The Significance Of Labour

The division of labour has been the chief cause of improvement in the productiveness of labour. For instance, the making of a single pin involves eighteen separate operations, which are entrusted to eighteen separate workmen; and the result is, that whereas one man working alone could make perhaps only twenty pins in a day, several men working together, on the principle of division of labour, can make several thousands of pins per man in one day. Division of labour, in a highly developed state of society, is carried into almost every practical art; and its great benefits depend upon the increase of dexterity in each workman, upon the saving of time otherwise lost in passing from one kind of work to another and, finally, upon the use of many labour-saving machines.

This division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom which foresees and intends the opulence to which it gives rise; it is rather the gradual result of the propensity in human nature to barter and exchange one thing for another. The power of exchanging their respective produce makes it possible for one man to produce only bread, and for another to produce only clothing.

The extent to which the division of labour can be carried is, therefore, limited by the extent of the market. There are some sorts of industry, even of the lowest kind, which can be carried on nowhere but in a great town–a porter, for example, cannot find employment and subsistence in a village. In the highlands of Scotland every farmer must be butcher, baker and brewer for his own family.

As water-carriage opens a more extensive market to every kind of industry than is afforded by land-carriage, it is on the sea-coast, and on the banks of navigable rivers, that industry begins to subdivide and improve itself, and it is not till long afterwards that these improvements extend to the inland parts. It was thus that the earliest civilized nations were grouped round the coasts of the Mediterranean Sea, and the extent and easiness of its inland navigation was probably the chief cause of the early improvement of Egypt.

As soon as the division of labour is well established, every man becomes in some measure a merchant and the society becomes a commercial society, and the continual process of exchange leads inevitably to the origin of money. In the absence of money, or a general medium of exchange, society would be restricted to the cumbersome method of barter. Every man, therefore, would early endeavour to keep by him, besides the produce of his own industry, a certain quantity of some commodity such as other people will be likely to take in exchange for the produce of their particular industries. Cattle, for example, have been widely used for this purpose in primitive societies, and Homer speaks of a suit of armour costing a hundred oxen.

But the durability of metals, as well as the facility with which they can be sub-divided, has led to their employment, in all countries, as the means of exchange; and in order to obviate the necessity of weighing portions of the metals at every purchase, as well as to prevent fraud, it has been found necessary to affix a public stamp upon certain quantities of the metals commonly used to purchase goods. The value of commodities thus comes to be expressed in terms of coinage.

But labour is the real measure of the exchangeable value of all commodities; the value of any commodity to the person who possesses it is equal to the quantity of labour which it enables him to purchase or to command. What is bought with money or with goods is purchased by labour as much as what we require by the toil of our own body. Labour alone, never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times, and in all places, be estimated and compared. It is their real price; money is their nominal price only Equal quantities of labour will at distant times be purchased more nearly with equal quantities of corn–the subsistence of the labourer–than with equal quantities of gold, or of any other commodity.

Several elements enter into the price of commodities. In a nation of hunters, if it costs twice the labour to kill a beaver which it costs to kill a deer, one beaver will be worth two deer. But if the one kind of labour be more severe than the other, some allowance will naturally be made for this superior hardship; and thirdly, if one kind of labour requires an uncommon degree of dexterity and ingenuity, it will command a higher value than that which would be due to the time employed in it.

So far the whole produce of labour belongs to the labourer. But as soon as stock has accumulated in the hands of particular persons, some of them will employ it in setting to work industrious workmen, whom they will supply with materials and subsistence, in order to make a profit by the sale of their work. The profits of stock are not to be regarded as the wages of a particular sort of labour, the labour of inspection and direction; for they are regulated altogether by the value of the stock employed, and are greater or smaller in proportion to the extent of this stock.

There is in every society or neighbourhood an ordinary or average rate both of wages and profit in every different employment of labour and stock; and this rate is regulated partly by the general circumstances of the society, its riches or poverty, and partly by the peculiar nature of each employment.

There is also in every society or neighbourhood an ordinary or average rate of rent, which is regulated, too, by the general circumstances of the society or neighbourhood in which the land is situated, and partly by the natural or improved fertility of the land. What we may call the natural price of any commodity depends upon these natural rates of wages, profit and rent at the place where it is produced. But its market price may vary from its natural price, and depends upon the proportion between the supply and the demand. – Adam Smith,An Inquiry Into The Nature And Causes Of  The Wealth Of Nations