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[I.iii] CHAPTER III: That the Division of Labour is limited by the Extent of the Market 1 - Adam Smith, Glasgow Edition of the Works and Correspondence Vol. 2a An Inquiry Into the Nature and Causes of the Wealth of Nations, Vol. 1 [1776]

Edition used:

An Inquiry Into the Nature and Causes of the Wealth of Nations, Vol. I ed. R. H. Campbell and A. S. Skinner, vol. II of the Glasgow Edition of the Works and Correspondence of Adam Smith (Indianapolis: Liberty Fund, 1981).

Part of: The Glasgow Edition of the Works and Correspondence of Adam Smith, 7 vols.

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CHAPTER III

That the Division of Labour is limited by the Extent of the Market1

1As it is the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the extent of that power, or, in other words, by the extent of the market.2 When the market is very small, no person can have any encouragement to dedicate himself entirely to one employment, for want of the power to exchange all that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men’s labour as he has occasion for.

2There are some sorts of industry, even of the lowest kind, which can be carried on no where but in a great town. A porter, for example, can find employment and subsistence in no other place. A village is by much too narrow a sphere for him; even an ordinary market town is scarce large enough to afford him constant occupation. In the lone houses and very small villages which are scattered about in so desert a country as the Highlands of Scotland, every farmer must be butcher, baker and brewer for his own family.3 In such situations we can scarce expect to find even a smith, a carpenter, or a mason, within less than twenty miles of another of the same trade. The scattered families that live at eight or ten miles distance from the nearest of them, must learn to perform themselves a great number of little pieces of work, for which, in more populous countries, they would call in the assistance of those workmen.4 Country workmen are almost every where obliged to apply themselves to all the different branches of industry that have so much affinity to one another as to be employed about the same sort of materials.5 A country carpenter deals in every sort of work that is made of wood: a country smith in every sort of work that is made of iron. The former is not only a carpenter, but a joiner, a cabinet–maker, and even a carver in wood, as well as a wheel–wright, a plough–wright, a cart and waggon maker. The employments of the latter are still more various.6 It is impossible there should be such a trade as even that of a nailer in the remote and inland parts of the Highlands of Scotland. Such a workman at the rate of a thousand nails a day, and three hundred working days in the year, will make three hundred thousand nails in the year. But in such a situation it would be impossible to dispose of one thousand, that is, of one day’s work in the year.7

3As by means of water–carriage a more extensive market is opened to every sort of industry than what land–carriage alone can afford it, so it is upon the sea–coast, and along the banks of navigable rivers, that industry of every kind naturally begins to subdivide and improve itself, and it is frequently not till a long time after that those improvements extend themselves to the inland parts of the country.8 A broad–wheeled waggon, attended by two men, and drawn by eight horses, in about six weeks time carries and brings back between London and Edinburgh near four ton weight of goods. In about the same time a ship navigated by six or eight men, and sailing between the ports of London and Leith, frequently carries and brings back two hundred ton weight of goods. Six or eight men, therefore, by the help of water–carriage, can carry and bring back in the same time the same quantity of goods between London and Edinburgh, as fifty broad–wheeled waggons, attended by a hundred men, and drawn by four hundred horses.9 Upon two hundred tons of goods, therefore, carried by the cheapest land–carriage from London to Edinburgh, there must be charged the maintenance of a hundred men for three weeks, and both the maintenance, and, what is nearly equal to the maintenance, the wear and tear of four hundred horses as well as of fifty great waggons. Whereas, upon the same quantity of goods carried by water, there is to be charged only the maintenance of six or eight men, and the wear and tear of a ship of two hundred tons burden, together with the value of the superior risk, or the difference of the insurance between land and water–carriage. Were there no other communication between those two places, therefore, but by land–carriage, as no goods could be transported from the one to the other, except such whose price was very considerable in proportion to their weight, they could carry on but a small part of that commerce whicha at present bsubsistsb between them, and consequently could give but a small part of that encouragement which they at present mutually afford to each other’s industry.10 There could be little or no commerce of any kind between the distant parts of the world. What goods could bear the expence of land–carriage between London and Calcutta? Or if there cwerec any so precious as to be able to support this expence, with what safety could they be transported through the territories of so many barbarous nations? Those two cities, however, at present carry ond a very considerable commerce ewith each othere , and by mutually affording a market, give a good deal of encouragement to each other’s industry.

4Since such, therefore, are the advantages of water–carriage, it is natural that the first improvements of art and industry should be made where this conveniency opens the whole world for a market to the produce of every sort of labour, and that they should always be much later in extending themselves into the inland parts of the country. The inland parts of the country can for a long time have no other market for the greater part of their goods, but the country which lies round about them, and separates them from the sea–coast, and the great navigable rivers. The extent of their market, therefore, must for a long time be in proportion to the riches and populousness of that country, and consequently their improvement must always be posterior to the improvement of that country. In our North American colonies the plantations have constantly followed either the sea–coast or the banks of the navigable rivers, and have scarce any where extended themselves to any considerable distance from both.11

5The nations that, according to the best authenticated history, appear to have been first civilized, were those that dwelt round the coast of the Mediterranean sea. That sea, by far the greatest inlet that is known in the world, having no tides, nor consequently any waves except such as are caused by the wind only, was, by the smoothness of its surface, as well as by the multitude of its islands, and the proximity of its neighbouring shores, extremely favourable to the infant navigation of the world; when, from their ignorance of the compass, men were afraid to quit the view of the coast, and from the imperfection of the art of ship–building, to abandon themselves to the boisterous waves of the ocean.12 To pass beyond the pillars of Hercules, that is, to sail out of the Streights of Gibraltar, was, in the antient world, long considered as a most wonderful and dangerous exploit of navigation. It was late before even the Phenicians and Carthaginians, the most skilful navigators and shipbuilders of those old times, attempted it, and they were for a long time the only nations that did attempt it.

6Of all the countries on the coast of the Mediterranean sea, Egypt seems to have been the first in which either agriculture or manufactures were cultivated and improved to any considerable degree.13 Upper Egypt extends itself nowhere above a few miles from the Nile, and in Lower Egypt that great river breaks itself into many different canals, which, with the assistance of a little art, seem to have afforded a communication by water–carriage, not only between all the great towns, but between all the considerable villages, and even to many farm–houses in the country; nearly in the same manner as the Rhine and the Maese do in Holland at present. The extent and easiness of this inland navigation was probably one of the principal causes of the early improvement of Egypt.14

7The improvements in agriculture and manufactures seem likewise to have been of very great antiquity in the provinces of Bengal in the East Indies, and in some of the eastern provinces of China; though the great extent of this antiquity is not authenticated by any histories of whose authority we, in this part of the world, are well assured. In Bengal the Ganges and several other great rivers fform a great number of navigablef canals in the same manner as the Nile does in Egypt. In the Eastern provinces of China too, several great rivers form, by their different branches, a multitude of canals, and by communicating with one another afford an inland navigation much more extensive than that either of the Nile or the Ganges, or perhaps than both of them put together.15 It is remarkable that neither the antient Egyptians, nor the Indians, nor the Chinese, encouraged foreign commerce, but seem all to have derived their great opulence from this inland navigation.

8All the inland parts of Africa, and all that part of Asia which lies any considerable way north of the Euxine and Caspian seas, the antient Scythia, the modern Tartary and Siberia, seem in all ages of the world to have been in the same barbarous and uncivilized state in which we find them at present.16 The sea of Tartary is the frozen ocean which admits of no navigation, and though some of the greatest rivers in the world run through that country, they are at too great a distance from one another to carry commerce and communication through the greater part of it. There are in Africa none of those great inlets, such as the Baltic and Adriatic seas in Europe, the Mediterranean and Euxine seas in both Europe and Asia, and the gulphs of Arabia, Persia, India, Bengal, and Siam, in Asia, to carry maritime commerce into the interior parts of that great continent: and the great rivers of Africa are at too great a distance from one another to give occasion to any considerable inland navigation. The commerce besides which any nation can carry on by means of a river which does not break itself into any great number of branches or canals, and which runs into another territory before it reaches the sea, can never be very considerable; because it is always in the power of the nations who possess that other territory to obstruct the communication between the upper country and the sea. The navigation of the Danube is of very little use to the different states of Bavaria, Austria and Hungary, in comparison of what it would be if anyg of them possessed the whole of its course till it falls into the Black Sea.

[1 ]The subjects of this chapter, as observed in the previous note, do not figure in ED. In LJ (A) vi Smith did develop the argument that the division of labour depends on the extent of the market, but did so in the course of offering a recapitulation of his treatment of price, i.e. outwith his main discussion of the division of labour. In LJ (B) the discussion of the extent of the market is brief, but integrated with the wider discussion of the division of labour. FA and FB thus provide the most elaborate examination of the subject; a fact which lends some support to the view that the fragments may have been written after ED. Paragraphs 1 and 2 of this chapter appear to be based on FA from the first complete paragraph of the latter ‘As it is the power of exchanging . . . ’ while paragraphs 3–7 show the same close connection with the whole of FB.

[2 ]LJ (B) 222, ed. Cannan 172: ‘From all that has been said we may observe that the division of labour must always be proportioned to the extent of commerce.’ In LJ (A) vi.63 it is remarked that the division of labour ‘is greater or less according to the market’.

[3 ]Cf. LJ (A) ii.40: ‘It is found that society must be pretty far advanced before the different trades can all find subsistence: . . . And to this day in the remote and deserted parts of the country, a weaver or a smith, besides the exercise of his trade, cultivates a small farm, and in that manner exercises two trades; that of a farmer and that of a weaver.’

[4 ]The degree of correspondence between the preceding passages and FA ceases at this point and there is a long passage from the beginning of the following sentence, and ending 22 lines below (‘a ship navigated by six’) which has no counterpart in the fragment. This passage amounts to about three hundred words, which would make about one folio page in the hand of the amanuensis used. Smith may, therefore, have decided to omit the two final pages of FA and introduce a new page which is now lost. The passage from FA which is omitted from the WN had gone on to illustrate the link between the division of labour and the extent of the market by reference to primitive communities such as the North American Indians and the Hottentots, Arabs, and Tartars. In speaking of the Hottentots he pointed out that there was some separation of employments such as the tailor, physician, and smith, but that the people involved were principally, but not entirely supported by them. It was in this connection that Smith made the interesting point that ‘The compleat division of labour however, is posteriour to the invention even of agriculture.’

[5 ]See I.x.c.8 where it is stated that country labourers were excluded from the statute of apprenticeship by judicial interpretation, as a result of the nature of the employment.

[6 ]LJ (A) vi.64 notes that ‘A wright in the country is a cart–wright, a house carpenter, a square wright or cabinet maker and a carver in wood; each of which in a town makes a separate business. A merchant in Glasgow or Aberdeen who deals in linnen will have in his ware–house, Irish, Scots and Hamburg linnens, but at London there are separate dealers in each of these.’

[7 ]Smith provides a further example, that of the shoemaker, at IV.ix.45.

[8 ]‘Great Cities are usually built on the seacoast or on the banks of large Rivers for the convenience of transport; because water–carriage of the produce and merchandise necessary for the subsistence and comfort of the inhabitants is much cheaper than Carriages and Land Transport.’ (R. Cantillon, Essai sur la Nature du Commerce (1755), 22–3; edited and translated by Henry Higgs (London, 1931), 19.) See below, II.v.33 and III.iii.20. While Smith gives a prominent place to navigation in explaining the historical origins of cities and manufactures in III.iii, he did not neglect the importance of land carriage. It is pointed out in LJ (B) 223, ed. Cannan 172, that ‘Since the mending of roads in England 40 or 50 years ago, its opulence has increased extremely.’ In LJ (A) vi.65 he commented on the problem of bad roads and remarked that ‘hence we see that the turnpikes of England have within these 30 or 40 years increased the opulence of the inland parts’. The advantages of good roads are also emphasized in I.xi.b.5 and V.i.d.17.

[9 ]The remainder of this paragraph finds a close parallel in the opening passages of FB, save that 8 or 10 men sailing from the port of Leith can transport 200 tons between Edinburgh and London more cheaply than ‘Sixty six narrow wheeled wagons drawn by three hundred & ninety horses & attended by a hundred & thirty two men; or than forty broad wheeled wagons drawn by three hundred & twenty horses & attended by eighty men.’ Cf. LJ (B) 223, ed. Cannan 172: ‘Water carriage is another convenience as by it 300 ton can be conveyed at the expence of the tare and wear of the vessel, and the wages of 5 or 6 men, and that too in a shorter time than by a 100 waggons which will take 6 horses and a man each.’ In LJ (A) vi.66 Smith compares the expense of a ship of 200 tons navigated by four or five men with that incurred in the use of wagons.

[a]is 1

[b–b]carried on 1

[10 ]Smith may exaggerate the relative advantage of water–carriage, particularly in his example of the costs of carriage between London and Edinburgh. Carriage by sea had its own dangers: natural hazards; pilfering; privateering in time of war. Fine woollen goods were often sent by land in spite of its other disadvantages (cf. IV.viii.21). Smith was writing at the end of the first major phase of passing turnpike acts, but before the improvements which followed were fully evident. Coaching times, a fairly reliable indicator of improvement, show the change. Edinburgh and London were about four days apart in the mid–eighteenth century; only 60 hours by 1786. Smith’s concern over the contribution of navigable rivers is more to the point. He was writing at the end of an age when rivers played a more important part in the economic life of Britain than they had ever done before or since.

[c–c]was 1

[d]together 1

[e–e]2–6

[11 ]This sentence appears verbatim in FB, which adds: ‘What James the sixth of Scotland said of the county of Fife, of which the inland parts were at that time very ill while the sea coast was extremely well cultivated, that it was like a coarse woollen coat edged with gold lace, might still be said of the greater part of our North American colonies.’ See below, I.ix.11.

[12 ]The passage from the beginning of this paragraph follows FB very closely, and often verbatim, although there is nothing corresponding to the two following sentences.

[13 ]In LJ (A) iv.60–2 and LJ (B) 31, ed. Cannan 22 the early economic development of Greece is attributed to its natural advantages including ease of communication. Smith added that ‘Most of the European countries have most part of the same advantages. They are divided by rivers and branches of the sea, and are naturally fit for the cultivation of the soil and other arts.’ The development of the arts and sciences in classical Greece was attributed to its early economic advance in LJ (A) iv.60, Astronomy, III.4 and, LRBL ii.117–9, ed. Lothian 132–3.

[14 ]This paragraph is evidently based on FB, which goes on, however, to conclude with the statement that ‘Agriculture and manufactures too seem to have been of very great antiquity in some of the maritime provinces of China & in the province of Bengal in the East Indies. All these were countries very much of the same nature with Egypt, cut by innumerable canals which afford them an immense inland navigation.’ LJ (A) iii.47 also remarks with regard to China, Egypt, and Bengal that ‘These countries are all remarkably fruitful. The banks of the Nile and the Ganges are overflowed by . . . rivers and yield immense crops, 3 or 4 in a year. This as there must be plenty of food and subsistence for man must . . . promote population, as the number of men is proportion’d to the quantity of subsistence.’

[f–f]break themselves into many 1

[15 ]Smith comments on the inland navigation of China and Indostan at I.xi.g.28, and links the concern of these governments with canal and road improvement to their reliance on land–taxes at V.ii.d.5. He mentions that China was not eminent for foreign trade at II.v.22 and IV.iii.c.11, and comments on the limitations thereby imposed on her economic growth at I.ix.15, IV.ix.40,41. However, it is stated that at least some trade was carried on by foreigners at III.i.7 and IV.ix.45.

[16 ]Smith comments on the limited improvement in Arabia due to the poorness of the soil and difficulties of transport and uses this point to explain why the Arabs had not advanced beyond the shepherd state in LJ (A) iv.36, 56–62; see also LJ (B) 303, ed. Cannan 234: ‘in Asia and other eastern countries; all inland commerce is carried on by great caravans, consisting of several thousands, for mutual defence, with waggons etca.’ The passages from LJ (A) iv above cited make it plain that the preconditions for economic development include fertility of the soil, ease of defence, and of communication where the latter provides an opportunity for the export of surpluses. In LJ (A) iv.53 Smith also comments that the Tartars ‘have indeed some of the largest rivers in the world’ while adding that they ‘have always been a state of shepherds, which they will always be from the nature of their country, which is dry and raised above the sea, with few rivers, tho’ some very large ones, and the weather and the air is too cold for the produce of any grain.’ See also 62, and cf. LJ (B) 30–1, ed. Cannan 22.

[g]one 1