Division of Labour
Adam Smith promotes the notion of division of labor which is dividing production processes into different stages. He believes that division of labor can make people specialize in one type of work that will increase overall productivity. This is clearly shown in his famous saying, “The division of labour was limited by the extent of the market” (Smith, 2002, 35). To support his argument, Smith provides an example of a pin factory where the division of labor enabled the factory to be productive. He writes that “But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business. They certainly could not each of them have made twenty, perhaps not one pin in a day” (19). By this, Smith shows that the major benefit of division of labor is in its ability to increase one’s specialization, which benefits the whole work.
Private Property and Justice
The emergence of private property obligated government to control the actions of owners. Smith believes that for the nation’s prosperity government should have been limited yet be able to enforce legal rights, such as property rights. He writes, “But in a country where the government is in a great measure arbitrary, where it is usual for the magistrate to intermeddle even in the management of the private property of individuals, and to send them, perhaps, a lettre de cachet if they do not manage it according to his liking. It is much easier for him to give some protection to the slave; And common humanity naturally disposes him to do so” (776). As long as the government controls the relations between property owners and workers, there should not be any problems.
Competition and Combination
For Smith, competition forces producers to make the best good at the most reasonable price. He proposed that people competing for the revenue will increase the quality of their work, thus benefiting society. So he writes, “By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention” (593). Here, “invisible hand” leads people to use their most recourses for the greatest value.
Opulence and Growth
The distinctions between rich and poor countries are that rich countries are well-governed, know the value of the exchange of goods, have a division of labor, and effectively use their natural resources. Individual citizens of richer countries are more quality-driven, meaning that they are concerned about providing goods and services. He notes that “rich and great farmers are, in every country, the principal improvers” (521), suggesting that people in wealthy countries seek ways to improvements of their work. He claims that opulence is necessary to keep people motivated with their production.
Rational Self-Interest and Interdependence
Smith’s concept of the invisible hand suggests that accumulated self-interested actions of people can increase the welfare of the nation. The rational self-interest of individuals does not intend to provide public goods, yet individuals interact with each other in a manner that contributes to a greater social and economic good. For example, a man who is driven by self-interest employs a worker to work for him. By this, the man provides a workplace for a worker as well as contributes to the division of labor. To show this, he says, “By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote” (594). Such interactions between individuals cause interdependence between them and civil society.
Human freedom, for Smith, is the freedom to earn a living. Government should ensure that citizens have the right to work and have reasonable wages. It also should provide national security and public goods along with the administration of justice. For example, with regard to defense, he writes, “The most important part of the expense of government, indeed, that of defence and protection, has constantly fallen upon the mother country” (757). By fulfilling these duties, governments provide freedom for individuals to make a profit, thus driving the economy.
Smith believed that education should be provided for all as it will offset the harmful effects of the division of labor. He claims that “The institutions for the education of the youth may, in the same manner, furnish a revenue sufficient for defraying their own expense” (1013). By providing education for youth, individuals will have the basic knowledge to do their work and may find their best skills. Smith promotes the free market, and it can be said that he worries about ownership as he desires wealth for all of society. He writes, “This great increase of the quantity of work which, in consequence of the division of labour, the same number of people are capable of performing, is owing to three different circumstances; first, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many.” This shows that division of labor is beneficial as it provides dexterity, saves time, and facilitates innovations.
Smith, Adam. The Wealth of Nations. Oxford, England: Bibliomania.com Ltd, 2002.