I would classify the article as historical revisionism. The conclusion "The concern with the welfare of the laboring poor is palpable throughout the book." means that the author at least read the whole of Adam Smith's book, which is more than what most internet commenters accomplish.
However if you believe that people's own selfishness is stronger than their empathy to their fellow humans, then The Wealth of Nations arguments are on very shaky ground.
Still as you say, most people just cherry pick one sentence fragement from the 1000+ pages of the book to justify "free markets".
This is explained in the same paragraph. Adam's theory is that the wealthy business owners collude against the workers while at the same time lobbying for laws that make it illegal for workers to combine. He says that these conflicts frequently play out violently and rarely end well for the workers.
This is explained in in Wealth of Nations in Chapter 8, "On The Wages of Labour."
More generally, Smith seems not to have been read by many economists, or at least his theory is rather different from what is ascribed to him by textbooks.
My comment exactly addressed that claim.
Now you seem to be asking if you eliminate bargaining power, would supply and demand dominate? I guess so? In the same sense that if you eliminate higher terms then sin(x) is just the identity function.
But why even ask the question? It's not relevant to the discussion of whether the terms you eliminated are key.
More likely you're conflating the issue with writers, ideologues, politicians, journalists, editorialists.
As long as companies can keep finding investors to bankroll them, workers can be paid more than the value they generate.
And ... managed to scarcely mention his invention at all in Wealth of Nations. For a book that's considered to be the foundation of modern economics, he utterly misses the major factor driving growth through the 19th and much of the 20th century: coal-fired steam power. Even today, coal-fired steam (through turbines rather than pistons) drives much electrical generation.
E.g. http://www.xnumber.com/xnumber/microprocessor_history.htm
There is no steady state in which a worker can be paid more than the value he creates. As long as that state continues, value is being destroyed, and whoever is paying the worker will ultimately run out of willingness or, failing that, ability to pay.
Pricing in Supply and Demand is decided by Bargaining Power, not the other way around.
The idea that workers 'outnumber' the capitalists does not give them power, it's the complete opposite.
I have no idea why you would think think they have some kind of power in that equation especially when there is probably a labour surplus.
If workers merged and formed a coherent Union, and acted as a single monolithic entity i.e. 'all labour in the colonies comes from a single Guild', then they'd possibly have more power, but this wouldn't really be possible obviously.
The entire treatise is essentially about the disproportionate power of concentrated wealth and that's what will ultimately drive wages.
That it's difficult to quantify doesn't make it false.
'Profit concentration' is literally a measure of value chain power: if you can collect a lot of profit, it's a sign that you have leverage over the other entities: workers, financiers, customers and suppliers.
Apple has incredible leverage over vendors, which is why even if you sell some really cool and awesome component to them for their iPhone you might not make Jack in profits, and may find yourself out of business a few years later.
Apple makes 100x more margin per device than Foxxcon, which illustrates the capital vs. labour dynamic quite well.
It's important to note that it's not necessarily labor-vs-capital. Capital-vs-capital also exhibits the same dynamics.
One might argue that Foxcon's business model is providing low margin manufacturing manpower; and that the real value-added is in an design and R&D of an always-connected device that fits into the pocket.
But there's a counterpoint - mobile connectivity requires radio networks. There's no a-priori reason why Apple should make 60% margins, while Nokia and Ericsson barely break even. Radio networks also require a lot of R&D, are designed in Western countries and their business model is not about exporting cheap labor.
The key difference is the power disparity. Nokia/Ericsson are facing powerful network operators, some of them close to an order of magnitude larger than the vendors themselves. The operators dictate the terms of the deal, the vendors have to adapt. With Apple - they're facing customers. Apple dictates the terms, customers have to adapt.
In fact, 6 out 7 largest corporations by market cap (the odd one out is Saudi Aramco) are all in the same position as Apple - power dynamics heavily tilted their way.
Market power is usually a function of competition - so mobile devices have a dynamic where in some ways (verticalized platforms), that's limited.
Apple also has systematic leverage from their Mac and other products and expertise.
Finally is the Brand and Marketing intangible. Nike doesn't have any 'real power' other than that, but they wield it well.
So those three things together, and scale, give them leverage.
The other immensely powerful players are the carriers. They have a kind of bought monopoly / oligarchy over airwaves - while they do pay into the public purse in the form of auctions, in reality, it's not a very competitive market.
They reap massive revenues from their position. That said - these companies are kind of older, they have unions, and they are not hyper efficient, and they don't post the same margins as Apple, and because there's limited growth in a market, it's not likely their stock will be highly leveraged.
The Carriers have immense power in some ways like Apple, but it's just that they don't have the apparent surpluses and glowing stock price due to the systematic power of their own entrenched bureaucracies.
Finally you have equipment vendors. They're an essential component, but the reality is the market is much smaller, there's no direct to consumer relationship, no recurring revenues, they have China nipping at their heels. So they are in a somewhat weaker position.
Also - the CCP has directed the Chinese Banking system to offer cheap loans for Huawei gear, a kind of Economic Dumping which is totally against free trade but it's like heroin to buying parties who can forgo huge cash outflows.
If carriers were dynamic and efficiently run without a lot of the legacy and went with fewer storefronts - and - somehow 'got good at marketing' - and - Apple wasn't quite as good at marketing and especially if they were like Android i.e. licenced their OS, then carriers would rival Apple for power.
Big Oils dominance comes from massive scale and systematic integration into the economy, geopolitical leverage (literally the US Armed Forces secure their supply chain), major geostrategic interventions (the state will represent Oil Companies or work with them), etc. etc.. If we were not facing Green Crisis then I suggest they would be much more powerful, as they were historically.
The more powerful corporations will accumulate more of the profits that are available to be divided.
So each corporate participant will get back it's 'costs' i.e. the minimum requirement for equipment (and maybe include very base salaries) - after that, everything is up for negotiation.
The 'Super Guild' that had 'All of the Workers in the Colonies' would probably be able to negotiate so that the corporations it sold it's services to didn't make any profits at all.
So the 'Super Guild' would accumulate most of the profits, and then they'd have to figure out how to divide those profits among themselves.
There are actually is not remotely 'that much surplus' in these systems, and that if workers took 'all the profits' it wouldn't make them rich. Just somewhat better off. So if the 'Super Guild' distributed the profits fairly evenly, everyone would get a nice raise and that's that.
Since workers tend to spend most of their income, almost all of that surplus would end up back in the economy pretty quickly, and all businesses would grow. This is Henry Ford's realization: "I have to pay my workers enough to be able to afford my car!"
FYI you can see this in action with professional designations, like MD, RN. They keep wages 'artificially' high by limiting the number of those that can do the work. That said, even without their Guilds, because they do work that not many can do, they'd still command good wages.
The 'Bad Asymmetries' in the economy happen at either end: the unskilled labour pool, who's wages would be 'barely survival wages' (i.e. workers in favelas, no proper sanitation, no healthcare), and on the other end concentration of corporate and private wealth that gives immense advantage.
The former needs something like 'minimum wage' (we can do better than that) and the later needs smarter taxation, getting rid of loopholes, offshore, unfair lobbying etc..
The five following are the principal circumstances which, so far as I have been able to observe, make up for a small pecuniary gain in some employments, and counterbalance a great one in others: first, the agreeableness or disagreeableness of the employments themselves; secondly, the easiness and cheapness, or the difficulty and expense of learning them; thirdly, the constancy or inconstancy of employment in them; fourthly, the small or great trust which must be reposed in those who exercise them; and, fifthly, the probability or improbability of success in them.
-- Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations, Book 1, Chapter 10
https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/...
The answer here is twofold: First because the state exists and will enforce property rights, protecting scabbing and preventing sabotage with force, if not escalating to outright war as they did in the early 1900s (continuing into the 70s in Kentucky.) Second, a capitalist can live just fine with a closed factory whereas workers will not be able to survive without work.
In any case, I encourage people to actually read Adam Smith for themselves. You can not only refine the mental model you have of economics but also learn that the popular Adam Smith that is caricatured is not the one who wrote Wealth of Nations. Did you know, for example, that the "invisible hand" is mentioned only once in all of WON? On the other hand, actual market mechanics and state policy (some of which was later discovered to be wrong) were discussed in great detail. You can find a lot of fun quotes too:
"As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce." [1]
1. From "CHAPTER VI. OF THE COMPONENT PART OF THE PRICE OF COMMODITIES." https://www.gutenberg.org/files/3300/3300-0.txt
He is referring specifically to land, which he rightly viewed apart from all other, more natural forms of private property.
In fact the only tax that I saw him advocate for raising is ground rents, which is exactly what geolibertarians advocate. Land taxes are also the only tax that economists believe cause zero economic inefficiency.
"The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state."
Income from overseas investments wouldn't be under the protection of the state where they reside, and appropriately, wouldn't be taxed by the state in which they reside.
On the subject of taxation, almost all of his admonishments were to tax less and less intrusively:
To subject every private family to the odious visits and examination of the tax-gatherers ... would be altogether inconsistent with liberty.
and
“[Governments are] ...without exception, the greatest spendthrifts in the society.”
and
“The agents of [government] regard the wealth of their master as inexhaustible; are careless at what price they buy … at what price they sell.”
and
“Those unproductive hands [in the government] … may consume so great a share … that all the frugality and good conduct of individuals may not be able to compensate … this violent and forced encroachment [of taxation].”
and
Now many such things may be done without intitling the people to rise in arms. A gross, flagrant, and palpable abuse no doubt will do it, as if they should be required to pay a tax equal to half or third of their substance.
and
Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.
and
There is no art which one government sooner learns of another than that of draining money from the pockets of the people.
and
“The profusion of government … [has] retarded the natural progress.”
and
The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.
His preference for ground rents:
Both ground- rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents, and the ordinary rent of land are, therefore, perhaps the species of revenue which can best bear to have a peculiar tax imposed upon them.
Him supporting revenue taxation would totally conflict with a sentiment like this which he expressed:
To subject every private family to the odious visits and examination of the tax-gatherers ... would be altogether inconsistent with liberty.
The visits are now replaced with the onerous requirement to keep records of all private financial transactions one engages in all year, and produce them on demand if the taxing authority should request them, and to detail to the taxing authority all the income one has earned from any private trade, even barter, and hand over a sizeable share of the value received in the totality of that trade.
An income tax did not exist in Smith's time, and had it been proposed in that period, it's extremely unlikely he would have favored it given 1. his admonishments against expansive government that intrudes upon the private lives of citizens, and 2. the need for an expansive tax enforcement apparatus, that invades the inner sanctums of the private lives of citizens, to enforce an income tax.
"Scab" is the union slur for poor unemployed people.
"Scabbing" is a pejorative term, that has been used to dehumanize replacement workers and incite assault and murder against them.
wtf are you talking about left-wing, there's no dialectical materialism or class struggle.
What a bizarre comment. That is literally the exact opposite of how it works - absent collective action, a larger pool of workers weakens the bargaining position, it doesn't strengthen it.
'Labour Day' which just happened, is a day to celebrate the rights achieved by Labour in this regard.
But even with proper Unions, in most situations, they're not going to be able to compel salaries higher than owners and management - the underlying economic reality of the fact that there are 10 workers to replace every Union worker is a powerful pressure on the fairly artificial nature of Unions.
From even the most remotely classically liberal perspective, the idea that 'A factory hires 10 employees, and now those sole 10 employees get to determine the operating terms of the business' is a pretty unnatural construct.
Unions have waned at least in part because of much better worker protections and minimum wage, which seems to have solved a great deal of the issues, but of course tension remains and I think the way we do minimum wage (so as to put a floor on the lack of negotiating power of unskilled individuals) is probably not nearly as intelligent as it could be.
It’s also, obviously easy to divide and conquer employees. Uber demonstrated that you can pay workers less then they are spending!
This is obviously not true as a general statement. A business which has to pay the mortgage on its factory can't just shut down and make nothing or the bank will foreclose.
Meanwhile if Uber doesn't pay as much as you're willing to accept, you can go work somewhere else, or take a loan and go to college. It's extremely rare for one company to be anyone's only alternative to starvation.
I believe here we might have the case of that old maxim "If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem.
> Meanwhile if Uber doesn't pay as much as you're willing to accept, you can go work somewhere else, or take a loan and go to college. It's extremely rare for one company to be anyone's only alternative to starvation.
The discussion revolves precisely around the fact companies collude, bringing the wages down to absolute minimal levels, i.e. it's not about Uber or any other single company - the problem is systemic.
A car isn’t just gas - it’s maintenance, depreciation, etc. For normal use, operating a car costs about $0.60/mile. Livery use like an Uber is a little higher due to maintenance needs.
When you work out what a driver actually gets paid, in many scenarios the driver is making very little, and in some they are losing money. Driving Uber is really monetizing automotive depreciation, while working for free. It’s a big accounting grift designed to run until the local competitors are out of business.
This is when amortizing the full cost of the car. Depreciation due to age, insurance and the whole lot. But these are sunk costs for someone who already needs a car for unrelated reasons. Any of those people are rational to consider only the incremental cost from the additional miles and fuel.
And that number is also assuming the typical car owned by people in general, not the typical car used for ride sharing. The most common "car" in the US is a Ford F-150. The most common Uber is a Toyota Prius. Because people aren't as dumb as they're made out to be.
Depreciation is the biggest component, and that is driven by mileage. My recollection is that the GAO/IRS rates are based on midsize sedans.
Three years ago, the average Uber driver made about $0.80/mile according to survey data. You can argue that the costs vary from $0.50/mile and $0.70/mile, but either way the driver is pretty fucked and is selling their asset’s value as well as time. Rental car companies price dynamically based on fleet depreciation in near real-time… there’s a reason why Uber didn’t buy 10,000 Priuses.
The car is a sunk cost, but the mileage and wear and tear erodes the value of the asset.
They can be saddled with debt on a depreciating vehicle, meaning that although their overall income may be negative when accounting for the debt, the alternative is even worse.
Maybe folks need to volunteer in shelters more often. Understand how much closer they are to poverty than they are to Bezos.
For example: "Wages are not the simple product of supply and demand in Smith; bargaining asymmetries are key." -- "key"? How is this key? If bargaining asymmetries are the key, why not low skill workers get paid $1million and the management get paid $1k instead, since workers are out numbers and they can easily win the bargaining fight? Of course, supply and demand is the key, and bargaining is simply a side factor.
The whole article does not have a clear methodology, totally driven by the author's perdetemined conclusion, just picking arguments from here and there. Seem useless to me.
BTW, I always think left-wing academics should just go out, open businesses, pay workers twice their market wage. And boom, a big win-win! You win your ideology fight and workers get better pay.