Periods of scarcity that increase dependence and reduce independent work.
- subsistence agriculture: The minimal subsistence level in China where workers are content with enough for basic survival.
- public registers of manufactures: Official records that Smith argues fail to capture full economic activity.
- stock of the country: The accumulated wealth that enables employment and raises wages when increasing.
- demand for labour: The need for workers that increases with national wealth and regulates population growth.
- natural complement of riches: The maximum wealth level permitted by a nation's laws and institutions.
- colony prosperity: Rapid economic growth in colonies where wages are high despite lower absolute wealth.
- economic backwardness: Declining economic conditions leading to falling wages and deteriorating living standards.
- economic prosperity symptoms: Indicators of thriving economies including high wages and increasing population.
- economic stagnation symptoms: Indicators of economic decline including low wages and poor conditions for workers.
VSM Mappings
- wages of labour → System 1 - Operations (Strong)
- landlord → System 5 - Policy (Moderate)
- master manufacturer → System 3 - Control (Strong)
- combination of workmen → System 2 - Coordination (Moderate)
- combination of masters → System 3 - Control (Strong)
- funds for maintaining labour → System 4 - Intelligence (Moderate)
- menial servants → System 1 - Operations (Strong)
- journeymen → System 1 - Operations (Strong)
- lowest rate of wages → System 2 - Coordination (Moderate)
- stationary country → System 5 - Policy (Moderate)
- thriving country → System 4 - Intelligence (Moderate)
- labouring poor → System 1 - Operations (Strong)
- progressive state of society → System 5 - Policy (Moderate)
- piece-work wages → System 1 - Operations (Strong)
- cheap years → System 4 - Intelligence (Moderate)
- dear years → System 4 - Intelligence (Moderate)
- subsistence agriculture → System 1 - Operations (Strong)
- public registers of manufactures → System 2 - Coordination (Moderate)
- stock of the country → System 4 - Intelligence (Strong)
- demand for labour → System 2 - Coordination (Strong)
- natural complement of riches → System 5 - Policy (Moderate)
- colony prosperity → System 4 - Intelligence (Moderate)
- economic backwardness → System 5 - Policy (Moderate)
- economic prosperity symptoms → System 4 - Intelligence (Strong)
- economic stagnation symptoms → System 4 - Intelligence (Strong)
VSM Coverage
This chapter demonstrates strong coverage of System 1 (Operations) through multiple mappings including wages of labour, menial servants, journeymen, piece-work wages, and subsistence agriculture. These entities represent the core productive activities and operational units of the economic system. System 2 (Coordination) receives moderate coverage through mappings like combination of workmen, lowest rate of wages, and demand for labour, which address coordination mechanisms and conflict resolution between operational units. System 3 (Control) is well-represented through master manufacturer and combination of masters, showing how internal regulation and control structures operate within the economic system. System 4 (Intelligence) has substantial coverage through funds for maintaining labour, stock of the country, and various economic condition mappings (cheap years, dear years, prosperity symptoms, stagnation symptoms), demonstrating environmental scanning and strategic adaptation functions. System 5 (Policy) receives moderate coverage through landlord, stationary country, thriving country, and various policy-related concepts, establishing the identity and purpose framework for the economic system. System 3* (Audit/Monitoring) receives no explicit coverage in this chapter, as Smith does not address verification mechanisms or direct monitoring of operational reality beyond general observations about wage determination.
Gaps & Observations
The chapter lacks explicit coverage of System 3* (Audit/Monitoring), which would involve mechanisms for verifying wage conditions, monitoring labour practices, or auditing economic performance beyond the general observations Smith provides. This gap suggests that Smith's analysis focuses more on systemic patterns and emergent properties rather than on formal verification or monitoring systems.
Several entities proved difficult to map cleanly, particularly the economic condition mappings (cheap years, dear years, stationary country, thriving country) which could potentially fit multiple VSM systems depending on interpretation. These entities represent both environmental conditions (System 4) and policy outcomes (System 5), creating some ambiguity in their placement.
A clear pattern emerges in Smith's analysis: he consistently maps economic phenomena to the operational level (System 1) and control/coordination mechanisms (Systems 2-3), while giving less attention to monitoring and verification systems. This reflects his focus on emergent economic patterns rather than institutional oversight mechanisms.
The chapter demonstrates Smith's cybernetic understanding of economic systems through his analysis of how different components interact to maintain viability. His discussion of how wages respond to economic conditions, how combinations of masters and workmen coordinate market outcomes, and how different economic states affect system viability all show an implicit understanding of cybernetic principles.
Future analysis could enrich coverage by examining how formal monitoring and auditing systems (System 3*) might have operated in Smith's economic context, and by exploring how his concepts of the invisible hand and natural liberty function as emergent control mechanisms within the VSM framework.