>>>>Adam Smith, in the "Wealth of Nations" published in 1776, asks one great question:
why are some nations wealthy? And writing in 1776 from Scotland he was well-positioned
to observe and to ask this question, because he could see the first fruits of the Industrial
Revolution which had started in Great Britain. And Smith realizes that Great Britain and
its society are wealthier than other parts of the world, and so Smith asks what is it
that causes this? Why are some nations wealthy? And in the great first book of the "Wealth
of Nations", Smith provides the answer. And in fact, it is the very first section of book
one, the division of labor. Smith says if we try and observe why it is that some societies
are wealthier than others, then we will realize that it is because of the division of labor.
Smith says, take an example, take a pin maker, which is a kind of piece that went on a coat.
He says in a traditional society say a farmer who wanted to have a coat would make these
pins for himself, and maybe he could make ten pins a day. Well, why could he only make
ten pins a day? Because he's one person working at it, and he has to do all the various steps
that are necessary to produce this article. Smith says if we observe what's happening
around us, we can see that the production of the pin today relies upon an extreme division
of labor. Smith says in our society, instead of having an individual who wants to produce
a pin perform each of the individual steps himself and make ten pins a day, we have a
system where we have divided up the various steps between laborers-- the division of labor.
So that there are eighteen different steps in this production process, and each one has
someone who specializes in that particular aspect of the production process. And we have
factories where these pins are made, and they make thousands a day. And so the equivalent,
if you divided out, is something like 4,000 pins per person. Where as an individual working
on himself say, can make ten, in this factory system because the labor is divided it allows
specialization, and it allows far greater productivity. And so the amount of product
per person is vastly higher in this system because of the division of labor. Smith says,
look at all the things that the division of labor allows. It allows specialization, so
you get very, very good at your individual step. He says it allows you to save time,
because you don't have to walk around with all of your things, you can stay in place
and just do that one task. He says, it allows expertise and that allows technological innovation,
because if all you do all day is one step in that production process, then your mind
will be thinking how can we make this more efficient? And Smith says I know of a case
of a 10-year-old boy who was involved in a certain kind of firing machine, and he came
up with an invention that saved huge amounts of labor. All of this is the result of the
division of labor and he says if you look around, the universal opulence that we see
in our society is the result of the division of labor. And Smith uses that exact phrase:
universal opulence. He says, if we observe our society we will see a general plenty,
a general plenty that diffuses itself even to the lowest ranks of society. Those are
profoundly meaningful words in the first book of the "Wealth of Nations", because Smith
says look, the division of labor is the cause of this wealth. It allows specialization and
innovation and time savings, and what it does is it allows a general plenty. It allows a
universal opulence that spreads itself even to the lowest ranks of society. So Smith says
that this economic growth is unleashed by the process of industrialization, by the division
of labor and the results, the fruits of this increase in productivity are diffused, they
are shared. It's a very optimistic picture of industrialization. It says everyone is
richer, that's what universal opulence means. It's good across the board for everybody,
the general plenty that diffuses itself. It's general it's not that some people profit and
other people suffer. It's a general plenty, and so Smith's vision in the "Wealth of Nations"
is that this process of transformation is on balance, highly beneficial across the society,
that it has broad distributive effects that are positive. And so this is the vision of
the "Wealth of Nations", that industrialization is a positive thing. That it unleashes productivity
and does so in a way that benefits the common person. And there's something else important
to notice about the assumptions that Smith makes in book on of the "Wealth of Nations",
about the assumptions that he makes about the nature of the human person and about the
relationship between the individual and society. Smith says that this general opulence that
the division of labor creates isn't a result of some grand design. There's no central design,
there's no overall scheme that someone has intentionally built to diffuse this opulence.
He says this comes about he says in a later passage because of an invisible hand, that
there isn't an intentional design but somehow there's an order that emerges spontaneously
out of human interactions and out of human nature. Smith says very famously that the
wealth that is created by the division of labor comes out of the human beings natural
disposition to truck, barter, and exchange. For Smith there's something natural about
the human being as an economic being. Now this is very different, isn't it, from Aristotle,
who imagines the individual as a political creature, who can only flourish in the context
of their polis their political community through the exercise of their natural faculties of
speech and reason. It's different too from the Roman vision, which draws from the Aristotelian
idea of the citizen but also places greater emphasis on humans as virtuous producers as
agriculturalists. Smith's is even more different than that. For Smith human beings are naturally
economic creatures. We have an innate tendency to truck, barter, and exchange and it's this
innate tendency, our self-interest to trade on our own behalf that causes the kinds of
exchange that we see in this society. And the division of labor, he says, is limited
by the extent of the market. And so the direct corollary of the division of labor is the
rise of the market, a place where humans exchange, where they trade, where they trade commodities,
where they trade labor, and so for Smith the division of labor is part and parcel of the
rise of markets and this is human destiny. This is where the human being naturally belongs,
the kind of creature we are naturally disposed to truck, barter, and exchange and so for
Smith there's spontaneous social order that emerges out of the individuals acting in their
own self-interest: trucking, bartering, and exchanging, trading, that causes this new
kind of society-- this industrializing society, this wealthy society to emerge.