Why is Smith's work on the division of labour still of interest after almost 250 years - Assignment Example

? Why is Smith's work on the division of labour still of interest after almost 250 years? Table of Contents: Introduction…………………………………………………………………………..3 Smith’s notion of Division of Labour………………………………………………...3 Current applicability of Smith’s notion of Division of Labour……………………….5 Division of labour and the production of Ford cars…………………………………...8 Conclusion……………………………………………………………………………10 References…………………………………………………………………………….12 Adam Smith introduced the notion of division of labour in his path-breaking book, An Inquiry into the Nature and Causes of the Wealth of Nations, in 1776. The notion of division of labour implies ‘separation of manufacturing process into distinct and simple operations which are then delegated to specific hands or machines to perform’ (Smith, 1776, p.10). The notion of division of labour is associated with the cooperative structure of supplying labour services to perform that task. Division of labour has been applied by producers of all goods and services and after the introduction of industrialisation this concept has been widely used by these producers (Brown and Rose, 2010, p.34). This research attempts to describe the notion of division of labour which was marked by Adam Smith and also describes the reasons of application of Smith’s idea of division of labour in the modern times. An effort is made to critically analyze the reasons behind importance of the concept of division of labour even after 250 years of its introduction in economic theories. Smith’s notion of Division of Labour: Adam Smith has argued that in the face of industrialisation and growing demand for various goods and services, it is most necessary for producers to apply the notion of division of labour into the production processes. The application of division of labour into production processes will not only increase the amount of output produced, but also will increase the quality of produced output. Adam Smith has opined in his book, The Wealth of Nations, that applying division of labour helps the producer by splitting up the entire production process in smaller divisions and by applying labour service to each division of the complete production process (Smith, 1776, pp.10-12). According to Adam Smith, using division of labour in the production process will also help labourers to efficiently perform a single tack and to achieve the level of expertise in the production of the part of the entire production process which is assigned to one labourer at a time. These developments in the process of production of the good help labourers to increase the volume of production and also help to augment the quality of production of that good. Adam Smith has also argued that the difference between a steel doorkeeper and a philosopher is a consequence of division of labour. A steel doorkeeper can apply the concept of division of labour by engaging others (mainly his family members) and increase the productivity, as well the quality of production of the service. A philosopher cannot divide his thinking process with the help of the notion of division of labour (Smith, 1776, pp.12-17). Adam Smith has opined that the introduction of division of labour in the production processes will help labourers to match their skills with the equipments available to them for producing different goods and services. He himself gave an example of pin production. In the production of a pin, one person produces the head and another person produces the body. Both these labourers are using the best (most efficient) available and different types of technology to produce either the head or the body of the pin. In this way the total volume of production can be increased along with the quality of production. However, Adam Smith also criticised the application of division of labour by saying that it can lead to “mental mutilation” for the labourer due to execution of same task in a repetitive manner. Adam Smith has forecasted that in the face of industrialisation and also in the presence of larger demand for goods and services throughout the world it would be necessary for producers of goods and services across the globe to use division of labour in their production processes. Global businesses and production processes have been applying this concept since the beginning of industrialisation (Smith, 1776, pp.17-21). Current applicability of Smith’s notion of Division of Labour: In modern economic decisions and production processes, the notion of division of labour is widely used. Business organisations of all sizes and production capacities widely apply division of labour in each and every part of their production processes and acquire qualitative, as well as quantitative improvements in their production processes. Modern production processes and modern producers of different goods and services have applied the notion of division of labour with the association of human capital. According to Adam Smith, greater application of technologies and technological advancements are increasing productivity, as well as quality of production of goods and services across the globe (Brown and Rose, 2010, pp.39-40). This is only possible when the human capital is matched with physical capital and these two capitals use the notion of division of labour. In modern production structures, the level of technological advancements is the highest one and production technologies are becoming more and more efficient in producing goods and services. The effective use of the notion of division of labour has been practiced by global producers at large. Hence, these producers have received the benefits from the application of division of labour in production processes in terms of greater amount of profits and, thus, greater amount of investments in further progress of technologies. In modern production processes, producers split up the entire work into several divisions and involve large number of workers into each of the division of the entire production procedure (Abbott, 2010, p.6). Again, generation of greater amount of profits increases the amount of income of each and every worker associated, both directly and indirectly, with the global production system of different goods and services. Hence, these people demand more amounts of these goods and services. In this situation, to increase the level of production of goods and services to satisfy the demand, more division of labour is required to apply. In this way, the notion of division of labour is increasingly becoming the most important part of the global production structure. For instance, the entire production process of a good is divided into several divisions like marketing division, production division (which has further divisions according to the type of good being produced), sales division, revenue division, analysis division and many more. Each of these divisions has large number of labourers involved and each person is doing a given task repetitively (Fernando, 2009, pp.103-104). The most important feature of this application of labour division in modern businesses is that with the help of this application modern businesses can produce greater volume of products and services at a particular time point, as compared to the past. Hence, modern producers can sell greater amount of products and services to the customers and also can earn greater amount of profit from production of these products or services, as compared to the past. Also with the application of division of labour in the production processes modern producers can increase the amount of investments in developing markets for their products or services with that greater amount of profits. Also modern producers use this greater amount of profit in developing technologies which are being used in these production processes at present and will be used in the future. The most important feature of these technological developments is that they help to generate more user-friendly technologies, such as computers, which increase both quantity and quality of products produced by a labour at a given point of time. All these developments and quantitative and/or qualitative improvements have been possible to achieve mainly because of successful use of Adam Smith’s notion of division of labour at large in modern production processes (Brown and Rose, 2010, pp.34-35). Division of labour has been described as the most important contributor in the development of competitive business methods and production, as well as distribution structures of modern businesses. According to Hobson (2010), ‘the notion of division of labour divides each worker into a section of a producer and separates each set of producers from the consumers of their products’. In this way, the notion of division of labour maintains the finest way of cooperation between each set of producers and each set of workers and, thus, increases the productivity of modern businesses. Greater the amount of division of labour, the greater is the benefit acquired by the producer or by the production house (Hobson, 2010, pp.157-158). With the help of successful application of division of labour, modern businesses and production processes have acquired greater volume of growth in monetary terms, as well as building up of reputations for goods and services produced by these companies. This growth procedure can be described as an endogenous growth process where initial application of division of labour has contributed in the production process by increasing the demand for the good and service and increased the amount of profit earned by the producer. This profit has again been invested to greater amount of demand has been generated in next time period which has increased the need for application of more division of labour in the production process. In this endogenous growth model, the initial volume division of labour is determining the final volume of division of labour in the economy (Fernando, 2009, pp.110-111). This model of endogenous growth theory also develops the growth perspective of the entire economy. Greater amount of application of labour division in the initial period of production processes has helped companies to increase the amount of profit earnings. This has further helped these production houses to increase the volume of economic activities in modern businesses and also in modern structure of production of various goods and services. Hence, the overall level of economic activities has been raised in the economy along with greater amount of income earned by economic agents. Hence, the level of economic growth has also been accelerated in the global economies. Countries like the United States of America, the United Kingdom, Japan, Australia, China, India etc. have applied the notion of division of into private, as well as public production system of goods and services and successfully enjoyed (and still enjoying) greater economic growth. According to Adam Smith, application of division of labour in each and every part of the entire production process of developed countries is highly essential for these economies to grow at faster rates. The modern development, as well as economic progress of developed countries of the world, such as the USA, the UK, Japan etc. have proven the fact that to achieve greater economic development and economic growth division of labour needs to be applied in the production process (Lavezzi, 2001, pp.2-5). Division of labour and the production of Ford cars: In the production of Ford cars, the concept of division of labour has been widely used. Ford cars have been one of the most popular cars since their invention. Henry Ford, the inventor of the Ford brand, had made use of this theory from the beginning in his assembly line production process. Division of labour was used in the process of the entire production structure. In the early 20th century, Henry Ford started to use the concept in producing cars (Rodda, n.d., p.1). The Ford Company has been producing large number of cars from the beginning and has been using large number of workers in the entire production process. Therefore, it became an absolute necessity for the company to apply division of labour in each and every production process. From the process of producing wheels, bodies of cars, engines and other parts of cars, division of labour has widely been used by the company. The most important advantage of using division of labour in the production processes of Ford cars has been that the increase in the productivity of each worker to a great extent. Hence, the profitability of the company, by selling large number of cars, increased too (Rodda, n.d., p.1). From 1913, the company started to use division of labour in all production processes; the following benefits have been achieved by the company: 1. Repetition of the same job has increased the quality of performing a job and also reduced the time required to complete a particular job. The concept also helped reducing the downtime of doing a job. It reduced the time required to switch from one job to other and also the time required to put down and/or pick up tools. 2. Since only one person does the same job using the same and large diversity of tools, the efficiency of each worker increases to a great extent and also the efficiency of capital equipments increases too. 3. With greater application of division of labour workers can work with their best working skills which are appropriate for the production of cars, in general, and for production of the particular part of the car, in particular. All these benefits have been acquired by the Ford Company while producing cars using division of labour to great extent. These benefits have also been acquired by other production houses and, hence, the concept becomes highly important even after 250 years of introduction of the concept (Rodda, n.d., pp.1-2). Conclusion: The notion of division of labour introduced by Adam Smith has been one of the most important contributors in the development and/or growth process of developed, as well as developing countries of the world. The notion has been applied by production houses all over the world and augmented both the demand and supply of various goods and services across the globe. It can undoubtedly be said that without successful use of division of labour it would have difficult for developed countries of the world to acquire benefits from industrialisation. However, several criticisms have been put forward by economists and philosophists. For instance, economist and philosophist Karl Marx has opined that rapid application of division of labour will reduce the level of overall skill of each and every worker and will also reduce the level of enthusiasm and interest of the worker in the overall production process. According to Karl Marx, use of division of labour incorporates the notion of alienation in the production process where worker gets alienated with the repetitive and extremely specialised work. This alienation eventually leads to complete alienation of the worker from the entire production process. This complete alienation reduces the quality of the worker. This also reduces the joy of the worker which he could obtain through active participation into the entire process of production of any good or service. The most important criticism of the division of labour has been pointed by Karl Marx where he said that under the capitalist structure of production of goods and services division of labour will lead to “exploitation of labor” through “exploitation of surplus labour” produced by the direct producers or workers (Harvey and Turner, 2008, pp.51-52). However, although Karl Marx’s views are more or less appropriate in the context of modern businesses and production processes, the beneficiary role of the notion of division of labour in modern businesses can never be ignored. Due to these reason even after 250 years of its first introduction, the notion of division of labour has been the most important concept for global production houses. References Abbott, L. (2010). Theories of Industrial Modernization and Development: A Review, UK: Industrial Systems Research. Brown, J. and Rose, M. B. (2010). Entrepreneurship, networks, and modern business, UK: Manchester University Press. Fernando, A. C. (2009). Business Environment, UK: Pearson Publishers. Harvey, C. and Turner, J. (2008). Labour and business in modern Britain, London: Routledge. Hobson, J. A. (2010). Work and Wealth: A Human Valuation, UK: Taylor & Francis. Lavezzi, A. M. (2001). Division of Labor and Economic Growth: from Adam Smith to Paul Romer and Beyond, Paper prepared for the Conference: Old and New Growth Theories: an Assessment. Pisa, [Online] Available at: http://time.dufe.edu.cn/article/romer/5.pdf [Accessed: February 17, 2012] Rodda, C. (n.d.). Specialisation, division of labour and exchange, Microeconomics, [Online] Available at: http://www.chrisrodda.com/ASMicroeconomics/Demand_files/Specialisation.pdf [Accessed: February 20, 2012] Smith, A. (1776). An Inquiry into the Nature and Causes of The Wealth of Nations, A Penn State Electronic Classics Series Publication, [Online] Available at: http://i-ahrens.de/schule/bvw/Wealth-Nations.pdf [Accessed: February 17, 2012] Read More