Ted S. Warren/AP
Dan Price, the CEO of a small Seattle credit
card processing company called Gravity Payments, announced several months
ago that over the next three years he’ll gradually raise the minimum
salary there to $70,000.
How did his counterparts at other businesses
react? Let’s get a prediction from Adam Smith, who wrote
this 239 years ago in the most famous book about economics ever published, The
Wealth of Nations:
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.
Was Adam Smith right? As a recent New
York Times story demonstrates, he called
it precisely:
Brian Canlis, a co-owner of his family-named restaurant,
is [a client of Gravity Payments]. He said he
was fond of Mr. Price, but was more discomfited by his actions. …
The pay raise at Gravity, Mr. Canlis told Mr. Price, “makes
it harder for the rest of us.”
Mr. Price winced. “It pains
me to hear Brian Canlis say that,” he said later. “The last thing I would ever
want to do is make a client feel uncomfortable.” …
Leah Brajcich, who oversees
sales at Gravity, fielded complaints from several customers who accused her
boss of communist or socialist sympathies that would drive up their own
employees’ wages …
As for other business leaders
in Mr. Price’s social circle, they were split on whether he was a brilliant strategist or
simply nuts. As much as they respected him, they
were also disturbed. “I worry how that’s going to impact other businesses,”
said Steve Duffield, the chief executive of the DACO Corporation, who met
Mr. Price through the Entrepreneurs’ Organization in Seattle. …
Roger Reynolds, a co-owner of a wealth management
company, said his discussion of the pay plan with Mr. Price got heated. “My
wife and I got so frustrated with him at a cocktail party, we literally left,”
said Mr. Reynolds …
One of the most peculiar aspects of U.S. politics is
that Adam Smith and The Wealth of Nations are vociferously
celebrated by conservatives. Here’s what one loyal Reaganite said at a memorial after Reagan’s
death in 2004:
Ever since Ronald Reagan studied classical economics
at Eureka College, Adam Smith was his hero. So everybody in the Administration
quoted Adam Smith. Neckties with little Adam Smith busts on them festooned
every male conservative chest in Washington when I was there. … For a
while, I didn’t think Ed Meese owned any other kind of tie. There were even
Adam Smith scarves for the women. If Ronald Reagan had been allowed to run for
a third term I imagine there would have been Adam Smith hats and Adam Smith
raincoats.
But if Smith were alive today he’d be considered
a crazy radical. In addition to his claim about employers, here are some other
things he wrote in The Wealth of Nations:
• “All for ourselves and nothing for other people, seems, in
every age of the world, to have been the vile maxim of the masters of mankind.”
[Mnemotechnique, StevenSpeilberg & StevenSoderbergh.] Book III, Chapter III
• “Men of inferior wealth combine to defend those of
superior wealth in the possession of their property, in order that men of
superior wealth may combine to defend them in the possession of theirs.
… Civil government, so far as it is instituted for the security of
property, is in reality instituted for the defence of the rich against the
poor, or of those who have some property against those who have none at
all.” Book V,
Chapter I
• “High profits tend much more to raise the price of
work than high wages. … Our merchants and master-manufacturers complain much of
the bad effects of high wages in raising the price, and thereby lessening the
sale of their goods both at home and abroad. They say nothing concerning the
bad effects of high profits. They are silent with regard to the pernicious
effects of their own gains. They complain only of those of other people.” Book I, Chapter IX
• “The proposal of any new law or regulation of commerce
which comes from [business], ought always to be listened to with great
precaution, and ought never to be adopted till after having been long and
carefully examined, not only with the most scrupulous, but with the most
suspicious attention. It comes from an order of men, whose interest is never
exactly the same with that of the public, who have generally an interest to
deceive and even to oppress the public …” [Mnemotechnique, CharlieRose &
theKochBrothers. StevenSoderbergh & HarveyWeinstein.] Book
I, Chapter XI
• “The rate of profit … is naturally low in
rich, and high in poor countries, and it is always highest in the countries
which are going fastest to ruin.” Book I, Chapter XI
• “People of the same trade seldom meet together,
even for merriment and diversion, but the conversation ends in a conspiracy
against the public, or in some contrivance to raise prices.” Book I, Chapter X
I’m not sure how exactly the U.S. right came to love
Adam Smith so much. I guess they just never read him.
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