Adam Smith is a much misunderstood philosopher. His great work, The Wealth of Nations, describes the capitalist system as it existed in his day. It does not necessarily follow that he approved of it.
He was much in favor of a division of labor as producing a greater quantity of goods than a single person could create doing the whole work himself. He was opposed to government created monopolies. He was a champion of "free trade" as the absence of monopolies, not as the absence of regulation.
He was notably critical of capitalists. "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the publick, or in some contrivance to raise prices."
He firmly espoused the labor theory of value.
"Labour was the first price, the original purchase-money that was paid for all things. It was not by gold or by silver, but by labour, that all wealth of the world was originally purchased."
"Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniencies, and amusements of human life."
"But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated."
"Labour alone, therefore, never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. It is their real price; money is their nominal price only."
"In this popular sense, therefore, labour, like commodities, may be said to have a real and a nominal price. Its real price may be said to consist in the quantity of the necessaries and conveniencies of life which are given for it; its nominal price, in the quantity of money. The labourer is rich or poor, is well or ill rewarded, in proportion to the real, not to the nominal price of his labour."
"Labour, therefore, it appears evidently, is the only universal, as well as the only accurate, measure of value, or the only standard by which we can compare the values of different commodities, at all times, and at all places. We cannot estimate, it is allowed, the real value of different commodities from century to century by the quantities of silver which were given for them. We cannot estimate it from year to year by the quantities of corn. By the quantities of labour, we can, with the greatest accuracy, estimate it, both from century to century, and from year to year."
He adds to the labor value of goods a second part of the price, the profit to be taken by the provider of capital, in stock or in money, by those who are fortunate enough to have a surplus of either.
"As soon as stock has accumulated in the hands of particular persons, some of them will naturally employ it in setting to work industrious people, whom they will supply with materials and subsistence, in order to make a profit by the sale of their work, or by what their labour adds to the value of the materials."
"What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little, as possible. The former are disposed to combine in order to raise, the latter in order to lower, the wages of labour."
Then there is the third part of the price, the rents to be charged for the land occupied by the enterprise.
"As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce. The wood of the forest, the grass of the field, and all the natural fruits of the earth, which, when land was in common, cost the labourer only the trouble of gathering them, come, even to him, to have an additional price fixed upon them. He must then pay for the licence to gather them, and must give up to the landlord a portion of what his labour either collects or produces. This portion, or, what comes to the same thing, the price of this portion, constitutes the rent of land, and in the price of the greater part of commodities, makes a third component part."
Finally, we have the artificial inflation of prices by way of monopolies or restrictive regulations. "The price of monopoly is upon every occasion the highest which can be got. The natural price, or the price of free competition, on the contrary, is the lowest which can be taken, not upon every occasion indeed, but for any considerable time together. The one is upon every occasion the highest which can be squeezed out of the buyers, or which it is supposed they will consent to give; the other is the lowest which the sellers can commonly afford to take, and at the same time continue their business."
Far from being a friend to the cutthroat capitalists of his day (and ours) Smith was a stern critic. Reading "The Wealth of Nations" is essential to really understanding economic philosophy. (Except for the chapters on seigniorage which are tedious and irrelevant.) "The Wealth of Nations" is available from Amazon for 99 cents.