The Pin Factory and Social Justice
In his seminal book, The Wealth of Nations, written in 1776, Enlightenment philosopher Adam Smith presented the example of the complex supply chain required to produce a simple straight pin. Smith asserted that one man working alone could barely produce one little pin a day, whereas a number of men dividing the labor between them could produce up to 48,000 pins a day.
‘One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head’
In this division of labor, the man who draws out the wire cares little to the final usage of the wire. It could have multiple applications. Each man performs a minute task that could be applied to various products. And they don’t care what products the wire goes into as long as they receive their pay. But this example of the division of labor greatly minimizes the vast assortment of labor and materials that go into the production of that simple pin. The 8-10 men at the pin factory would have nothing to do if the teamster hauling the metal from the smelter didn’t arrive. And there were the smiths at the smelter converting the ore into metal, and the young lads stoking the fires to melt the ore. And the teamster hauling the ore from the mine to the smelter. And don’t forget the miners digging out the ore from the mine. And the operators of the ore carriers bringing the ore from deep underground to the surface. Already we are talking about hundreds if not thousands of people that played an essential role in the production of that simple pin.
And don’t forget the farmers that fed the miners, and the ore carrier operators, and the teamsters, and the smiths and our pin factory workers as well. There were innkeepers that put up the teamsters on their journeys and stable boys to take care of their horses and oxen. And there were farmers that grew wheat for bread, and farmers that raised cattle for meat and farmers that grew barley for the brewer.
And who managed this immensely complicated supply chain? Why nobody. Of course, the smelter would have a manager that arranged the purchase of the ore and who contracted the sale of metal to nearby factories. Plus, all the salespeople, accountants and clerks needed to track expenses and to create invoices and all the other minutia needed to run a small business. But these managers only saw a fraction of the supply chain. They didn’t worry about the farmers’ supplies of seed and fertilizer. They didn’t worry about imports of cloth for the textile factories to clothe the miners, teamsters and pin factory workers let alone his own employees.
So how does this immensely complicated supply chain function? This was Smith’s great discovery. Prices. If there weren’t enough teamsters to haul the ore to the smelter, the smelter operators would increase the price they were willing to pay for teamsters because they needed the ore. A guy who wanted to improve his lot might say, “Hey, at that price I could make a tidy profit hauling ore.” So he would. And, almost like magic the shortage of the teamsters would be solved. It was almost like (how to say it?) as if an invisible hand was guiding the market.
Of course, this being a human enterprise, it is not without problems, such as child labor, pollution and price fixing. But we have been working to solve those problems and many others although more yet needs to be done. Government does have a role to play. But the proper role of government is to build trust in the free market system and make sure that prices are allowed to adjust without manipulation.
The reason that this free market system has been so spectacularly successful is that no one is in charge. Each market participant makes his or her own decisions based on what is best for their own self-interest. But their ability to serve their own self-interest is limited by market rules that guarantee that a person’s pursuit of his self-interest does not cheat, abuse or take unfair advantage of other market participants. And because market participants are focused on their self-interest they do not pay much attention to things that do not directly impact their self-interest.
Self-interest has been given a bad rap. Self-interest is the attention one pays to one’s own affairs. You work so that you can eat and feed your family. You own a business so that you can increase your wealth and provide opportunities to your offspring. If you don’t pay attention to these details of daily life, who will? Your benefactor, your sovereign, your government? The opposite of self-interest is not the public interest, it is dependency. And Adam Smith showed that it was the self-interest of the butcher, baker and brewer that provided you with these daily necessities.
And while the baker was not very good at butchering or brewing, he was very good at baking. He could focus on his specialty, and if he got thirsty in the afternoon after a day of baking, he would visit the nearby brewer to enjoy a pint of ale. He was also not very good at succoring the poor or healing the sick, but he could donate to his church or civic group that was better at delivering those services. The division of labor allowed him to focus on what he was good at and let others focus on what they were good at. Without the division of labor, he might as well be living medieval times or in a hut on the edge of the wilderness.
American companies, entrepreneurs and individual working folk are being beset by snooty social justice warriors who think they have a right to tell them what to do. Companies are now being judged on their environmental, social and governance (ESG) scores that require companies to achieve certain arbitrarily set goals as established by the social justice warriors. Wealthy hedge fund managers (such as Blackrock’s Larry Fink who gained his great wealth from the very unprogressive carried interest tax loophole) are using the trillions of dollars under their management to force companies to adhere to their social justice goals.
These goals are not economic goals, but ideological goals based on Marxist, woke or progressive concepts of justice. The cost of their implementation and how this will impact the prices of goods and services is irrelevant (a fact of which you will be reminded every time you visit the gas station). Companies that have spent decades trying to perfect the production and marketing of widgets and thingumajigs are now being asked to spend time and effort on matters where they have little expertise, environmental scoring not only for their company but also their suppliers, hiring diversity, equity and inclusion administrators for their HR departments and conducting seminars on white privilege. Not only do these social justice demands take up a lot of time and energy without adding anything to the bottom line, this woke ideology is being applied across the board. There is no thought diversity allowed within these “diversity, equity and inclusion” efforts.
Self-interest (or as Alexis de Tocqueville phrased it self-interest rightly understood) is an essential element to free market economics and free market economics is an essential component to civil liberty. If you are not free to make the economic decisions necessary for you and your family, you are not really free. The progressive woke ideology seeks to impose an authority over economic decisions (supposedly in the public interest) that take precedence over your personal self-interests and economic decisions. Currently, this ideology is being imposed on companies through ESG scoring and through DEI and anti-racism programs that place these social justice goals above the core objectives of the companies, impairing their ability to achieve their core goals of delivering quality goods and services at market prices while providing an adequate return on investment for owners. These woke programs have already permeated many other American institutions including universities, law schools and medical associations.
These social justice goals, based on an arbitrarily determined concept of the public interest as envisioned by progressive elitists, will not just affect the companies you work for, or the products they make, or the institutions you rely on such as the courts and schools. They will affect you as well. You will comply or be fired, blackballed, cancelled or otherwise punished for thinking independently.
The purpose of inserting ESG and DEI programs and goals into US corporations is not intended to be complementary to our free market economic system, nor is it intended to smooth out the rough edges of excessive capitalism. It is intended to terminate our free market system and replace it with a Marxist inspired socialist system that replaces our millions of free market economic participants with a powerful group of progressive elitists. Some corporations are resisting this push. Netflix (of all people) recently told their employees to leave their woke politics at home or find other employment. People are just beginning to realize the true implications of this woke ideology. There is much more that needs to be done.