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id: book-1-chapter-08 title: "OF THE WAGES OF LABOUR." book: "1" chapter: 8 artifact_type: content
CHAPTER VIII. OF THE WAGES OF LABOUR.
The produce of labour constitutes the natural recompence or wages of
labour. In that original state of things which precedes both the
appropriation of land and the accumulation of stock, the whole produce of
labour belongs to the labourer. He has neither landlord nor master to
share with him.
Had this state continued, the wages of labour would have augmented with
all those improvements in its productive powers, to which the division of
labour gives occasion. All things would gradually have become cheaper.
They would have been produced by a smaller quantity of labour; and as the
commodities produced by equal quantities of labour would naturally in this
state of things be exchanged for one another, they would have been
purchased likewise with the produce of a smaller quantity.
But though all things would have become cheaper in reality, in appearance
many things might have become dearer, than before, or have been exchanged
for a greater quantity of other goods. Let us suppose, for example, that
in the greater part of employments the productive powers of labour had
been improved to tenfold, or that a day’s labour could produce ten times
the quantity of work which it had done originally; but that in a
particular employment they had been improved only to double, or that a
day’s labour could produce only twice the quantity of work which it had
done before. In exchanging the produce of a day’s labour in the greater
part of employments for that of a day’s labour in this particular one, ten
times the original quantity of work in them would purchase only twice the
original quantity in it. Any particular quantity in it, therefore, a pound
weight, for example, would appear to be five times dearer than before. In
reality, however, it would be twice as cheap. Though it required five
times the quantity of other goods to purchase it, it would require only
half the quantity of labour either to purchase or to produce it. The
acquisition, therefore, would be twice as easy as before.
But this original state of things, in which the labourer enjoyed the whole
produce of his own labour, could not last beyond the first introduction of
the appropriation of land and the accumulation of stock. It was at an end,
therefore, long before the most considerable improvements were made in the
productive powers of labour; and it would be to no purpose to trace
further what might have been its effects upon the recompence or wages of
labour.
As soon as land becomes private property, the landlord demands a share of
almost all the produce which the labourer can either raise or collect from
it. His rent makes the first deduction from the produce of the labour
which is employed upon land.
It seldom happens that the person who tills the ground has wherewithal to
maintain himself till he reaps the harvest. His maintenance is generally
advanced to him from the stock of a master, the farmer who employs him,
and who would have no interest to employ him, unless he was to share in
the produce of his labour, or unless his stock was to be replaced to him
with a profit. This profit makes a second deduction from the produce of
the labour which is employed upon land.
The produce of almost all other labour is liable to the like deduction of
profit. In all arts and manufactures, the greater part of the workmen
stand in need of a master, to advance them the materials of their work,
and their wages and maintenance, till it be completed. He shares in the
produce of their labour, or in the value which it adds to the materials
upon which it is bestowed; and in this share consists his profit.
It sometimes happens, indeed, that a single independent workman has stock
sufficient both to purchase the materials of his work, and to maintain
himself till it be completed. He is both master and workman, and enjoys
the whole produce of his own labour, or the whole value which it adds to
the materials upon which it is bestowed. It includes what are usually two
distinct revenues, belonging to two distinct persons, the profits of
stock, and the wages of labour.
Such cases, however, are not very frequent; and in every part of Europe
twenty workmen serve under a master for one that is independent, and the
wages of labour are everywhere understood to be, what they usually are,
when the labourer is one person, and the owner of the stock which employs
him another.
What are the common wages of labour, depends everywhere upon the contract
usually made between those two parties, whose interests are by no means
the same. The workmen desire to get as much, the masters to give as
little, as possible. The former are disposed to combine in order to raise,
the latter in order to lower, the wages of labour.
It is not, however, difficult to foresee which of the two parties must,
upon all ordinary occasions, have the advantage in the dispute, and force
the other into a compliance with their terms. The masters, being fewer in
number, can combine much more easily: and the law, besides, authorises, or
at least does not prohibit, their combinations, while it prohibits those
of the workmen. We have no acts of parliament against combining to lower
the price of work, but many against combining to raise it. In all such
disputes, the masters can hold out much longer. A landlord, a farmer, a
master manufacturer, or merchant, though they did not employ a single
workman, could generally live a year or two upon the stocks, which they
have already acquired. Many workmen could not subsist a week, few could
subsist a month, and scarce any a year, without employment. In the long
run, the workman may be as necessary to his master as his master is to
him; but the necessity is not so immediate.
We rarely hear, it has been said, of the combinations of masters, though
frequently of those of workmen. But whoever imagines, upon this account,
that masters rarely combine, is as ignorant of the world as of the
subject. Masters are always and everywhere in a sort of tacit, but
constant and uniform, combination, not to raise the wages of labour above
their actual rate. To violate this combination is everywhere a most
unpopular action, and a sort of reproach to a master among his neighbours
and equals. We seldom, indeed, hear of this combination, because it is the
usual, and, one may say, the natural state of things, which nobody ever
hears of. Masters, too, sometimes enter into particular combinations to
sink the wages of labour even below this rate. These are always conducted
with the utmost silence and secrecy till the moment of execution; and when
the workmen yield, as they sometimes do without resistance, though
severely felt by them, they are never heard of by other people. Such
combinations, however, are frequently resisted by a contrary defensive
combination of the workmen, who sometimes, too, without any provocation of
this kind, combine, of their own accord, to raise the price of their
labour. Their usual pretences are, sometimes the high price of provisions,
sometimes the great profit which their masters make by their work. But
whether their combinations be offensive or defensive, they are always
abundantly heard of. In order to bring the point to a speedy decision,
they have always recourse to the loudest clamour, and sometimes to the
most shocking violence and outrage. They are desperate, and act with the
folly and extravagance of desperate men, who must either starve, or
frighten their masters into an immediate compliance with their demands.
The masters, upon these occasions, are just as clamorous upon the other
side, and never cease to call aloud for the assistance of the civil
magistrate, and the rigorous execution of those laws which have been
enacted with so much severity against the combination of servants,
labourers, and journeymen. The workmen, accordingly, very seldom derive
any advantage from the violence of those tumultuous combinations, which,
partly from the interposition of the civil magistrate, partly from the
superior steadiness of the masters, partly from the necessity which the
greater part of the workmen are under of submitting for the sake of
present subsistence, generally end in nothing but the punishment or ruin
of the ringleaders.
But though, in disputes with their workmen, masters must generally have
the advantage, there is, however, a certain rate, below which it seems
impossible to reduce, for any considerable time, the ordinary wages even
of the lowest species of labour.
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. Mr
Cantillon seems, upon this account, to suppose that the lowest species of
common labourers must everywhere earn at least double their own
maintenance, in order that, one with another, they may be enabled to bring
up two children; the labour of the wife, on account of her necessary
attendance on the children, being supposed no more than sufficient to
provide for herself: 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. But the necessary maintenance of four children, it is supposed, may
be nearly equal to that of one man. The labour of an able-bodied slave,
the same author adds, is computed to be worth double his maintenance; and
that of the meanest labourer, he thinks, cannot be worth less than that of
an able-bodied slave. Thus far at least seems certain, that, in order to
bring up a family, the labour of the husband and wife together must, even
in the lowest species of common labour, be able to earn something more
than what is precisely necessary for their own maintenance; but in what
proportion, whether in that above-mentioned, or any other, I shall not
take upon me to determine.
There are certain circumstances, however, which sometimes give the
labourers an advantage, and enable them to raise their wages considerably
above this rate, evidently the lowest which is consistent with common
humanity.
When in any country the demand for those who live by wages, labourers,
journeymen, servants of every kind, is continually increasing; when every
year furnishes employment for a greater number than had been employed the
year before, the workmen have no occasion to combine in order to raise
their wages. The scarcity of hands occasions a competition among masters,
who bid against one another in order to get workmen, and thus voluntarily
break through the natural combination of masters not to raise wages. The
demand for those who live by wages, it is evident, cannot increase but in
proportion to the increase of the funds which are destined to the payment
of wages. These funds are of two kinds, first, the revenue which is over
and above what is necessary for the maintenance; and, secondly, the stock
which is over and above what is necessary for the employment of their
masters.
When the landlord, annuitant, or monied man, has a greater revenue than
what he judges sufficient to maintain his own family, he employs either
the whole or a part of the surplus in maintaining one or more menial
servants. Increase this surplus, and he will naturally increase the number
of those servants.
When an independent workman, such as a weaver or shoemaker, has got more
stock than what is sufficient to purchase the materials of his own work,
and to maintain himself till he can dispose of it, he naturally employs
one or more journeymen with the surplus, in order to make a profit by
their work. Increase this surplus, and he will naturally increase the
number of his journeymen.
The demand for those who live by wages, therefore, necessarily increases
with the increase of the revenue and stock of every country, and cannot
possibly increase without it. The increase of revenue and stock is the
increase of national wealth. The demand for those who live by wages,
therefore, naturally increases with the increase of national wealth, and
cannot possibly increase without it.
It is not the actual greatness of national wealth, but its continual
increase, which occasions a rise in the wages of labour. It is not,
accordingly, in the richest countries, but in the most thriving, or in
those which are growing rich the fastest, that the wages of labour are
highest. England is certainly, in the present times, a much richer country
than any part of North America. The wages of labour, however, are much
higher in North America than in any part of England. In the province of
New York, common labourers earned in 1773, before the commencement of the
late disturbances, three shillings and sixpence currency, equal to two
shillings sterling, a-day; ship-carpenters, ten shillings and sixpence
currency, with a pint of rum, worth sixpence sterling, equal in all to six
shillings and sixpence sterling; house-carpenters and bricklayers, eight
shillings currency, equal to four shillings and sixpence sterling;
journeymen tailors, five shillings currency, equal to about two shillings
and tenpence sterling. These prices are all above the London price; and
wages are said to be as high in the other colonies as in New York. The
price of provisions is everywhere in North America much lower than in
England. A dearth has never been known there. In the worst seasons they
have always had a sufficiency for themselves, though less for exportation.
If the money price of labour, therefore, be higher than it is anywhere in
the mother-country, its real price, the real command of the necessaries
and conveniencies of life which it conveys to the labourer, must be higher
in a still greater proportion.
But though North America is not yet so rich as England, it is much more
thriving, and advancing with much greater rapidity to the further
acquisition of riches. The most decisive mark of the prosperity of any
country is the increase of the number of its inhabitants. In Great
Britain, and most other European countries, they are not supposed to
double in less than five hundred years. In the British colonies in North
America, it has been found that they double in twenty or five-and-twenty
years. Nor in the present times is this increase principally owing to the
continual importation of new inhabitants, but to the great multiplication
of the species. Those who live to old age, it is said, frequently see
there from fifty to a hundred, and sometimes many more, descendants from
their own body. Labour is there so well rewarded, that a numerous family
of children, instead of being a burden, is a source of opulence and
prosperity to the parents. The labour of each child, before it can leave
their house, is computed to be worth a hundred pounds clear gain to them.
A young widow with four or five young children, who, among the middling or
inferior ranks of people in Europe, would have so little chance for a
second husband, is there frequently courted as a sort of fortune. The
value of children is the greatest of all encouragements to marriage. We
cannot, therefore, wonder that the people in North America should
generally marry very young. Notwithstanding the great increase occasioned
by such early marriages, there is a continual complaint of the scarcity of
hands in North America. The demand for labourers, the funds destined for
maintaining them increase, it seems, still faster than they can find
labourers to employ.
Though the wealth of a country should be very great, yet if it has been
long stationary, we must not expect to find the wages of labour very high
in it. The funds destined for the payment of wages, the revenue and stock
of its inhabitants, may be of the greatest extent; but if they have
continued for several centuries of the same, or very nearly of the same
extent, the number of labourers employed every year could easily supply,
and even more than supply, the number wanted the following year. There
could seldom be any scarcity of hands, nor could the masters be obliged to
bid against one another in order to get them. The hands, on the contrary,
would, in this case, naturally multiply beyond their employment. There
would be a constant scarcity of employment, and the labourers would be
obliged to bid against one another in order to get it. If in such a
country the wages of labour had ever been more than sufficient to
maintain the labourer, and to enable him to bring up a family, the
competition of the labourers and the interest of the masters would soon
reduce them to the lowest rate which is consistent with common humanity.
China has been long one of the richest, that is, one of the most fertile,
best cultivated, most industrious, and most populous, countries in the
world. It seems, however, to have been long stationary. Marco Polo, who
visited it more than five hundred years ago, describes its cultivation,
industry, and populousness, almost in the same terms in which they are
described by travellers in the present times. It had, perhaps, even long
before his time, acquired that full complement of riches which the nature
of its laws and institutions permits it to acquire. The accounts of all
travellers, inconsistent in many other respects, agree in the low wages of
labour, and in the difficulty which a labourer finds in bringing up a
family in China. If by digging the ground a whole day he can get what will
purchase a small quantity of rice in the evening, he is contented. The
condition of artificers is, if possible, still worse. Instead of waiting
indolently in their work-houses for the calls of their customers, as in
Europe, they are continually running about the streets with the tools of
their respective trades, offering their services, and, as it were, begging
employment. The poverty of the lower ranks of people in China far
surpasses that of the most beggarly nations in Europe. In the
neighbourhood of Canton, many hundred, it is commonly said, many thousand
families have no habitation on the land, but live constantly in little
fishing-boats upon the rivers and canals. The subsistence which they find
there is so scanty, that they are eager to fish up the nastiest garbage
thrown overboard from any European ship. Any carrion, the carcase of a
dead dog or cat, for example, though half putrid and stinking, is as
welcome to them as the most wholesome food to the people of other
countries. Marriage is encouraged in China, not by the profitableness of
children, but by the liberty of destroying them. In all great towns,
several are every night exposed in the street, or drowned like puppies in
the water. The performance of this horrid office is even said to be the
avowed business by which some people earn their subsistence.
China, however, though it may, perhaps, stand still, does not seem to go
backwards. Its towns are nowhere deserted by their inhabitants. The lands
which had once been cultivated, are nowhere neglected. The same, or very
nearly the same, annual labour, must, therefore, continue to be performed,
and the funds destined for maintaining it must not, consequently, be
sensibly diminished. The lowest class of labourers, therefore,
notwithstanding their scanty subsistence, must some way or another make
shift to continue their race so far as to keep up their usual numbers.
But it would be otherwise in a country where the funds destined for the
maintenance of labour were sensibly decaying. Every year the demand for
servants and labourers would, in all the different classes of employments,
be less than it had been the year before. Many who had been bred in the
superior classes, not being able to find employment in their own business,
would be glad to seek it in the lowest. The lowest class being not only
overstocked with its own workmen, but with the overflowings of all the
other classes, the competition for employment would be so great in it, as
to reduce the wages of labour to the most miserable and scanty subsistence
of the labourer. Many would not be able to find employment even upon these
hard terms, but would either starve, or be driven to seek a subsistence,
either by begging, or by the perpetration perhaps, of the greatest
enormities. Want, famine, and mortality, would immediately prevail in that
class, and from thence extend themselves to all the superior classes, till
the number of inhabitants in the country was reduced to what could easily
be maintained by the revenue and stock which remained in it, and which had
escaped either the tyranny or calamity which had destroyed the rest. This,
perhaps, is nearly the present state of Bengal, and of some other of the
English settlements in the East Indies. In a fertile country, which had
before been much depopulated, where subsistence, consequently, should not
be very difficult, and where, notwithstanding, three or four hundred
thousand people die of hunger in one year, we may be assured that the funds
destined for the maintenance of the labouring poor are fast decaying. The
difference between the genius of the British constitution, which protects
and governs North America, and that of the mercantile company which
oppresses and domineers in the East Indies, cannot, perhaps, be better
illustrated than by the different state of those countries.
The liberal reward of labour, therefore, as it is the necessary effect, so
it is the natural symptom of increasing national wealth. The scanty
maintenance of the labouring poor, on the other hand, is the natural
symptom that things are at a stand, and their starving condition, that
they are going fast backwards.
In Great Britain, the wages of labour seem, in the present times, to be
evidently more than what is precisely necessary to enable the labourer to
bring up a family. In order to satisfy ourselves upon this point, it will
not be necessary to enter into any tedious or doubtful calculation of what
may be the lowest sum upon which it is possible to do this. There are many
plain symptoms, that the wages of labour are nowhere in this country
regulated by this lowest rate, which is consistent with common humanity.
First, in almost every part of Great Britain there is a distinction, even
in the lowest species of labour, between summer and winter wages. Summer
wages are always highest. But, on account of the extraordinary expense of
fuel, the maintenance of a family is most expensive in winter. Wages,
therefore, being highest when this expense is lowest, it seems evident
that they are not regulated by what is necessary for this expense, but by
the quantity and supposed value of the work. A labourer, it may be said,
indeed, ought to save part of his summer wages, in order to defray his
winter expense; and that, through the whole year, they do not exceed what
is necessary to maintain his family through the whole year. A slave,
however, or one absolutely dependent on us for immediate subsistence,
would not be treated in this manner. His daily subsistence would be
proportioned to his daily necessities.
Secondly, the wages of labour do not, in Great Britain, fluctuate with the
price of provisions. These vary everywhere from year to year, frequently
from month to month. But in many places, the money price of labour remains
uniformly the same, sometimes for half a century together. If, in these
places, therefore, the labouring poor can maintain their families in dear
years, they must be at their ease in times of moderate plenty, and in
affluence in those of extraordinary cheapness. The high price of
provisions during these ten years past, has not, in many parts of the
kingdom, been accompanied with any sensible rise in the money price of
labour. It has, indeed, in some; owing, probably, more to the increase of
the demand for labour, than to that of the price of provisions.
Thirdly, as the price of provisions varies more from year to year than the
wages of labour, so, on the other hand, the wages of labour vary more from
place to place than the price of provisions. The prices of bread and
butchers’ meat are generally the same, or very nearly the same, through
the greater part of the united kingdom. These, and most other things which
are sold by retail, the way in which the labouring poor buy all things,
are generally fully as cheap, or cheaper, in great towns than in the
remoter parts of the country, for reasons which I shall have occasion to
explain hereafter. But the wages of labour in a great town and its
neighbourhood are frequently a fourth or a fifth part, twenty or five-and—twenty
per cent. higher than at a few miles distance. Eighteen pence a day may be
reckoned the common price of labour in London and its neighbourhood. At a
few miles distance, it falls to fourteen and fifteen pence. Tenpence may
be reckoned its price in Edinburgh and its neighbourhood. At a few miles
distance, it falls to eightpence, the usual price of common labour through
the greater part of the low country of Scotland, where it varies a good
deal less than in England. Such a difference of prices, which, it seems,
is not always sufficient to transport a man from one parish to another,
would necessarily occasion so great a transportation of the most bulky
commodities, not only from one parish to another, but from one end of the
kingdom, almost from one end of the world to the other, as would soon
reduce them more nearly to a level. After all that has been said of the
levity and inconstancy of human nature, it appears evidently from
experience, that man is, of all sorts of luggage, the most difficult to be
transported. If the labouring poor, therefore, can maintain their families
in those parts of the kingdom where the price of labour is lowest, they
must be in affluence where it is highest.
Fourthly, the variations in the price of labour not only do not
correspond, either in place or time, with those in the price of
provisions, but they are frequently quite opposite.
Grain, the food of the common people, is dearer in Scotland than in
England, whence Scotland receives almost every year very large supplies.
But English corn must be sold dearer in Scotland, the country to which it
is brought, than in England, the country from which it comes; and in
proportion to its quality it cannot be sold dearer in Scotland than the
Scotch corn that comes to the same market in competition with it. The
quality of grain depends chiefly upon the quantity of flour or meal which
it yields at the mill; and, in this respect, English grain is so much
superior to the Scotch, that though often dearer in appearance, or in
proportion to the measure of its bulk, it is generally cheaper in reality,
or in proportion to its quality, or even to the measure of its weight. The
price of labour, on the contrary, is dearer in England than in Scotland.
If the labouring poor, therefore, can maintain their families in the one
part of the united kingdom, they must be in affluence in the other.
Oatmeal, indeed, supplies the common people in Scotland with the greatest
and the best part of their food, which is, in general, much inferior to
that of their neighbours of the same rank in England. This difference,
however, in the mode of their subsistence, is not the cause, but the
effect, of the difference in their wages; though, by a strange
misapprehension, I have frequently heard it represented as the cause. It
is not because one man keeps a coach, while his neighbour walks a-foot,
that the one is rich, and the other poor; but because the one is rich, he
keeps a coach, and because the other is poor, he walks a-foot.
During the course of the last century, taking one year with another, grain
was dearer in both parts of the united kingdom than during that of the
present. This is a matter of fact which cannot now admit of any reasonable
doubt; and the proof of it is, if possible, still more decisive with
regard to Scotland than with regard to England. It is in Scotland
supported by the evidence of the public fiars, annual valuations made upon
oath, according to the actual state of the markets, of all the different
sorts of grain in every different county of Scotland. If such direct proof
could require any collateral evidence to confirm it, I would observe, that
this has likewise been the case in France, and probably in most other
parts of Europe. With regard to France, there is the clearest proof. But
though it is certain, that in both parts of the united kingdom grain was
somewhat dearer in the last century than in the present, it is equally
certain that labour was much cheaper. If the labouring poor, therefore,
could bring up their families then, they must be much more at their ease
now. In the last century, the most usual day-wages of common labour
through the greater part of Scotland were sixpence in summer, and
fivepence in winter. Three shillings a-week, the same price, very nearly
still continues to be paid in some parts of the Highlands and Western
islands. Through the greater part of the Low country, the most usual wages
of common labour are now eight pence a-day; tenpence, sometimes a
shilling, about Edinburgh, in the counties which border upon England,
probably on account of that neighbourhood, and in a few other places where
there has lately been a considerable rise in the demand for labour, about
Glasgow, Carron, Ayrshire, etc. In England, the improvements of
agriculture, manufactures, and commerce, began much earlier than in
Scotland. The demand for labour, and consequently its price, must
necessarily have increased with those improvements. In the last century,
accordingly, as well as in the present, the wages of labour were higher in
England than in Scotland. They have risen, too, considerably since that
time, though, on account of the greater variety of wages paid there in
different places, it is more difficult to ascertain how much. In 1614, the
pay of a foot soldier was the same as in the present times, eightpence
a-day. When it was first established, it would naturally be regulated by
the usual wages of common labourers, the rank of people from which foot
soldiers are commonly drawn. Lord-chief-justice Hales, who wrote in the
time of Charles II. computes the necessary expense of a labourer’s family,
consisting of six persons, the father and mother, two children able to do
something, and two not able, at ten shillings a-week, or twenty-six pounds
a-year. If they cannot earn this by their labour, they must make it up, he
supposes, either by begging or stealing. He appears to have enquired very
carefully into this subject {See his scheme for the maintenance of the
poor, in Burn’s History of the Poor Laws.}. In 1688, Mr Gregory King,
whose skill in political arithmetic is so much extolled by Dr Davenant,
computed the ordinary income of labourers and out-servants to be fifteen
pounds a-year to a family, which he supposed to consist, one with another,
of three and a half persons. His calculation, therefore, though different
in appearance, corresponds very nearly at bottom with that of Judge Hales.
Both suppose the weekly expense of such families to be about twenty-pence
a-head. Both the pecuniary income and expense of such families have
increased considerably since that time through the greater part of the
kingdom, in some places more, and in some less, though perhaps scarce
anywhere so much as some exaggerated accounts of the present wages of
labour have lately represented them to the public. The price of labour, it
must be observed, cannot be ascertained very accurately anywhere,
different prices being often paid at the same place and for the same sort
of labour, not only according to the different abilities of the workman,
but according to the easiness or hardness of the masters. Where wages are
not regulated by law, all that we can pretend to determine is, what are
the most usual; and experience seems to shew that law can never regulate
them properly, though it has often pretended to do so.
The real recompence of labour, the real quantity of the necessaries and
conveniencies of life which it can procure to the labourer, has, during
the course of the present century, increased perhaps in a still greater
proportion than its money price. Not only grain has become somewhat
cheaper, but many other things, from which the industrious poor derive an
agreeable and wholesome variety of food, have become a great deal cheaper.
Potatoes, for example, do not at present, through the greater part of the
kingdom, cost half the price which they used to do thirty or forty years
ago. The same thing may be said of turnips, carrots, cabbages; things
which were formerly never raised but by the spade, but which are now
commonly raised by the plough. All sort of garden stuff, too, has become
cheaper. The greater part of the apples, and even of the onions, consumed
in Great Britain, were, in the last century, imported from Flanders. The
great improvements in the coarser manufactories of both linen and woollen
cloth furnish the labourers with cheaper and better clothing; and those in
the manufactories of the coarser metals, with cheaper and better
instruments of trade, as well as with many agreeable and convenient pieces
of household furniture. Soap, salt, candles, leather, and fermented
liquors, have, indeed, become a good deal dearer, chiefly from the taxes
which have been laid upon them. The quantity of these, however, which the
labouring poor are under any necessity of consuming, is so very small, that
the increase in their price does not compensate the diminution in that of
so many other things. The common complaint, that luxury extends itself
even to the lowest ranks of the people, and that the labouring poor will
not now be contented with the same food, clothing, and lodging, which
satisfied them in former times, may convince us that it is not the money
price of labour only, but its real recompence, which has augmented.
Is this improvement in the circumstances of the lower ranks of the people
to be regarded as an advantage, or as an inconveniency, to the society?
The answer seems at first abundantly plain. Servants, labourers, and
workmen of different kinds, make up the far greater part of every great
political society. But what improves the circumstances of the greater
part, can never be regarded as any inconveniency to the whole. No society
can surely be flourishing and happy, of which the far greater part of the
members are poor and miserable. It is but equity, besides, that they who
feed, clothe, and lodge the whole body of the people, should have such a
share of the produce of their own labour as to be themselves tolerably
well fed, clothed, and lodged.
Poverty, though it no doubt discourages, does not always prevent,
marriage. It seems even to be favourable to generation. A half-starved
Highland woman frequently bears more than twenty children, while a
pampered fine lady is often incapable of bearing any, and is generally
exhausted by two or three. Barrenness, so frequent among women of fashion,
is very rare among those of inferior station. Luxury, in the fair sex,
while it inflames, perhaps, the passion for enjoyment, seems always to
weaken, and frequently to destroy altogether, the powers of generation.
But poverty, though it does not prevent the generation, is extremely
unfavourable to the rearing of children. The tender plant is produced; but
in so cold a soil, and so severe a climate, soon withers and dies. It is
not uncommon, I have been frequently told, in the Highlands of Scotland,
for a mother who has born twenty children not to have two alive. Several
officers of great experience have assured me, that, so far from recruiting
their regiment, they have never been able to supply it with drums and
fifes, from all the soldiers’ children that were born in it. A greater
number of fine children, however, is seldom seen anywhere than about a
barrack of soldiers. Very few of them, it seems, arrive at the age of
thirteen or fourteen. In some places, one half the children die before
they are four years of age, in many places before they are seven, and in
almost all places before they are nine or ten. This great mortality,
however will everywhere be found chiefly among the children of the common
people, who cannot afford to tend them with the same care as those of
better station. Though their marriages are generally more fruitful than
those of people of fashion, a smaller proportion of their children arrive
at maturity. In foundling hospitals, and among the children brought up by
parish charities, the mortality is still greater than among those of the
common people.
Every species of animals naturally multiplies in proportion to the means
of their subsistence, and no species can ever multiply beyond it. But in
civilized society, it 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 which their fruitful marriages produce.
The liberal reward of labour, by enabling them to provide better for their
children, and consequently to bring up a greater number, naturally tends
to widen and extend those limits. It deserves to be remarked, too, that it
necessarily does this as nearly as possible in the proportion which the
demand for labour requires. If this demand is continually increasing, the
reward of labour must necessarily encourage in such a manner the marriage
and multiplication of labourers, as may enable them to supply that
continually increasing demand by a continually increasing population. If
the reward should at any time be less than what was requisite for this
purpose, the deficiency of hands would soon raise it; and if it should at
any time be more, their excessive multiplication would soon lower it to
this necessary rate. The market would be so much understocked with labour
in the one case, and so much overstocked in the other, as would soon force
back its price to that proper rate which the circumstances of the society
required. It is in this manner that the demand for men, like that for any
other commodity, necessarily regulates the production of men, quickens it
when it goes on too slowly, and stops it when it advances too fast. It is
this demand which regulates and determines the state of propagation in all
the different countries of the world; in North America, in Europe, and in
China; which renders it rapidly progressive in the first, slow and gradual
in the second, and altogether stationary in the last.
The wear and tear of a slave, it has been said, is at the expense of his
master; but that of a free servant is at his own expense. The wear and
tear of the latter, however, is, in reality, as much at the expense of his
master as that of the former. The wages paid to journeymen and servants of
every kind must be such as may enable them, one with another to continue
the race of journeymen and servants, according as the increasing,
diminishing, or stationary demand of the society, may happen to require.
But though the wear and tear of a free servant be equally at the expense
of his master, it generally costs him much less than that of a slave. The
fund destined for replacing or repairing, if I may say so, the wear and
tear of the slave, is commonly managed by a negligent master or careless
overseer. That destined for performing the same office with regard to the
freeman is managed by the freeman himself. The disorders which generally
prevail in the economy of the rich, naturally introduce themselves into
the management of the former; the strict frugality and parsimonious
attention of the poor as naturally establish themselves in that of the
latter. Under such different management, the same purpose must require
very different degrees of expense to execute it. It appears, accordingly,
from the experience of all ages and nations, I believe, that the work done
by freemen comes cheaper in the end than that performed by slaves. It is
found to do so even at Boston, New-York, and Philadelphia, where the wages
of common labour are so very high.
The liberal reward of labour, therefore, as it is the effect of increasing
wealth, so it is the cause of increasing population. To complain of it, is
to lament over the necessary cause and effect of the greatest public
prosperity.
It deserves to be remarked, perhaps, that it is in the progressive state,
while the society is advancing to the further acquisition, rather than
when it has acquired its full complement of riches, that the condition of
the labouring poor, of the great body of the people, seems to be the
happiest and the most comfortable. It is hard in the stationary, and
miserable in the declining state. The progressive state is, in reality,
the cheerful and the hearty state to all the different orders of the
society; the stationary is dull; the declining melancholy.
The liberal reward of labour, as it encourages the propagation, so it
increases the industry of the common people. The wages of labour are the
encouragement of industry, which, like every other human quality, improves
in proportion to the encouragement it receives. A plentiful subsistence
increases the bodily strength of the labourer, and the comfortable hope of
bettering his condition, and of ending his days, perhaps, in ease and
plenty, animates him to exert that strength to the utmost. Where wages are
high, accordingly, we shall always find the workmen more active, diligent,
and expeditious, than where they are low; in England, for example, than in
Scotland; in the neighbourhood of great towns, than in remote country
places. Some workmen, indeed, when they can earn in four days what will
maintain them through the week, will be idle the other three. This,
however, is by no means the case with the greater part. Workmen, on the
contrary, when they are liberally paid by the piece, are very apt to
overwork themselves, and to ruin their health and constitution in a few
years. A carpenter in London, and in some other places, is not supposed to
last in his utmost vigour above eight years. Something of the same kind
happens in many other trades, in which the workmen are paid by the piece;
as they generally are in manufactures, and even in country labour,
wherever wages are higher than ordinary. Almost every class of artificers
is subject to some peculiar infirmity occasioned by excessive application
to their peculiar species of work. Ramuzzini, an eminent Italian
physician, has written a particular book concerning such diseases. We do
not reckon our soldiers the most industrious set of people among us; yet
when soldiers have been employed in some particular sorts of work, and
liberally paid by the piece, their officers have frequently been obliged
to stipulate with the undertaker, that they should not be allowed to earn
above a certain sum every day, according to the rate at which they were
paid. Till this stipulation was made, mutual emulation, and the desire of
greater gain, frequently prompted them to overwork themselves, and to hurt
their health by excessive labour. Excessive application, during four days
of the week, is frequently the real cause of the idleness of the other
three, so much and so loudly complained of. Great labour, either of mind
or body, continued for several days together is, in most men, naturally
followed by a great desire of relaxation, which, if not restrained by
force, or by some strong necessity, is almost irresistible. It is the call
of nature, which requires to be relieved by some indulgence, sometimes of
ease only, but sometimes too of dissipation and diversion. If it is not
complied with, the consequences are often dangerous and sometimes fatal,
and such as almost always, sooner or later, bring on the peculiar
infirmity of the trade. If masters would always listen to the dictates of
reason and humanity, they have frequently occasion rather to moderate,
than to animate the application of many of their workmen. It will be
found, I believe, in every sort of trade, that the man who works so
moderately, as to be able to work constantly, not only preserves his
health the longest, but, in the course of the year, executes the greatest
quantity of work.
In cheap years it is pretended, workmen are generally more idle, and in
dear times more industrious than ordinary. A plentiful subsistence,
therefore, it has been concluded, relaxes, and a scanty one quickens their
industry. That a little more plenty than ordinary may render some workmen
idle, cannot be well doubted; but that it should have this effect upon the
greater part, or that men in general should work better when they are ill
fed, than when they are well fed, when they are disheartened than when
they are in good spirits, when they are frequently sick than when they are
generally in good health, seems not very probable. Years of dearth, it is
to be observed, are generally among the common people years of sickness
and mortality, which cannot fail to diminish the produce of their
industry.
In years of plenty, servants frequently leave their masters, and trust
their subsistence to what they can make by their own industry. But the
same cheapness of provisions, by increasing the fund which is destined for
the maintenance of servants, encourages masters, farmers especially, to
employ a greater number. Farmers, upon such occasions, expect more profit
from their corn by maintaining a few more labouring servants, than by
selling it at a low price in the market. The demand for servants
increases, while the number of those who offer to supply that demand
diminishes. The price of labour, therefore, frequently rises in cheap
years.
In years of scarcity, the difficulty and uncertainty of subsistence make
all such people eager to return to service. But the high price of
provisions, by diminishing the funds destined for the maintenance of
servants, disposes masters rather to diminish than to increase the number
of those they have. In dear years, too, poor independent workmen
frequently consume the little stock with which they had used to supply
themselves with the materials of their work, and are obliged to become
journeymen for subsistence. More people want employment than easily get
it; many are willing to take it upon lower terms than ordinary; and the
wages of both servants and journeymen frequently sink in dear years.
Masters of all sorts, therefore, frequently make better bargains with
their servants in dear than in cheap years, and find them more humble and
dependent in the former than in the latter. They naturally, therefore,
commend the former as more favourable to industry. Landlords and farmers,
besides, two of the largest classes of masters, have another reason for
being pleased with dear years. The rents of the one, and the profits of
the other, depend very much upon the price of provisions. Nothing can be
more absurd, however, than to imagine that men in general should work less
when they work for themselves, than when they work for other people. A
poor independent workman will generally be more industrious than even a
journeyman who works by the piece. The one enjoys the whole produce of his
own industry, the other shares it with his master. The one, in his
separate independent state, is less liable to the temptations of bad
company, which, in large manufactories, so frequently ruin the morals of
the other. The superiority of the independent workman over those servants
who are hired by the month or by the year, and whose wages and maintenance
are the same, whether they do much or do little, is likely to be still
greater. Cheap years tend to increase the proportion of independent
workmen to journeymen and servants of all kinds, and dear years to
diminish it.
A French author of great knowledge and ingenuity, Mr Messance, receiver of
the tallies in the election of St Etienne, endeavours to shew that the
poor do more work in cheap than in dear years, by comparing the quantity
and value of the goods made upon those different occasions in three
different manufactures; one of coarse woollens, carried on at Elbeuf; one
of linen, and another of silk, both which extend through the whole
generality of Rouen. It appears from his account, which is copied from the
registers of the public offices, that the quantity and value of the goods
made in all those three manufactories has generally been greater in cheap
than in dear years, and that it has always been greatest in the cheapest,
and least in the dearest years. All the three seem to be stationary
manufactures, or which, though their produce may vary somewhat from year
to year, are, upon the whole, neither going backwards nor forwards.
The manufacture of linen in Scotland, and that of coarse woollens in the
West Riding of Yorkshire, are growing manufactures, of which the produce
is generally, though with some variations, increasing both in quantity and
value. Upon examining, however, the accounts which have been published of
their annual produce, I have not been able to observe that its variations
have had any sensible connection with the dearness or cheapness of the
seasons. In 1740, a year of great scarcity, both manufactures, indeed,
appear to have declined very considerably. But in 1756, another year of
great scarcity, the Scotch manufactures made more than ordinary advances.
The Yorkshire manufacture, indeed, declined, and its produce did not rise
to what it had been in 1755, till 1766, after the repeal of the American
stamp act. In that and the following year, it greatly exceeded what it had
ever been before, and it has continued to advance ever since.
The produce of all great manufactures for distant sale must necessarily
depend, not so much upon the dearness or cheapness of the seasons in the
countries where they are carried on, as upon the circumstances which
affect the demand in the countries where they are consumed; upon peace or
war, upon the prosperity or declension of other rival manufactures and
upon the good or bad humour of their principal customers. A great part of
the extraordinary work, besides, which is probably done in cheap years,
never enters the public registers of manufactures. The men-servants, who
leave their masters, become independent labourers. The women return to
their parents, and commonly spin, in order to make clothes for themselves
and their families. Even the independent workmen do not always work for
public sale, but are employed by some of their neighbours in manufactures
for family use. The produce of their labour, therefore, frequently makes
no figure in those public registers, of which the records are sometimes
published with so much parade, and from which our merchants and
manufacturers would often vainly pretend to announce the prosperity or
declension of the greatest empires.
Though the variations in the price of labour not only do not always
correspond with those in the price of provisions, but are frequently quite
opposite, we must not, upon this account, imagine that the price of
provisions has no influence upon that of labour. The money price of labour
is necessarily regulated by two circumstances; the demand for labour, and
the price of the necessaries and conveniencies of life. The demand for
labour, according as it happens to be increasing, stationary, or
declining, or to require an increasing, stationary, or declining
population, determines the quantities of the necessaries and conveniencies
of life which must be given to the labourer; and the money price of labour
is determined by what is requisite for purchasing this quantity. Though
the money price of labour, therefore, is sometimes high where the price of
provisions is low, it would be still higher, the demand continuing the
same, if the price of provisions was high.
It is because the demand for labour increases in years of sudden and
extraordinary plenty, and diminishes in those of sudden and extraordinary
scarcity, that the money price of labour sometimes rises in the one, and
sinks in the other.
In a year of sudden and extraordinary plenty, there are funds in the hands
of many of the employers of industry, sufficient to maintain and employ a
greater number of industrious people than had been employed the year
before; and this extraordinary number cannot always be had. Those masters,
therefore, who want more workmen, bid against one another, in order to get
them, which sometimes raises both the real and the money price of their
labour.
The contrary of this happens in a year of sudden and extraordinary
scarcity. The funds destined for employing industry are less than they had
been the year before. A considerable number of people are thrown out of
employment, who bid one against another, in order to get it, which
sometimes lowers both the real and the money price of labour. In 1740, a
year of extraordinary scarcity, many people were willing to work for bare
subsistence. In the succeeding years of plenty, it was more difficult to
get labourers and servants. The scarcity of a dear year, by diminishing
the demand for labour, tends to lower its price, as the high price of
provisions tends to raise it. The plenty of a cheap year, on the contrary,
by increasing the demand, tends to raise the price of labour, as the
cheapness of provisions tends to lower it. In the ordinary variations of
the prices of provisions, those two opposite causes seem to counterbalance
one another, which is probably, in part, the reason why the wages of
labour are everywhere so much more steady and permanent than the price of
provisions.
The increase in the wages of labour necessarily increases the price of
many commodities, by increasing that part of it which resolves itself into
wages, and so far tends to diminish their consumption, both at home and
abroad. The same cause, however, which raises the wages of labour, the
increase of stock, tends to increase its productive powers, and to make a
smaller quantity of labour produce a greater quantity of work. The owner
of the stock which employs a great number of labourers necessarily
endeavours, for his own advantage, to make such a proper division and
distribution of employment, that they may be enabled to produce the
greatest quantity of work possible. For the same reason, he endeavours to
supply them with the best machinery which either he or they can think of.
What takes place among the labourers in a particular workhouse, takes
place, for the same reason, among those of a great society. The greater
their number, the more they naturally divide themselves into different
classes and subdivisions of employments. More heads are occupied in
inventing the most proper machinery for executing the work of each, and it
is, therefore, more likely to be invented. There are many commodities,
therefore, which, in consequence of these improvements, come to be
produced by so much less labour than before, that the increase of its
price is more than compensated by the diminution of its quantity.
Extracted Entities
--- ENTITY: wages of labour ---
Wages of Labour
Definition
The natural recompense or compensation that a labourer receives for their work, which in the original state of things constituted the whole produce of their labour before the appropriation of land and accumulation of stock created deductions for rent and profit.
Source Chapter
Book I, Chapter 8
Context
The central concept explored throughout the chapter, examining how wages are determined by the contract between masters and workmen, how they vary across different circumstances, and their relationship to national wealth and population growth.
Economic Domain
Distribution
--- ENTITY: landlord ---
Landlord
Definition
The owner of land who, once land becomes private property, demands a share of almost all the produce which the labourer can either raise or collect from it, making rent the first deduction from the produce of labour employed upon land.
Source Chapter
Book I, Chapter 8
Context
Introduced as one of the three parties in the economic relationship, alongside the labourer and master, who claims a portion of the produce through rent once land becomes private property.
Economic Domain
Distribution
--- ENTITY: master manufacturer ---
Master Manufacturer
Definition
The employer who advances materials, wages, and maintenance to workmen in manufacturing, sharing in the produce of their labour or in the value which their labour adds to the materials, with this profit making a second deduction from the produce of labour.
Source Chapter
Book I, Chapter 8
Context
Presented as the second major economic actor alongside landlords, who advances capital to workers and claims profit as their share of the produce of labour.
Economic Domain
Distribution
--- ENTITY: combination of workmen ---
Combination of Workmen
Definition
The collective action by labourers to raise their wages through coordinated efforts, which Smith observes are frequently heard of and often involve violence, clamour, and outrage, though generally ending in punishment or ruin of the ringleaders.
Source Chapter
Book I, Chapter 8
Context
Discussed as one side of the wage negotiation dynamic, contrasting with the more successful combinations of masters, and illustrating the power imbalance between workers and employers.
Economic Domain
Regulation
--- ENTITY: combination of masters ---
Combination of Masters
Definition
The tacit and constant agreement among employers not to raise wages above their actual rate, which Smith argues is the natural state of things and is everywhere a most unpopular action to violate, often conducted with silence and secrecy when attempting to lower wages below this rate.
Source Chapter
Book I, Chapter 8
Context
Presented as the more effective side of wage negotiations, able to hold out longer than workmen due to greater financial resources and legal authorization for their combinations.
Economic Domain
Regulation
--- ENTITY: funds for maintaining labour ---
Funds for Maintaining Labour
Definition
The financial resources destined for the payment of wages, consisting of two kinds: first, the revenue which is over and above what is necessary for the maintenance of those who possess it, and secondly, the stock which is over and above what is necessary for the employment of their masters.
Source Chapter
Book I, Chapter 8
Context
Identified as the determining factor for the demand for labour, with increases in these funds leading to increases in the number of labourers employed and consequently higher wages.
Economic Domain
Accumulation
--- ENTITY: menial servants ---
Menial Servants
Definition
Domestic workers employed by landlords, annuitants, or monied men who have revenue beyond what they judge sufficient to maintain their own family, with increases in their surplus revenue naturally leading to increases in the number of such servants.
Source Chapter
Book I, Chapter 8
Context
Used as an example of how increased revenue for those who live by income rather than labour creates additional demand for wage-labourers.
Economic Domain
Consumption
--- ENTITY: journeymen ---
Journeymen
Definition
Independent workmen employed by master craftsmen who have surplus stock beyond what is necessary to purchase materials and maintain themselves, with increases in this surplus naturally leading to increases in the number of journeymen employed for profit.
Source Chapter
Book I, Chapter 8
Context
Presented as the second category of wage-labourers, distinct from menial servants, employed by independent craftsmen to work with surplus stock for profit.
Economic Domain
Production
--- ENTITY: lowest rate of wages ---
Lowest Rate of Wages
Definition
The minimum wage below which it seems impossible to reduce the ordinary wages of labour for any considerable time, which must at least be sufficient to maintain the labourer and enable them to bring up a family, otherwise the race of such workmen could not last beyond the first generation.
Source Chapter
Book I, Chapter 8
Context
Identified as the natural floor for wages determined by the necessity of maintaining workers and their families, below which labour supply would eventually diminish.
Economic Domain
Distribution
--- ENTITY: stationary country ---
Stationary Country
Definition
A nation whose wealth has remained long unchanged in extent, where the funds for maintaining labour have continued for several centuries at the same or nearly the same level, resulting in stable population and wages at the lowest rate consistent with common humanity.
Source Chapter
Book I, Chapter 8
Context
Used as a contrast to thriving nations, with China presented as an example where long-term economic stability has resulted in low wages and difficult conditions for labourers.
Economic Domain
General Theory
--- ENTITY: thriving country ---
Thriving Country
Definition
A nation experiencing continual increase in wealth, where the continual increase in the number of inhabitants and the funds for maintaining labour create competition among masters for workers, naturally raising wages above the lowest rate.
Source Chapter
Book I, Chapter 8
Context
Presented as the condition most favourable to high wages, with North America used as an example of rapid economic growth leading to high wages and favourable conditions for labour.
Economic Domain
General Theory
--- ENTITY: labouring poor ---
Labouring Poor
Definition
The great body of people who live by wages, including labourers, journeymen, and servants of every kind, who make up the far greater part of every great political society and whose improved circumstances are regarded as an advantage rather than an inconvenience to society.
Source Chapter
Book I, Chapter 8
Context
The central focus of Smith's analysis of wages, representing the majority of society whose welfare is presented as essential to a flourishing and happy society.
Economic Domain
Distribution
--- ENTITY: progressive state of society ---
Progressive State of Society
Definition
The condition of a society that is advancing to the further acquisition of riches, rather than having acquired its full complement, which Smith argues is the happiest and most comfortable state for the labouring poor and all orders of society.
Source Chapter
Book I, Chapter 8
Context
Identified as the optimal condition for wages and general prosperity, contrasting with the dull stationary state and the miserable declining state.
Economic Domain
General Theory
--- ENTITY: piece-work wages ---
Piece-Work Wages
Definition
A system of compensation where workmen are paid by the piece rather than by time, which Smith observes leads to greater activity and diligence among workers, though sometimes resulting in overwork and health damage when wages are high.
Source Chapter
Book I, Chapter 8
Context
Discussed as a wage system that encourages industriousness but requires moderation to prevent workers from ruining their health through excessive application.
Economic Domain
Distribution
--- ENTITY: cheap years ---
Cheap Years
Definition
Periods of agricultural abundance and low prices that tend to increase the proportion of independent workmen relative to journeymen and servants, while also encouraging masters to employ more labour due to increased funds for maintaining servants.
Source Chapter
Book I, Chapter 8
Context
Examined for their effects on wages and employment patterns, with Smith arguing they tend to increase independent work and moderate labour application.
Economic Domain
General Theory
--- ENTITY: dear years ---
Dear Years
Definition
Periods of scarcity and high prices that tend to diminish the proportion of independent workmen relative to journeymen and servants, while also reducing the funds for maintaining servants and increasing competition for employment.
Source Chapter
Book I, Chapter 8
Context
Examined for their effects on wages and employment patterns, with Smith arguing they tend to increase dependence and sometimes lead to lower wages.
Economic Domain
General Theory
--- ENTITY: subsistence agriculture ---
Subsistence Agriculture
Definition
The condition in China where labourers are content if they can earn enough through a day's labour to purchase a small quantity of rice in the evening, representing the lowest level of subsistence that still maintains population numbers.
Source Chapter
Book I, Chapter 8
Context
Used as an example of how low wages in a stationary economy can still maintain population through minimal subsistence levels.
Economic Domain
Production
--- ENTITY: public registers of manufactures ---
Public Registers of Manufactures
Definition
Official records that Smith argues often fail to capture the full extent of manufacturing activity, particularly the extraordinary work done in cheap years by independent workmen and family members working for their own consumption.
Source Chapter
Book I, Chapter 8
Context
Criticized as incomplete representations of economic activity that merchants and manufacturers often use to falsely announce prosperity or declension.
Economic Domain
General Theory
--- ENTITY: stock of the country ---
Stock of the Country
Stock of the Country
Definition
The accumulated wealth of a nation that, when increasing, raises wages of labour by enabling masters to employ more workers and by increasing the demand for labour through both revenue and capital investment.
Source Chapter
Book I, Chapter 8
Context
Identified as the fundamental driver of wage increases, with its growth creating the funds necessary to maintain and employ more labour.
Economic Domain
Accumulation
--- ENTITY: demand for labour ---
Demand for Labour
Definition
The need for workers in various employments that necessarily increases with the increase of the revenue and stock of every country, and cannot possibly increase without it, regulating the production of men like any other commodity.
Source Chapter
Book I, Chapter 8
Context
Presented as the key determinant of wages, with its fluctuations explaining variations in wage levels across different times and places.
Economic Domain
General Theory
--- ENTITY: natural complement of riches ---
Natural Complement of Riches
Definition
The maximum level of wealth that the nature of a country's laws and institutions permits it to acquire, beyond which further accumulation becomes impossible, as Smith suggests has occurred in China.
Source Chapter
Book I, Chapter 8
Context
Used to explain why some wealthy nations like China can remain stationary with low wages despite their riches.
Economic Domain
General Theory
--- ENTITY: colony prosperity ---
Colony Prosperity
Definition
The rapid economic growth and population increase in British North American colonies, where wages are high despite lower national wealth than England, due to the rapid increase in funds for maintaining labour.
Source Chapter
Book I, Chapter 8
Context
Presented as an example of how the rate of wealth increase, rather than absolute wealth, determines wage levels.
Economic Domain
General Theory
--- ENTITY: economic backwardness ---
Economic Backwardness
Economic Backwardness
Definition
The condition of nations like Bengal where funds for maintaining labour are decaying, leading to declining wages, increased poverty, and potential depopulation as labour supply exceeds demand.
Source Chapter
Book I, Chapter 8
Context
Used as an example of how declining economic conditions lead to falling wages and deteriorating living standards for the labouring poor.
Economic Domain
General Theory
--- ENTITY: economic prosperity symptoms ---
Economic Prosperity Symptoms
Definition
The observable indicators that a nation is economically thriving, including high wages of labour, increasing population, and the liberal reward of labour that encourages propagation and industry.
Source Chapter
Book I, Chapter 8
Context
Identified as the natural symptoms of increasing national wealth, contrasting with the symptoms of economic stagnation or decline.
Economic Domain
General Theory
--- ENTITY: economic stagnation symptoms ---
Economic Stagnation Symptoms
Definition
The observable indicators that a nation's economy is at a standstill, including scanty maintenance of the labouring poor and their starving condition, which Smith presents as natural symptoms that things are going backwards.
Source Chapter
Book I, Chapter 8
Context
Identified as the opposite of prosperity symptoms, indicating economic decline and deteriorating conditions for the labouring classes.
Economic Domain
General Theory
VSM Mappings
--- MAPPING: wages-of-labour-to-system-1-operations ---
wages of labour -> System 1 - Operations
Economic Entity Reference
--- ENTITY: wages of labour ---
Wages of Labour
Definition
The natural recompense or compensation that a labourer receives for their work, which in the original state of things constituted the whole produce of their labour before the appropriation of land and accumulation of stock created deductions for rent and profit.
Source Chapter
Book I, Chapter 8
Context
The central concept explored throughout the chapter, examining how wages are determined by the contract between masters and workmen, how they vary across different circumstances, and their relationship to national wealth and population growth.
Economic Domain
Distribution
VSM Concept Reference
System 1 - Operations
The primary activities that produce the organisation's purpose. These are the operational units that directly create value. Each operational element is itself a viable system (the principle of recursion).
In economic terms: Productive enterprises, factories, farms, workshops, individual labourers performing specialised tasks, merchant operations.
Key properties: Autonomy within constraints, self-organisation, direct engagement with the environment.
Mapping Rationale
Wages of labour represent the direct compensation for operational work performed by System 1 entities (labourers, journeymen, servants). These workers constitute the primary productive units that create value through their labour, which is the fundamental operational activity in Smith's economic system. The wages they receive are the immediate output of their operational contribution, making this entity a core component of System 1's value-producing activities.
Mapping Strength
Strong
--- MAPPING: landlord-to-system-5-policy ---
landlord -> System 5 - Policy
Economic Entity Reference
--- ENTITY: landlord ---
Landlord
Definition
The owner of land who, once land becomes private property, demands a share of almost all the produce which the labourer can either raise or collect from it, making rent the first deduction from the produce of labour employed upon land.
Source Chapter
Book I, Chapter 8
Context
Introduced as one of the three parties in the economic relationship, alongside the labourer and master, who claims a portion of the produce through rent once land becomes private property.
Economic Domain
Distribution
VSM Concept Reference
System 5 - Policy
The policy-making body that balances demands from Systems 3 and 4 and defines the identity, values, and purpose of the organisation. System 5 provides closure to the whole system and represents its supreme authority.
In economic terms: Sovereign authority, constitutional principles governing economic policy, national economic identity, the philosophical foundations of economic systems (mercantilism vs. free trade), the overarching purpose of the commonwealth.
Key properties: Identity, ethos, supreme command, policy closure, balancing internal and external perspectives.
Mapping Rationale
Landlords represent the ultimate authority over land resources, which in Smith's framework constitutes the foundational property rights that define economic structure. Their claim to rent establishes the fundamental distribution rules that shape the entire economic system, similar to how System 5 establishes the identity and policy framework that governs the organisation. The landlord's role in defining what portion of produce is allocated to rent versus wages parallels System 5's function of establishing distribution principles.
Mapping Strength
Moderate
--- MAPPING: master-manufacturer-to-system-3-control ---
master manufacturer -> System 3 - Control
Economic Entity Reference
--- ENTITY: master manufacturer ---
Master Manufacturer
Definition
The employer who advances materials, wages, and maintenance to workmen in manufacturing, sharing in the produce of their labour or in the value which their labour adds to the materials, with this profit making a second deduction from the produce of labour.
Source Chapter
Book I, Chapter 8
Context
Presented as the second major economic actor alongside landlords, who advances capital to workers and claims profit as their share of the produce of labour.
Economic Domain
Distribution
VSM Concept Reference
System 3 - Control
The structures and controls that establish the rules, resources, rights, and responsibilities of System 1 and provide an interface between Systems 1 and Systems 4/5. System 3 represents the day-to-day control of the organisation. It optimises the internal environment.
In economic terms: Government regulation of trade, taxation policy, labour laws, enforcement of contracts, the "invisible hand" as emergent internal regulation, guilds and corporations governing members.
Key properties: Internal regulation, resource allocation, accountability, synergy extraction, performance management.
Mapping Rationale
Master manufacturers exercise direct control over production processes by providing capital, materials, and wage payments to workers, while claiming profit as their share. This mirrors System 3's function of managing internal operations, allocating resources, and establishing the rules under which System 1 (labourers) operate. The master's role in coordinating production, setting work terms, and extracting profit from labour operations directly parallels System 3's internal management and control functions.
Mapping Strength
Strong
--- MAPPING: combination-of-workmen-to-system-2-coordination ---
combination of workmen -> System 2 - Coordination
Economic Entity Reference
--- ENTITY: combination of workmen ---
Combination of Workmen
Definition
The collective action by labourers to raise their wages through coordinated efforts, which Smith observes are frequently heard of and often involve violence, clamour, and outrage, though generally ending in punishment or ruin of the ringleaders.
Source Chapter
Book I, Chapter 8
Context
Discussed as one side of the wage negotiation dynamic, contrasting with the more successful combinations of masters, and illustrating the power imbalance between workers and employers.
Economic Domain
Regulation
VSM Concept Reference
System 2 - Coordination
The information channels and bodies that allow the primary activities in System 1 to communicate with each other and that allow System 3 to monitor and coordinate activities. System 2 dampens oscillations and resolves conflicts between operational units.
In economic terms: Market price mechanisms, trade customs, standard weights and measures, commercial law, banking clearinghouses, trade guilds.
Key properties: Anti-oscillatory, dampening, scheduling, conflict resolution, standardisation.
Mapping Rationale
Combinations of workmen represent collective coordination mechanisms among operational units (labourers) to negotiate wage terms with masters. This coordinated action serves to align the interests of multiple System 1 entities and resolve the inherent conflict between workers and employers over wage distribution. While Smith notes these combinations are often unsuccessful, they function as attempts at coordination and conflict resolution between operational units, which is the primary role of System 2.
Mapping Strength
Moderate
--- MAPPING: combination-of-masters-to-system-3-control ---
combination of masters -> System 3 - Control
Economic Entity Reference
--- ENTITY: combination of masters ---
Combination of Masters
Definition
The tacit and constant agreement among employers not to raise wages above their actual rate, which Smith argues is the natural state of things and is everywhere a most unpopular action to violate, often conducted with silence and secrecy when attempting to lower wages below this rate.
Source Chapter
Book I, Chapter 8
Context
Presented as the more effective side of wage negotiations, able to hold out longer than workmen due to greater financial resources and legal authorization for their combinations.
Economic Domain
Regulation
VSM Concept Reference
System 3 - Control
The structures and controls that establish the rules, resources, rights, and responsibilities of System 1 and provide an interface between Systems 1 and Systems 4/5. System 3 represents the day-to-day control of the organisation. It optimises the internal environment.
In economic terms: Government regulation of trade, taxation policy, labour laws, enforcement of contracts, the "invisible hand" as emergent internal regulation, guilds and corporations governing members.
Key properties: Internal regulation, resource allocation, accountability, synergy extraction, performance management.
Mapping Rationale
Combinations of masters exercise internal control over wage levels by establishing tacit agreements that regulate the compensation of System 1 workers. This coordinated control mechanism among employers establishes the rules and constraints under which labour operations function, directly managing the internal environment of wage determination. The masters' ability to maintain wage levels through collective action mirrors System 3's function of establishing operational rules and managing internal economic relationships.
Mapping Strength
Strong
--- MAPPING: funds-for-maintaining-labour-to-system-4-intelligence ---
funds for maintaining labour -> System 4 - Intelligence
Economic Entity Reference
--- ENTITY: funds for maintaining labour ---
Funds for Maintaining Labour
Definition
The financial resources destined for the payment of wages, consisting of two kinds: first, the revenue which is over and above what is necessary for the maintenance of those who possess it, and secondly, the stock which is over and above what is necessary for the employment of their masters.
Source Chapter
Book I, Chapter 8
Context
Identified as the determining factor for the demand for labour, with increases in these funds leading to increases in the number of labourers employed and consequently higher wages.
Economic Domain
Accumulation
VSM Concept Reference
System 4 - Intelligence
The bodies and processes that look outward to the environment to monitor how the organisation needs to adapt to remain viable. System 4 captures all relevant information about the outside-and-then environment. It is responsible for strategic responses.
In economic terms: Foreign intelligence about trade opportunities, market research, new technology adoption, colonial exploration and trade route development, understanding of foreign economic systems.
Key properties: Environmental scanning, future orientation, strategic planning, modelling, research and development.
Mapping Rationale
Funds for maintaining labour represent the economic intelligence about resource availability that determines future employment capacity and wage levels. These funds scan the economic environment to identify available capital and revenue that can be deployed for future labour investment. Their growth or decline provides strategic information about the economy's capacity to support workers, functioning as intelligence about the economic environment that guides future adaptation and resource allocation decisions.
Mapping Strength
Moderate
--- MAPPING: menial-servants-to-system-1-operations ---
menial servants -> System 1 - Operations
Economic Entity Reference
--- ENTITY: menial servants ---
Menial Servants
Definition
Domestic workers employed by landlords, annuitants, or monied men who have revenue beyond what they judge sufficient to maintain their own family, with increases in their surplus revenue naturally leading to increases in the number of such servants.
Source Chapter
Book I, Chapter 8
Context
Used as an example of how increased revenue for those who live by income rather than labour creates additional demand for wage-labourers.
Economic Domain
Consumption
VSM Concept Reference
System 1 - Operations
The primary activities that produce the organisation's purpose. These are the operational units that directly create value. Each operational element is itself a viable system (the principle of recursion).
In economic terms: Productive enterprises, factories, farms, workshops, individual labourers performing specialised tasks, merchant operations.
Key properties: Autonomy within constraints, self-organisation, direct engagement with the environment.
Mapping Rationale
Menial servants constitute operational units that directly produce domestic services, representing a form of productive activity within households. Though their work is domestic rather than commercial, they function as System 1 entities by performing specialised tasks that create value for their employers. Their wages represent the compensation for operational work, and their employment responds to the availability of surplus revenue, making them integral operational components of the economic system.
Mapping Strength
Strong
--- MAPPING: journeymen-to-system-1-operations ---
journeymen -> System 1 - Operations
Economic Entity Reference
--- ENTITY: journeymen ---
Journeymen
Definition
Independent workmen employed by master craftsmen who have surplus stock beyond what is necessary to purchase materials and maintain themselves, with increases in this surplus naturally leading to increases in the number of journeymen employed for profit.
Source Chapter
Book I, Chapter 8
Context
Presented as the second category of wage-labourers, distinct from menial servants, employed by independent craftsmen to work with surplus stock for profit.
Economic Domain
Production
VSM Concept Reference
System 1 - Operations
The primary activities that produce the organisation's purpose. These are the operational units that directly create value. Each operational element is itself a viable system (the principle of recursion).
In economic terms: Productive enterprises, factories, farms, workshops, individual labourers performing specialised tasks, merchant operations.
Key properties: Autonomy within constraints, self-organisation, direct engagement with the environment.
Mapping Rationale
Journeymen are direct operational workers who perform productive labour in manufacturing and craft production. They represent the core System 1 entities that create value through their specialised skills and labour, working with materials provided by masters to produce finished goods. Their wages constitute the compensation for operational work, and their employment directly responds to the availability of surplus capital for production, making them fundamental operational components of the economic system.
Mapping Strength
Strong
--- MAPPING: lowest-rate-of-wages-to-system-2-coordination ---
lowest rate of wages -> System 2 - Coordination
Economic Entity Reference
--- ENTITY: lowest rate of wages ---
Lowest Rate of Wages
Definition
The minimum wage below which it seems impossible to reduce the ordinary wages of labour for any considerable time, which must at least be sufficient to maintain the labourer and enable them to bring up a family, otherwise the race of such workmen could not last beyond the first generation.
Source Chapter
Book I, Chapter 8
Context
Identified as the natural floor for wages determined by the necessity of maintaining workers and their families, below which labour supply would eventually diminish.
Economic Domain
Distribution
VSM Concept Reference
System 2 - Coordination
The information channels and bodies that allow the primary activities in System 1 to communicate with each other and that allow System 3 to monitor and coordinate activities. System 2 dampens oscillations and resolves conflicts between operational units.
In economic terms: Market price mechanisms, trade customs, standard weights and measures, commercial law, banking clearinghouses, trade guilds.
Key properties: Anti-oscillatory, dampening, scheduling, conflict resolution, standardisation.
Mapping Rationale
The lowest rate of wages functions as a coordination mechanism that stabilises the labour market by establishing a natural floor below which wages cannot sustainably fall. This minimum wage level coordinates the relationship between labour supply and demand by ensuring that workers can maintain themselves and reproduce, preventing the system from collapsing into unsustainable conditions. It serves as an anti-oscillatory mechanism that dampens extreme wage fluctuations and maintains systemic stability.
Mapping Strength
Moderate
--- MAPPING: stationary-country-to-system-5-policy ---
stationary country -> System 5 - Policy
Economic Entity Reference
--- ENTITY: stationary country ---
Stationary Country
Definition
A nation whose wealth has remained long unchanged in extent, where the funds for maintaining labour have continued for several centuries at the same or nearly the same level, resulting in stable population and wages at the lowest rate consistent with common humanity.
Source Chapter
Book I, Chapter 8
Context
Used as a contrast to thriving nations, with China presented as an example where long-term economic stability has resulted in low wages and difficult conditions for labourers.
Economic Domain
General Theory
VSM Concept Reference
System 5 - Policy
The policy-making body that balances demands from Systems 3 and 4 and defines the identity, values, and purpose of the organisation. System 5 provides closure to the whole system and represents its supreme authority.
In economic terms: Sovereign authority, constitutional principles governing economic policy, national economic identity, the philosophical foundations of economic systems (mercantilism vs. free trade), the overarching purpose of the commonwealth.
Key properties: Identity, ethos, supreme command, policy closure, balancing internal and external perspectives.
Mapping Rationale
A stationary country represents the policy identity and economic ethos of a nation that has chosen or been constrained into a stable equilibrium state. This condition reflects the fundamental policy choices or institutional constraints that define the nation's economic identity and purpose, similar to how System 5 establishes the overarching identity and policy framework for an organisation. The stationary state embodies the nation's economic values and the policy closure that maintains its current configuration.
Mapping Strength
Moderate
--- MAPPING: thriving-country-to-system-4-intelligence ---
thriving country -> System 4 - Intelligence
Economic Entity Reference
--- ENTITY: thriving country ---
Thriving Country
Definition
A nation experiencing continual increase in wealth, where the continual increase in the number of inhabitants and the funds for maintaining labour create competition among masters for workers, naturally raising wages above the lowest rate.
Source Chapter
Book I, Chapter 8
Context
Presented as the condition most favourable to high wages, with North America used as an example of rapid economic growth leading to high wages and favourable conditions for labour.
Economic Domain
General Theory
VSM Concept Reference
System 4 - Intelligence
The bodies and processes that look outward to the environment to monitor how the organisation needs to adapt to remain viable. System 4 captures all relevant information about the outside-and-then environment. It is responsible for strategic responses.
In economic terms: Foreign intelligence about trade opportunities, market research, new technology adoption, colonial exploration and trade route development, understanding of foreign economic systems.
Key properties: Environmental scanning, future orientation, strategic planning, modelling, research and development.
Mapping Rationale
A thriving country represents the intelligence function of an economy that successfully scans its environment and adapts to opportunities for growth. The continuous increase in wealth and population demonstrates effective environmental monitoring and strategic response to economic conditions. This dynamic state reflects System 4's role in gathering information about external opportunities and internal capacities, then adapting the economic system to maintain viability through growth and development.
Mapping Strength
Moderate
--- MAPPING: labouring-poor-to-system-1-operations ---
labouring poor -> System 1 - Operations
Economic Entity Reference
--- ENTITY: labouring poor ---
Labouring Poor
Definition
The great body of people who live by wages, including labourers, journeymen, and servants of every kind, who make up the far greater part of every great political society and whose improved circumstances are regarded as an advantage rather than an inconvenience to society.
Source Chapter
Book I, Chapter 8
Context
The central focus of Smith's analysis of wages, representing the majority of society whose welfare is presented as essential to a flourishing and happy society.
Economic Domain
Distribution
VSM Concept Reference
System 1 - Operations
The primary activities that produce the organisation's purpose. These are the operational units that directly create value. Each operational element is itself a viable system (the principle of recursion).
In economic terms: Productive enterprises, factories, farms, workshops, individual labourers performing specialised tasks, merchant operations.
Key properties: Autonomy within constraints, self-organisation, direct engagement with the environment.
Mapping Rationale
The labouring poor constitute the primary operational workforce that directly produces the economic value of society through their labour. As the majority of the population engaged in wage-based work, they represent the fundamental System 1 entities that create the goods and services that constitute the economy's output. Their improved circumstances directly correlate with the overall health and viability of the economic system, making them the essential operational foundation.
Mapping Strength
Strong
--- MAPPING: progressive-state-of-society-to-system-5-policy ---
progressive state of society -> System 5 - Policy
Economic Entity Reference
--- ENTITY: progressive state of society ---
Progressive State of Society
Definition
The condition of a society that is advancing to the further acquisition of riches, rather than having acquired its full complement, which Smith argues is the happiest and most comfortable state for the labouring poor and all orders of society.
Source Chapter
Book I, Chapter 8
Context
Identified as the optimal condition for wages and general prosperity, contrasting with the dull stationary state and the miserable declining state.
Economic Domain
General Theory
VSM Concept Reference
System 5 - Policy
The policy-making body that balances demands from Systems 3 and 4 and defines the identity, values, and purpose of the organisation. System 5 provides closure to the whole system and represents its supreme authority.
In economic terms: Sovereign authority, constitutional principles governing economic policy, national economic identity, the philosophical foundations of economic systems (mercantilism vs. free trade), the overarching purpose of the commonwealth.
Key properties: Identity, ethos, supreme command, policy closure, balancing internal and external perspectives.
Mapping Rationale
The progressive state of society represents the optimal policy identity and economic purpose that Smith advocates for national prosperity. This condition embodies the philosophical framework and policy objectives that define what constitutes a successful economic system, similar to how System 5 establishes the identity and purpose that guides organisational direction. The progressive state reflects the policy closure that balances various economic interests to achieve optimal outcomes for all members of society.
Mapping Strength
Moderate
--- MAPPING: piece-work-wages-to-system-1-operations ---
piece-work wages -> System 1 - Operations
Economic Entity Reference
--- ENTITY: piece-work wages ---
Piece-Work Wages
Definition
A system of compensation where workmen are paid by the piece rather than by time, which Smith observes leads to greater activity and diligence among workers, though sometimes resulting in overwork and health damage when wages are high.
Source Chapter
Book I, Chapter 8
Context
Discussed as a wage system that encourages industriousness but requires moderation to prevent workers from ruining their health through excessive application.
Economic Domain
Distribution
VSM Concept Reference
System 1 - Operations
The primary activities that produce the organisation's purpose. These are the operational units that directly create value. Each operational element is itself a viable system (the principle of recursion).
In economic terms: Productive enterprises, factories, farms, workshops, individual labourers performing specialised tasks, merchant operations.
Key properties: Autonomy within constraints, self-organisation, direct engagement with the environment.
Mapping Rationale
Piece-work wages represent a compensation mechanism that directly incentivises operational productivity by linking worker compensation to output volume. This system encourages System 1 entities (workers) to increase their operational efficiency and output, while also creating autonomy in how they achieve production targets. The piece-work system exemplifies the operational dynamics of System 1, where workers self-organise their effort within the constraints of the compensation structure to maximise their productivity.
Mapping Strength
Strong
--- MAPPING: cheap-years-to-system-4-intelligence ---
cheap years -> System 4 - Intelligence
Economic Entity Reference
--- ENTITY: cheap years ---
Cheap Years
Definition
Periods of agricultural abundance and low prices that tend to increase the proportion of independent workmen relative to journeymen and servants, while also encouraging masters to employ more labour due to increased funds for maintaining servants.
Source Chapter
Book I, Chapter 8
Context
Examined for their effects on wages and employment patterns, with Smith arguing they tend to increase independent work and moderate labour application.
Economic Domain
General Theory
VSM Concept Reference
System 4 - Intelligence
The bodies and processes that look outward to the environment to monitor how the organisation needs to adapt to remain viable. System 4 captures all relevant information about the outside-and-then environment. It is responsible for strategic responses.
In economic terms: Foreign intelligence about trade opportunities, market research, new technology adoption, colonial exploration and trade route development, understanding of foreign economic systems.
Key properties: Environmental scanning, future orientation, strategic planning, modelling, research and development.
Mapping Rationale
Cheap years represent environmental conditions that provide intelligence about economic opportunities and constraints. These periods of abundance signal favourable conditions for expanding employment and encouraging independent work, similar to how System 4 scans the environment for opportunities. The economic adaptations that occur during cheap years—increased independent work, moderated labour application—reflect strategic responses to environmental intelligence about resource availability and market conditions.
Mapping Strength
Moderate
--- MAPPING: dear-years-to-system-4-intelligence ---
dear years -> System 4 - Intelligence
Economic Entity Reference
--- ENTITY: dear years ---
Dear Years
Definition
Periods of scarcity and high prices that tend to diminish the proportion of independent workmen relative to journeymen and servants, while also reducing the funds for maintaining servants and increasing competition for employment.
Source Chapter
Book I, Chapter 8
Context
Examined for their effects on wages and employment patterns, with Smith arguing they tend to increase dependence and sometimes lead to lower wages.
Economic Domain
General Theory
VSM Concept Reference
System 4 - Intelligence
The bodies and processes that look outward to the environment to monitor how the organisation needs to adapt to remain viable. System 4 captures all relevant information about the outside-and-then environment. It is responsible for strategic responses.
In economic terms: Foreign intelligence about trade opportunities, market research, new technology adoption, colonial exploration and trade route development, understanding of foreign economic systems.
Key properties: Environmental scanning, future orientation, strategic planning, modelling, research and development.
Mapping Rationale
Dear years provide environmental intelligence about economic constraints and challenges that require strategic adaptation. These periods of scarcity signal the need for economic systems to adjust their employment patterns and wage structures, similar to how System 4 monitors environmental conditions that affect organisational viability. The economic responses to dear years—increased dependence, reduced independent work—reflect strategic adaptations based on intelligence about resource scarcity and market pressures.
Mapping Strength
Moderate
--- MAPPING: subsistence-agriculture-to-system-1-operations ---
subsistence agriculture -> System 1 - Operations
Economic Entity Reference
--- ENTITY: subsistence agriculture ---
Subsistence Agriculture
Definition
The condition in China where labourers are content if they can earn enough through a day's labour to purchase a small quantity of rice in the evening, representing the lowest level of subsistence that still maintains population numbers.
Source Chapter
Book I, Chapter 8
Context
Used as an example of how low wages in a stationary economy can still maintain population through minimal subsistence levels.
Economic Domain
Production
VSM Concept Reference
System 1 - Operations
The primary activities that produce the organisation's purpose. These are the operational units that directly create value. Each operational element is itself a viable system (the principle of recursion).
In economic terms: Productive enterprises, factories, farms, workshops, individual labourers performing specialised tasks, merchant operations.
Key properties: Autonomy within constraints, self-organisation, direct engagement with the environment.
Mapping Rationale
Subsistence agriculture represents the most basic form of operational production where workers directly produce their own means of survival. This autonomous operational activity creates minimal value sufficient only for survival, yet it constitutes the fundamental System 1 function of producing value through direct engagement with the environment. The subsistence farmer operates as an autonomous unit within the constraints of minimal resource availability, creating the most basic economic output.
Mapping Strength
Strong
--- MAPPING: public-registers-of-manufactures-to-system-2-coordination ---
public registers of manufactures -> System 2 - Coordination
Economic Entity Reference
--- ENTITY: public registers of manufactures ---
Public Registers of Manufactures
Definition
Official records that Smith argues often fail to capture the full extent of manufacturing activity, particularly the extraordinary work done in cheap years by independent workmen and family members working for their own consumption.
Source Chapter
Book I, Chapter 8
Context
Criticized as incomplete representations of economic activity that merchants and manufacturers often use to falsely announce prosperity or declension.
Economic Domain
General Theory
VSM Concept Reference
System 2 - Coordination
The information channels and bodies that allow the primary activities in System 1 to communicate with each other and that allow System 3 to monitor and coordinate activities. System 2 dampens oscillations and resolves conflicts between operational units.
In economic terms: Market price mechanisms, trade customs, standard weights and measures, commercial law, banking clearinghouses, trade guilds.
Key properties: Anti-oscillatory, dampening, scheduling, conflict resolution, standardisation.
Mapping Rationale
Public registers of manufactures function as official coordination mechanisms that attempt to standardise and communicate information about manufacturing activity across the economic system. These records serve to coordinate understanding of economic conditions, even though Smith criticises their completeness. They represent an attempt at standardisation and information sharing that would allow different economic actors to coordinate their activities based on shared data about manufacturing output.
Mapping Strength
Moderate
--- MAPPING: stock-of-the-country-to-system-4-intelligence ---
stock of the country -> System 4 - Intelligence
Economic Entity Reference
--- ENTITY: stock of the country ---
Stock of the Country
Definition
The accumulated wealth of a nation that, when increasing, raises wages of labour by enabling masters to employ more workers and by increasing the demand for labour through both revenue and capital investment.
Source Chapter
Book I, Chapter 8
Context
Identified as the fundamental driver of wage increases, with its growth creating the funds necessary to maintain and employ more labour.
VSM Concept Reference
System 4 - Intelligence
The bodies and processes that look outward to the environment to monitor how the organisation needs to adapt to remain viable. System 4 captures all relevant information about the outside-and-then environment. It is responsible for strategic responses.
In economic terms: Foreign intelligence about trade opportunities, market research, new technology adoption, colonial exploration and trade route development, understanding of foreign economic systems.
Key properties: Environmental scanning, future orientation, strategic planning, modelling, research and development.
Mapping Rationale
The stock of the country represents the accumulated economic intelligence about a nation's capacity for future growth and employment. This accumulated wealth provides strategic information about the economy's ability to maintain and expand its labour force, functioning as intelligence about internal resources that can be deployed for future development. The growth or decline of national stock provides crucial information for strategic economic planning and adaptation.
Mapping Strength
Strong
--- MAPPING: demand-for-labour-to-system-2-coordination ---
demand for labour -> System 2 - Coordination
Economic Entity Reference
--- ENTITY: demand for labour ---
Demand for Labour
Definition
The need for workers in various employments that necessarily increases with the increase of the revenue and stock of every country, and cannot possibly increase without it, regulating the production of men like any other commodity.
Source Chapter
Book I, Chapter 8
Context
Presented as the key determinant of wages, with its fluctuations explaining variations in wage levels across different times and places.
Economic Domain
General Theory
VSM Concept Reference
System 2 - Coordination
The information channels and bodies that allow the primary activities in System 1 to communicate with each other and that allow System 3 to monitor and coordinate activities. System 2 dampens oscillations and resolves conflicts between operational units.
In economic terms: Market price mechanisms, trade customs, standard weights and measures, commercial law, banking clearinghouses, trade guilds.
Key properties: Anti-oscillatory, dampening, scheduling, conflict resolution, standardisation.
Mapping Rationale
Demand for labour functions as a coordination mechanism that aligns the supply of workers with the needs of employers across the economy. This dynamic coordination resolves the fundamental conflict between labour supply and demand by establishing equilibrium wage levels that coordinate employment across different sectors. The demand for labour serves as an anti-oscillatory mechanism that stabilises the labour market by coordinating the activities of multiple System 1 entities (workers and employers).
Mapping Strength
Strong
--- MAPPING: natural-complement-of-riches-to-system-5-policy ---
natural complement of riches -> System 5 - Policy
Economic Entity Reference
--- ENTITY: natural complement of riches ---
Natural Complement of Riches
Definition
The maximum level of wealth that the nature of a country's laws and institutions permits it to acquire, beyond which further accumulation becomes impossible, as Smith suggests has occurred in China.
Source Chapter
Book I, Chapter 8
Context
Used to explain why some wealthy nations like China can remain stationary with low wages despite their riches.
Economic Domain
General Theory
VSM Concept Reference
System 5 - Policy
The policy-making body that balances demands from Systems 3 and 4 and defines the identity, values, and purpose of the organisation. System 5 provides closure to the whole system and represents its supreme authority.
In economic terms: Sovereign authority, constitutional principles governing economic policy, national economic identity, the philosophical foundations of economic systems (mercantilism vs. free trade), the overarching purpose of the commonwealth.
Key properties: Identity, ethos, supreme command, policy closure, balancing internal and external perspectives.
Mapping Rationale
The natural complement of riches represents the policy identity and institutional framework that defines the maximum economic potential of a nation. This concept embodies the constitutional and legal principles that establish the boundaries of economic growth, similar to how System 5 establishes the identity and policy framework that governs organisational limits. The natural complement reflects the policy closure that determines what level of wealth the economic system is permitted to achieve.
Mapping Strength
Moderate
--- MAPPING: colony-prosperity-to-system-4-intelligence ---
colony prosperity -> System 4 - Intelligence
Economic Entity Reference
--- ENTITY: colony prosperity ---
Colony Prosperity
Definition
The rapid economic growth and population increase in British North American colonies, where wages are high despite lower national wealth than England, due to the rapid increase in funds for maintaining labour.
Source Chapter
Book I, Chapter 8
Context
Presented as an example of how the rate of wealth increase, rather than absolute wealth, determines wage levels.
Economic Domain
General Theory
VSM Concept Reference
System 4 - Intelligence
The bodies and processes that look outward to the environment to monitor how the organisation needs to adapt to remain viable. System 4 captures all relevant information about the outside-and-then environment. It is responsible for strategic responses.
In economic terms: Foreign intelligence about trade opportunities, market research, new technology adoption, colonial exploration and trade route development, understanding of foreign economic systems.
Key properties: Environmental scanning, future orientation, strategic planning, modelling, research and development.
Mapping Rationale
Colony prosperity represents the intelligence function of identifying and capitalising on new economic opportunities in expanding territories. The rapid growth and high wages in colonies demonstrate successful environmental scanning and strategic adaptation to new conditions, similar to how System 4 monitors external opportunities for organisational development. This prosperity reflects the intelligence about frontier economic conditions that enables strategic responses to maximise growth potential.
Mapping Strength
Moderate
--- MAPPING: economic-backwardness-to-system-5-policy ---
economic backwardness -> System 5 - Policy
Economic Entity Reference
--- ENTITY: economic backwardness ---
Economic Backwardness
Definition
The condition of nations like Bengal where funds for maintaining labour are decaying, leading to declining wages, increased poverty, and potential depopulation as labour supply exceeds demand.
Source Chapter
Book I, Chapter 8
Context
Used as an example of how declining economic conditions lead to falling wages and deteriorating living standards for the labouring poor.
Economic Domain
General Theory
VSM Concept Reference
System 5 - Policy
The policy-making body that balances demands from Systems 3 and 4 and defines the identity, values, and purpose of the organisation. System 5 provides closure to the whole system and represents its supreme authority.
In economic terms: Sovereign authority, constitutional principles governing economic policy, national economic identity, the philosophical foundations of economic systems (mercantilism vs. free trade), the overarching purpose of the commonwealth.
Key properties: Identity, ethos, supreme command, policy closure, balancing internal and external perspectives.
Mapping Rationale
Economic backwardness represents the failure of policy identity and institutional framework to maintain economic viability. This condition reflects the consequences of policy choices or institutional constraints that prevent economic adaptation and growth, similar to how System 5's policy framework can either enable or constrain organisational development. The backwardness embodies the policy closure that has resulted in economic stagnation and declining conditions for the labouring population.
Mapping Strength
Moderate
--- MAPPING: economic-prosperity-symptoms-to-system-4-intelligence ---
economic prosperity symptoms -> System 4 - Intelligence
Economic Entity Reference
--- ENTITY: economic prosperity symptoms ---
Economic Prosperity Symptoms
Definition
The observable indicators that a nation is economically thriving, including high wages of labour, increasing population, and the liberal reward of labour that encourages propagation and industry.
Source Chapter
Book I, Chapter 8
Context
Identified as the natural symptoms of increasing national wealth, contrasting with the symptoms of economic stagnation or decline.
Economic Domain
General Theory
VSM Concept Reference
System 4 - Intelligence
The bodies and processes that look outward to the environment to monitor how the organisation needs to adapt to remain viable. System 4 captures all relevant information about the outside-and-then environment. It is responsible for strategic responses.
In economic terms: Foreign intelligence about trade opportunities, market research, new technology adoption, colonial exploration and trade route development, understanding of foreign economic systems.
Key properties: Environmental scanning, future orientation, strategic planning, modelling, research and development.
Mapping Rationale
Economic prosperity symptoms function as intelligence indicators that signal the health and viability of the economic system. These observable metrics provide information about the success of current economic policies and conditions, similar to how System 4 monitors performance indicators to assess organisational health. The symptoms of prosperity serve as feedback mechanisms that inform strategic decisions about maintaining or expanding economic growth.
Mapping Strength
Strong
--- MAPPING: economic-stagnation-symptoms-to-system-4-intelligence ---
economic stagnation symptoms -> System 4 - Intelligence
Economic Entity Reference
--- ENTITY: economic stagnation symptoms ---
Economic Stagnation Symptoms
Definition
The observable indicators that a nation's economy is at a standstill, including scanty maintenance of the labouring poor and their starving condition, which Smith presents as natural symptoms that things are going backwards.
Source Chapter
Book I, Chapter 8
Context
Identified as the opposite of prosperity symptoms, indicating economic decline and deteriorating conditions for the labouring classes.
Economic Domain
General Theory
VSM Concept Reference
System 4 - Intelligence
The bodies and processes that look outward to the environment to monitor how the organisation needs to adapt to remain viable. System 4 captures all relevant information about the outside-and-then environment. It is responsible for strategic responses.
In economic terms: Foreign intelligence about trade opportunities, market research, new technology adoption, colonial exploration and trade route development, understanding of foreign economic systems.
Key properties: Environmental scanning, future orientation, strategic planning, modelling, research and development.
Mapping Rationale
Economic stagnation symptoms function as intelligence indicators that signal systemic failure and the need for strategic intervention. These negative metrics provide crucial information about economic decline, similar to how System 4 monitors warning signs that require organisational adaptation. The symptoms of stagnation serve as algedonic signals that alert the economic system to critical conditions requiring immediate attention and strategic response.
Mapping Strength
Strong
VSM Framework Reference
id: vsm-framework name: vsm_framework artifact_type: content description: Stafford Beer's Viable System Model reference for economic analysis version: 1.0.0
Stafford Beer's Viable System Model (VSM)
The Viable System Model (VSM) is a model of the organisational structure of any autonomous system capable of producing itself. It was created by management cybernetician Stafford Beer in his books Brain of the Firm (1972) and The Heart of Enterprise (1979).
Core Principle: Viability
A viable system is any system organised in such a way as to meet the demands of surviving in a changing environment. One of the prime features of systems that survive is that they are adaptable. The VSM expresses a model for a viable system, which is an abstracted cybernetic description applicable to any organisation that is a going concern.
The Five Systems
System 1 (S1) — Operations
The primary activities that produce the organisation's purpose. These are the operational units that directly create value. Each operational element is itself a viable system (the principle of recursion).
In economic terms: Productive enterprises, factories, farms, workshops, individual labourers performing specialised tasks, merchant operations.
Key properties: Autonomy within constraints, self-organisation, direct engagement with the environment.
System 2 (S2) — Coordination
The information channels and bodies that allow the primary activities in System 1 to communicate with each other and that allow System 3 to monitor and coordinate activities. System 2 dampens oscillations and resolves conflicts between operational units.
In economic terms: Market price mechanisms, trade customs, standard weights and measures, commercial law, banking clearinghouses, trade guilds.
Key properties: Anti-oscillatory, dampening, scheduling, conflict resolution, standardisation.
System 3 (S3) — Control / Operational Management
The structures and controls that establish the rules, resources, rights, and responsibilities of System 1 and provide an interface between Systems 1 and Systems 4/5. System 3 represents the day-to-day control of the organisation. It optimises the internal environment.
In economic terms: Government regulation of trade, taxation policy, labour laws, enforcement of contracts, the "invisible hand" as emergent internal regulation, guilds and corporations governing members.
Key properties: Internal regulation, resource allocation, accountability, synergy extraction, performance management.
System 3* (S3*) — Audit / Monitoring
The audit and monitoring channel that allows System 3 to verify information coming from System 1 through channels other than those provided by System 2. System 3* provides sporadic, direct access to operational reality.
In economic terms: Market inspections, quality checks, auditing of accounts, surprise investigations into trade practices, verification of weights and measures.
Key properties: Sporadic direct investigation, reality checking, bypassing normal reporting channels.
System 4 (S4) — Intelligence / Adaptation
The bodies and processes that look outward to the environment to monitor how the organisation needs to adapt to remain viable. System 4 captures all relevant information about the outside-and-then environment. It is responsible for strategic responses.
In economic terms: Foreign intelligence about trade opportunities, market research, new technology adoption, colonial exploration and trade route development, understanding of foreign economic systems.
Key properties: Environmental scanning, future orientation, strategic planning, modelling, research and development.
System 5 (S5) — Policy / Identity
The policy-making body that balances demands from Systems 3 and 4 and defines the identity, values, and purpose of the organisation. System 5 provides closure to the whole system and represents its supreme authority.
In economic terms: Sovereign authority, constitutional principles governing economic policy, national economic identity, the philosophical foundations of economic systems (mercantilism vs. free trade), the overarching purpose of the commonwealth.
Key properties: Identity, ethos, supreme command, policy closure, balancing internal and external perspectives.
Key Concepts
Recursion
Every viable system contains and is contained in a viable system. The same five-system structure recurs at every level of organisation. A workshop is a viable system within a factory, which is a viable system within an industry, which is a viable system within a national economy.
Variety
A measure of the number of possible states of a system. The Law of Requisite Variety (Ashby's Law) states that only variety can absorb variety. A controller must have at least as much variety as the system it controls.
Requisite Variety
The principle that for effective regulation, the variety of the regulator must match the variety of the system being regulated. This is achieved through variety attenuation (reducing the variety coming up from operations) and variety amplification (increasing the variety of management's responses).
Attenuation and Amplification
Variety engineering mechanisms. Attenuation reduces variety (e.g., reporting summaries, statistical aggregation, standardisation). Amplification increases variety (e.g., delegation, empowerment, decentralisation).
Algedonic Signals
Emergency signals that bypass the normal management hierarchy to alert higher systems of critical situations requiring immediate attention. Named from the Greek words for pain (algos) and pleasure (hedone).
In economic terms: Market panics, famine signals, sudden price collapses, trade embargoes, economic crises that demand immediate sovereign intervention.
Autonomy
The degree of freedom granted to operational units (System 1) to self-organise within constraints set by System 3. Beer argued that maximum autonomy consistent with systemic cohesion yields maximum viability.
Viability
The capacity of a system to maintain a separate existence and survive in a changing environment. A viable system continuously adapts while maintaining its identity.
Instructions
- Review the source chapter, extracted entities, and VSM mappings together.
- Produce a single chapter analysis document following the Chapter Analysis Schema v1.0.
- The analysis must include:
- An H1 heading with the chapter analysis title
- A Chapter Summary (50-300 words) of the main economic arguments
- An Entities Extracted section listing all entities with brief descriptions
- A VSM Mappings section listing all mappings with entity, concept, and strength
- A VSM Coverage section assessing which systems (S1-S5, S3*) are represented
- A Gaps & Observations section identifying uncovered systems and patterns
- In the VSM Coverage section, explicitly state which systems are covered and which are not, based on the mappings.
- In Gaps & Observations, note:
- Which VSM systems lack representation from this chapter
- Entities that were difficult to map
- Emerging themes or patterns
- Suggestions for enriching coverage in future analysis
Output Format
Output a single markdown document following the Chapter Analysis Schema v1.0.