As you know, Adam Smith was a moral philosopher. You might want to ponder this quote from the Wealth of Nations:
“No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed, and lodged.”I think that this really is the piece that modern objectivists (Randians) miss. Even in Atlas Shrugged, the hyper-capitalist society was clearly defined as being better for the average worker. In fact, the story of the company becoming socialist suggested that socialism under-mined values like generosity.
The notion that an equitable society is a better society is very important and yet seems to be increasingly lost in the rhetoric. When we have a high unemployment rate, it cannot merely be laziness that prevents work and it seems that we are having trouble with the most expensive part of the formulation (lodged --it is housing that is the big expense these days).
Now before the argument that this inequality was necessary for progress comes into being, remember that Adam Smith celebrated a nation of shopkeepers, not of corporations.