Monday, September 01, 2008

Adam Smith and the Importance of the Liberating Force of the Division of Labour

Daniel Bulone writes in Tunnel Vision (‘Observations on Exchange’), 1 September: “Adam Smith: Machine-Minded Misanthrope or Merry Man of Manufacture?” HERE:

Adam Smith lived in a time when industry was on the verge of revolution. A unique relationship between workers and machines had begun, one in which the two worked together, in an almost equal partnership, to produce marketable goods. This leads one to wonder if the newfound brotherhood of man and machine affected Smith’s writings. What is more, did Smith see people as a means toward an end? It is hard to avoid thinking as much, when he speaks of workers in terms of what they can produce. In WON, he spends almost an entire page analyzing the output of pin makers, and how they can become more efficient by dividing their labor. It is true that he was a scientist, whose job was to quantify the activities of workers. However, the way he speaks of the division of labor makes it seem as though it is a way to transcend the bothersome tendencies of humanity.

Smith states in WON that, “The rapidity with which some of the operations of those manufactures are performed, exceeds what the human hand could, by those who had never seen them, be supposed capable of acquiring.” Essentially, Smith’s process involves the greater value of the whole above that of the individual. According to him, people achieve maximum efficiency when they are cogs in a vast network of industry.

In addition to thinking of people as commodities, he does not have a particularly sunny view of humanity. When speaking of a common workman in WON, Smith states that the problem of too many tasks at once “renders him almost always slothful and lazy, and incapable of any vigorous application.” He also states that most of the technological innovations of the age had been created by bored, lazy workers who wanted to make their jobs easier.

The novelty of Smith’s somewhat cynical world view is that he spins it as positive. The idle curiosity of a lazy workman turns into “a great number of machines which facilitate and abridge labour, and enable one man to do the work of many.” The mean necessities of trying to earn a living force people to “exchange a great quantity of his own goods for a great quantity” and supply his neighbors “abundantly with what they have occasion for.”

It would appear that Smith acknowledges a certain roughness with regards to humanity, and claims that it all works out for everyone’s benefit. If anything, he could be regarded as the world’s most perceptive optimist

This is rather a sad way to look at Adam Smith on the division of labour.

Smith’s approach, as a moral philosopher, was ‘to do nothing but observe everything’, and in his case he took the long-view of history to explain how and why a section of humanity in Europe had created societies somewhat advantageous to the spread of opulence compared to the stagnant 18th-century societies of India and China (the latter in the 15th century was on the verge of becoming the world’s leading economy – it had the technology - until it deliberately aborted its development on the instructions of a totalitarian emperor by cutting all links with other civilizations).

Also, compared to the earlier societies (‘the Age of Hunters’) of North and South America, the ‘meanest labourer’ in 18th-century Scotland was considerably richer in his annual consumption of goods than the ‘richest’ Indian (and African) Prince (Wealth Of Nations, I.i.11: pp 23-4). The difference in living standards (appalling as they may appear to appear to modern consumers) was down to the enhanced divisions of labour in Europe.

Instead of being relatively independent of others – each hunter going into the forest and with his own tools catching something for his family to eat, building his own shelter for the night and covering himself and his families with animal skins – the initial division of labour came from the propensity to truck, barter, and exchange one thing for another. Some people made arrow heads and flights for their arrows, others exchanged game for arrow heads, and so on. In doing so they became less independent and more dependent on their fellows and the mothers of their children.

The ‘pin factory’ by no means is the most important aspect of the division of labour in Adam Smith's view, though it is important to indicate the productivity consequences of co-operative labour, which is a singular matter of importance for the spread of opulence, especially among the lowest paid. To help to see this neglected aspect of Smith’s economic analysis, may I suggest that the rest of chapter 1 of Wealth Of Nations is read carefully (go on, read it now – its actually quite revealing of the beneficial role of the division of labour in the supply chain assembled to produce a simple commodity!):

Observe the accommodation of the most common artificer or day-labourer in a civilized and thriving country, and you will perceive that the number of people of whose industry a part, though but a small part, has been employed in procuring him this accommodation, exceeds all computation. The woollen coat, for example, which covers the day-labourer, as coarse and rough as it may appear, is the produce of the joint labour of a great multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to complete even this homely production. How many merchants and carriers, besides, must have been employed in transporting the materials from some of those workmen to others who often live in a very distant part of the country! how much commerce and navigation in particular, how many ship-builders, sailors, sail-makers, rope-makers, must have been employed in order to bring together the different drugs made use of by the dyer, which often come from the remotest corners of the world! What a variety of labour too is necessary in order to produce the tools of the meanest of those workmen! To say nothing of such complicated machines as the ship of the sailor, the mill of the fuller, or even the loom of the weaver, let us consider only what a variety of labour is requisite in order to form that very simple machine, the shears with which the shepherd clips the wool. The miner, the builder of the furnace for smelting the ore, the feller of the timber, the burner of the charcoal to be made use of in the smelting-house, the brick-maker, the brick-layer, the workmen who attend the furnace, the mill-wright, the forger, the smith, must all of them join their different arts in order to produce them. Were we to examine, in the same manner, all the different parts of his dress and household furniture, the coarse linen shirt which he wears next his skin, the shoes which cover his feet, the bed which he lies on, and all the different parts which compose it, the kitchen-grate at which he prepares his victuals, the coals which he makes use of for that purpose, dug from the bowels of the earth, and brought to him perhaps by a long sea and a long land carriage, all the other utensils of his kitchen, all the furniture of his table, the knives and forks, the earthen or pewter plates upon which he serves up and divides his victuals, the different hands employed in preparing his bread and his beer, the glass window which lets in the heat and the light, and keeps out the wind and the rain, with all the knowledge and art requisite for preparing that beautiful and happy invention, without which these northern parts of the world could scarce have afforded a very comfortable habitation, together with the tools of all the different workmen employed in producing those different conveniencies; if we examine, I say, all these things, and consider what a variety of labour is employed about each of them, we shall be sensible that without the assistance and co-operation of many thousands, the very meanest person in a civilized country could not be provided, even according to what we very falsely imagine, the easy and simple manner in which he is commonly accommodated. Compared, indeed, with the more extravagant luxury of the great, his accommodation must no doubt appear extremely simple and easy; and yet it may be true, perhaps, that the accommodation of an European prince does not always so much exceed that of an industrious and frugal peasant, as the accommodation of the latter exceeds that of many an African king, the absolute master of the lives and liberties of ten thousand naked savages” (WN I.i.11: pp 22-23).

Indeed, it is in productivity gains all along afinal product's supply chain, and the many separate supply chains connected to points on it, that is main the source of economic growth and the spread of opulence, which constantly works away under the entrepreneurial drive and technological enhancement brought about by thousands of others.

Allyn Young considered that ‘Adam Smith's famous theorem that the division of labour depends upon the extent of the market … I have always thought, is one of the most illuminating and fruitful generalisations which can be found anywhere in the whole literature of economics’. This observation is particularly authoritative today because Young’s 1928 article in The Economic Journal article has recently promoted developments in modern growth theory away from its early versions (Harrod-Domar, Solow) towards recognizing increasing returns.

Smith went well beyond the restricted single-product example of a pin factory, with which most people associate his name, in his crucial example of the ‘multiplicity of trades’ in the making of a common labourer’s woollen coat, the ‘produce of the joint labour of a great number of workmen’, during which he displays emphatic and unusual excitement by placing exclamation marks at the end of three consecutive sentences, the last concluding: ‘What a variety of labour too is necessary in order to produce the tools of the meanest of those workmen!’(WN p 23)

An individual firm supplies people in an economy ‘abundantly with what they have occasion for’ in respect of their product, and in effect and in return the people in the firm receive products of other firms that they ‘have occasion for’, and across society these transactions amount to ‘a general plenty’ that ‘diffuses itself through all the different ranks of the society’ (WN p 22). The more developed the society, the more interconnected are the separate markets for each good or service.

It is the extent of the market that drives the division of labour and the division of labour that drives the extent of the market. By considering only the ‘pin factory’ example of an aspect of the division of labour, Daniel Bulone (like many others before him) may have missed entirely the grand sweep of Adam Smith’s analysis, as well has missing the essential humanity of his outlook on the pressing need to liberate the labouring poor from drudgery of extremely low incomes.

The latter paragraphs of his post on Smith the ‘cynic’, and so on, are particularly unhelpful of understanding his general disposition that high wages are better for all concerned than low wages:

Is this improvement in the circumstances of the lower ranks of the people to be regarded as an advantage or as an inconveniency to the society?*38 The answer seems at first sight abundantly plain. Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. 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, cloath 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, cloathed and lodged…” (WN I.viii.36: p 96)


“…The liberal reward of labour, as it encourages the propagation, so it increases the industry of the common people. The wages of labour are the encouragement of industry, which, like every other human quality, improves in proportion to the encouragement it receives. A plentiful subsistence increases the bodily strength of the labourer, and the comfortable hope of bettering his condition, and of ending his days perhaps in ease and plenty, animates him to exert that strength to the utmost. Where wages are high, accordingly, we shall always find the workmen more active, diligent, and expeditious, than where they are low” (WN I.viii.44: p 99).

I would have thought these sentiments would place Adam Smith on the side of the labourers on the issues that mattered most to them: higher wages are preferred to lower wages, a point worth remembering, I think, on Labour Day.


Blogger PGL said...

"I would have thought these sentiments would place Adam Smith on the side of the labourers on the issues that mattered most to them: higher wages are preferred to lower wages ..."

I can the champions of the "investor class" (Robert Novak and Lawrence Kudlow) accusing Adam Smith of CLASS WARFARE11

10:24 pm  
Blogger Gavin Kennedy said...

In mid-18th century Britain there was a strong argument emanating from commentators, such as Arthur Young, 1771: 'everyone but an idiot knows that the lower classes must be kept poor or they never will be inudstrious'; and Sir William Templar, 1758: the only way to keep the poor 'temperate and industrious is to lay them under the necessity of labouring all the times they can spare from meals and sleep, in order to procure th necessities of life' (Adam Smith's Lost legacy, p 159, 2005, Palgrave Macmillan).

Smith rejected those ideas.

5:28 am  

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