> It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages."
Pay close attention and note that Smith is talking about individuals-as- butchers, brewers, and bakers.
Not multinational conglomerate monopolist meat-packing, alcohol, and shelf-stable baked goods manufacturers.
As individuals, Smith's artisans would have faced ample competition both within a community and from others nearby if they attempted to strong-arm customers or degrade products (though there was plenty of both going on, as attested by food-quality and food-purity laws dating back to Hammurabi). They lacked any appreciable ability to lock in more than a very localised monopoly absent armed force or coercion, though those too were abundantly evident (see: America's Colonies and the British East India Company, both of which Smith also writes of).
Yeah, Smith's little chestnut requires heavy interpretation and contextualization. Definitely not the 'anytime any person or organization sells anything in self-interest it is good for everyone because markets' definition which it often gets dragged out for.
Weren't there trade unions back then, preventing a certain amount of competition? I'm not sure those days were some golden age of healthy market competition.
No. Certainly not general unions amongst unskilled labourers.
As Smith himself notes:
What are the common wages of labor, depends everywhere upon the contract usually made between those two parties [(masters and workmen)], whose interests are by no means the same. The workmen desire to get as much, the masters to give as little as possible. ... The masters, being fewer in number, can combine much more easily; and the law, besides, authorizes, 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.
The proto-labour organisations were probably the guilds, which existed in Smith's time, and in fact he helped find alternative employment for one guy who had been blackisted by the local Hammermen's Guild (the blacksmith's union, as it were), goes by the name of James Watt. Had him set up at the University of Edinburgh, and worked on one of the fire engines there. What we'd now call a steam engine.
(And for all that, Smith utterly failed to realise what the import of that particular invention on the economic development of Britain during the 19th century would be....)
The first general unions in the UK date to the 1820s and 1830s, roughly three to four decades after Smith, who died in 1790:
> My parent was somehow dedicating more empathy towards single-man operations than large companies
They were not. They were pointing out that a single-man operation has far less power to dictate market conditions than a 50,000 person conglomerate. Even when they are the only butcher in a whole village, they have nowhere near the price-setting power that a company does (even one that doesn't have the same level of monopoly).
Much of what Smith argues about is power, beginning with among the shortest, pithiest, and clearest sentences in the entire book:
"Wealth, as Mr Hobbes says, is power."
Then there is his very long diatribe against joint stock (privately-held, shareholder-based) corporations, which Smith argues should be limited largely to the financial sector (banks and insurance). Itself an interesting distinction and one that's had me think about those areas of economic activity, and why the so-called "FIRE" sector (finance, insurance, and real estate) are linked together.
One interpretation I've arrived at is that all concern the evaluation of future value over a given portfolio: of loans, of insurance policies, and of mortgages (themselves a class of loans). These all ... have some peculiar and similar behavioural characteristics, risks, and moral and morale hazards associated with them. They also tend toward monopolistic in both scale and practices. Among the notable exceptions to anti-trust regulations against conspiring on prices is the exception for insurance underwriting boards, comprised of multiple companies, who share risk, cost, and pricing data to set premiums.
Just to clarify: you mean all those people who were never found personally liable for anything they did on behalf of their corporate employer? The ones who are either already re-employed (most likely at another corporate-type employer, where they're shielded from personal liability), or probably looking for employment at such an employer?
You mean those people? Because I just want to make sure we know who we're referring to here.
Corporate liability doctrine has two major components.
The first is limited liability to stockholders, whose losses are capped at the value of their investment and not for their full personal assets. That is, if you purchase stock in a company, neither creditors nor plaintiffs may seek compensation above and beyond what's already been invested. This is what is meant in the term "limited liability company", though the protection includes firms not described by that specific term. The protection does not apply to sole proprieterships and simple partnerships, so far as I understand (US law).
The second is the so-called "corporate veil", which further protects specific officers and board members of a firm from personal liability for the firm's actions in many cases. A recent notable (and notorious) example of this has been of Perdue Pharma and the Sackler Family, in which the officers (of Perdue) and the shareholders (the Sacklers) escaped most civil and any criminal liability for the deaths of 500,000 slewn for profits via the company's unwarranted and addictive opioid products.
There is no corporate protection, large or small, for shifts in overall economic conditions, particularly as affects individual workers (as opposed to officers, board members, creditors, and/or investors). Though of course, large corporate interests do have much greater influence over both government policy and legislation, and often secure bailouts ... which seem rarely to reach individual front-line workers.
ProPublica has a list compiled in 2008 extending from the Penn Central Railroad (1970, $3.2 billion) to the Troubled Asset Relief Program (2008, $700 billion), Citigroup (2008, $280 billion), and Bank of America (2009, $142 billion).
I'd strongly recommend you respond to what's actually been said by those you're responding to, and based on factual and relevant information. It makes for a more interesting discussion, even where, or rather, especially where, there is disagreement.
With all due respect to Graeber, and acknowledgement of Smith's faults, far more of the apparent contradictions in Smith come from those who grossly misrepresent him, whilst at the same time strongly discouraging others from reading him directly.
I'd compiled a set of quotes from Karl Marx and Adam Smith a ways back and encouraged people to tell which came from whom:
The "butcher, brewer, and baker" quote is most often seen in a form that ties it together with another passage hundreds of pages from it within Wealth. That construction was created in the early 20th century, more than 100 years after Smith wrote his work, by Jacob Viner, at the monopolist-defending University of Chicago. My understanding is that this was initially an exercise to show how much one could twist Smith's meaning by selectively editing his work. It's since come to be taken as a flat statement by Smith, as originally intended, when it is in fact no such thing.
In fact, the chapter in which the vastly over-exaggerated and greatly misconstrued phrase "invisible hand" occurs, begins with a discussion of restraint of trade by monopoly interests, including of the previously-mentioned butchers:
BY RESTRAINING, either by high duties, or by absolute prohibitions, the importation of such goods from foreign countries as can be produced at home, the monopoly of the home market is more or less secured to the domestic industry employed in producing them. Thus the prohibition of importing either live cattle or salt provisions from foreign countries secures to the graziers of Great Britain the monopoly of the home market for butcher's meat. The high duties upon the importation of corn, which in times of moderate plenty amount to a prohibition, give a like advantage to the growers of that commodity. The prohibition of the importation of foreign woollens is equally favorable to the woollen manufactures. The silk manufacture, though altogether employed upon foreign materials, has lately obtained the same advantage. The linen manufacture has not yet obtained it, but is making great strides toward it. Many other sorts of manufactures have, in the same manner, obtained in Great Britain, either altogether, or very nearly a monopoly against their countrymen. The variety of goods of which the importation into Great Britain is prohibited, either absolutely, or under certain circumstances, greatly exceeds what can easily be suspected by those who are not well acquainted with the laws of the customs.
Kennedy's hardly the only person to point this out. John Kenneth Galbraith made much of how Smith was misrepresented during his lifetime, and Steve Keen is amongst present-day economists doing similarly, if memory serves.
Since the post I'm responding to seems to be drawing negative attention, I'd like to make clear: I do respect Graeber, and think that his work on the origins of money in particular are far more credible than that suggested by Smith.
Smith does best where he comments on that which he can observe directly. He's weak on ancient history and what we'd now call archeology and anthropology (Graeber's own specialisation), as well as on contemporary conditions he'd not directly witnessed --- the American Colonies, again, or China, come to mind.
But in observing and commenting on actual trade, commerce, and politics of his own time and place, there's a great deal of wisdom. His commentary on prices suggests to me a number of classes of goods & services (commodities, assets, rents, wages, skilled / privileged work, public goods, capital stock) with distinct pricing tendencies, some of which behave poorly in open markets. His commentary on the components of wages is excellent (I've mentioned this numerous times over the years on HN). His commentary on the practices of privately chartered companies operating as empires and armies abroad are telling (and little commented on by the usual vociferous "champions" of Smith).
It's useful to keep in mind that all authors and authorities have their strengths and weaknesses. The one shouldn't blind us to the other, either way.
(Graeber also has his ... excessive enthusiasms, I'll put it. But he's also intelligent, a keen observer, and doesn't fall slave to orthodoxies and convention.)
> It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages."
— Adam Smith