Note 124 — Chapter VI · The Era of Handicraft122

A classic passage of Adam Smith shows this handicraft conception of the mechanics of industry: “The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniencies of life which it annually consumes....” “But this proportion [of the produce to the consumers] must in every nation be regulated by two different circumstances; first, by the skill, dexterity, and judgment with which its labour is generally applied; and, secondly, by the proportion between the number of those who are employed in useful labour, and that of those who are not so employed.”—Wealth of Nations, Introduction, p. 1.

Adam Smith consistently speaks of industry in terms of manual workmanship, as the traditions and the continued habitual outlook of that generation unavoidably led him to do; and the sweeping way in which his interpretation of economic life finds acceptance with his contemporaries shows that in so doing he is speaking in full consonance with the prevailing conceptions of his time. He writes during the opening passages of the machine era, but he speaks in terms of the past industrial era, from which his outlook on the economic situation and his conception of normal economic relations had been derived. It may be added that his conception of natural liberty in economic matters is similarly derived from the traditional situation, whose discipline during the later phases of the handicraft era inculcated freedom of ownership as applied to the workman’s product and freedom of bargain and sale as touches the traffic of the typical petty trader. And so thoroughly had this manner of conceiving industry and the economic situation been worked into the texture of men’s thinking, that the same line of interpretation continues to satisfy economic theory for a hundred years after Adam Smith had formulated this canon of economic doctrine, and after the situation to which it would apply had been put out by the machine industry and large business management.