67
In a busy stockroom, labor may be
divided between porters, inventory
clerks, a manager, accountants,
distribution specialists, IT workers,
and truck drivers.
See also: Comparative advantage 80–85 ■ Economies of scale 132 ■
The emergence of modern economies 178–79
THE AGE OF REASON
made in a day. Smith concluded
that the division of labor causes
“in every art, a proportionable
increase of the productive powers
of labor.”
The engine of growth
Smith was not the first to
appreciate the value of the division
of labor. About 2,200 years earlier
Plato had argued that a state needs
specialists, such as farmers and
builders, to supply its needs. The
Islamic philosopher Al-Ghazali
(10 5 8 –1111) not e d t hat i f we t a ke
into account every step involved
in making bread, from clearing the
weeds in the fields to harvesting
the wheat, we would find that the
loaf takes its final form with the
help of over a thousand workers.
Many early thinkers linked
division of labor to the growth of
cities and markets. Some thought
that the division of labor caused the
growth, while others proposed that
the growing cities allowed the
division of labor.
What was groundbreaking about
Smith’s idea was that he put
division of labor at the heart of
the economic system, insisting that
it is the engine that drives growth.
The more specialized the workers
and businesses, the greater the
market growth and the higher
the returns on investments.A necessary evil
Karl Marx (p.105) saw the power
of this idea but believed that the
division of labor was a temporary,
necessary evil. Specialization
alienates, condemning workers
to the dispiriting condition of a
machine performing repetitive
tasks. He distinguished between
the technical division of labor,
such as each specialized task in
house building, and social division,
which is enforced by hierarchies
of power and status.
Labor division is the norm
within most companies today.
Many large corporations now
outsource tasks formerly carried
out by their own staff to cheaper
overseas workers, giving the
division of labor a new,
international dimension. ■All-American jobs?
When people working in
industry worry about the
strength of their home
economy and rates of
employment, they sometimes
urge consumers to buy home-
produced goods. However, it
can be hard to know what is
home-produced since division
of labor has now become
global in scope. For example,
Apple is a US company, so
consumers might suppose that
by buying an iPhone they are
contributing to US jobs. In fact,
of all the processes involved in
making an iPhone, only the
product and software design
and marketing occur primarily
in the US.
Each iPhone is assembled
by workers in China, using
parts—such as the case,
screen, and processor—made
by workers in South Korea,
Japan, Germany, and six
other countries. In addition,
each of these parts has been
assembled by a range of
specialists around the world.
The iPhone is a truly global
product, made by perhaps
tens of thousands of people.Assembly-line workers in
China build computer processors
with components made in up to
nine different countries.Every expansion of the
personal division of labor
brings advantages
to all who take part in it.
Ludwig von Mises