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Money Makes the World Go Around
Smith perspective
Barbara Garson investigates deeper into the aftermath of the closure of the Sunbeam plant located in Portland, Tennessee. She discovers that many former plant employees are struggling with unemployment and living costs, such as the much needed blood thinners of Cleta Ison’s husband and Mitzi’s inability to take her son, who had a hot piece of led pierce his eye to the doctor. The local factory Cleta is employed at through a temp agency recently reduced her workdays from four to three days a week. Cleta, however, still remains at the factory believing she would become a permanent worker after six months and receive health insurance. Cleta had also heard recently of another factory that was definitely hiring permanent workers, but does not immediately seek out the job. Adam Smith’s belief that labor’s wages can be regulated by an “invisible hand” through competition and self-interest without government regulation cannot be applied to the economy today.
Smith believed that while competition would regulate self-interest by balancing out the economy towards an equilibrium. If someone offers a product at a more competitive price than a competitor, he will attract business away from his competitor who may overcharge for the product and thus competition checks self-interest. Smith also applied this belief to labor’s wages. A worker will naturally be attracted to a better paying job in the same field, but then the increased labor supply will decrease the pay scale of that job. Therefore, the reverse must be true also, as Smith believed. When a wages or profits are too low, workers will leave in search of better paying jobs.
In Cleta’s case, however, this is not true. She had been recently fired due to the merger between Chase and Chemical and her family up until then had “relied on her insurance from Sunbeam.” Cleta’s husband recently had a heart attack and needed to take blood thinners, but...