According to Adam Smith division of labour “is a system of social co-operation”
by which production is carried in particular activities. Adam Smith’s example of
pin making industry which involves 18 different operations has become a classic example. Smith has shown that an individual pin maker, working alone, could not make more than 20 pins a day. But under proper division of labour, he could produce 4800 pins a day. Adam Smith concentrated upon the social division of labour. It emphasised the co-operation of all individuals for the satisfaction of the desires of each. Division of labour is a process by which a particular type of labour which produces goods to satisfy the individual needs are transformed into social labour which produces goods for all. Before understanding Accumulation of Capital we have to understand the the concept of division of Division of Labour. It is broadly classified into two - Productive and Unproductive Doesn’t add value to the economy. Unproductive labour does have a value. It just doesn’t last long nor can it be sold. Prod – adds value
The following are the advantage of division of labour as pointed by Adam
Smith: (1) It increases the productivity of labour through specialisation. (2) As work is sub-divided and done quickly, production also increases. (3) Worker’s efficiency and skill increase when work is subdivided into various parts and a worker is asked to do a small part of the whole job. ADVERTISEMENTS: (4) There is saving of time and tools. (5) As production increases quickly, it forms an incentive to investors. Adam Smith also pointed out the disadvantages of division of labour: (1) As worker is confined to one or two operations, there is no personal satisfaction of having made a full product. (2) It leads to immobility of labour because of specialisation. (3) As the same work is done repeatedly, the worker gets bored which leads to mental stagnation. Adam Smith pointed out that division of labour was limited by the extent of the market. The wider the market for a commodity, the greater the division of labour. So in order to have a high degree of division of labour, large scale production is essential. Division of labour was limited by the availability of capital also. 2. Capital: Smith regarded capital as a fountain of national wealth. It has a greater role to play in production. The wealth of a nation depends upon division of labour and division of labour itself is governed by capital. In his book “Wealth of Nations” capital appears in three forms: (1) As an instrument of production (2) As a fund maintaining the workers and (3) As a source of revenue. Smith distinguished between two types of capital, namely, fixed capital and circulating capital. Smith advocated that capital could be employed in four different ways: (1) In procuring raw materials annually for the consumption of the society (2) In the manufacture of raw materials (3) In transporting the finished goods and (4) In the distribution. In other words capital is used for the cultivation of land, mines and fisheries, secondly for manufacturing, thirdly for whole sale distribution and fourthly for retail distribution. To Smith capital formation is the result of the interaction of the self-interest of individuals. Expansion of output depended on the rate of investment in a country.