The Division of Labor

Modern thinkers have implicitly accepted technology to be the principle fountain of the development that has occurred in the economic scene in the most recent centuries. Our contemporary perception of the evolution of our material standard of living is based more in the constant influx of new technologies than in any other factor. But in the gestation period of the fetal science of economics, without obvious improvement in methods of production in technological terms, classical thinkers needed to find a theoretical impetus behind the productive increase in the preindustrial countries of Europe.

This impetus would be the division of labor; that is to say, a process of dividing work into small tasks so that they can be performed more easily. The first manifestation of this concept was that in Adam Smith's well-known and seminal work The Wealth of the Nations.

Smith provides us with three key areas of increased efficiency caused by the division of labor: first an individual worker's tasks are made more simplistic and easy, second, no worker needs to move about during his work day, and lastly, and perhaps most importantly, because the work is reduced to small movements, it because much more easy to implement technology and new methods of production.

Placing emphasis on an example of a farm, Smith surmises that the reason that country areas are generally less productive than those in the city is their lack of a dense population that can specialize. A farmer oft-times needs to be a herdsman, a blacksmith, or a lumberjack among other occupations and because he is always moving from one task to the next, he has no time to invest in production or streamline the small tasks with machinery or scientific management.

Many of the fruits of the Industrial Revolution were essentially the results of the division of labor. Even before the implementation of new machinery, one can see clearly a rise in output and productivity in factories that divided specialized work in the United States and England. This factor is what separates individual farms from larger ones where employees can specialize more easily. This is what accounts for productivity gaps like the one between the northern and southern farms of Mexico; in the south, farms can grow their crops far more cheaply because they can divided specialized work between laborers.

And of course with the use of foreign capital for the purpose of exporting, technology gains a higher availability in developing regions. The example of Costa Rica is clear: the use of technology in the specialized jobs involved with information technology has spilt over into other sectors of society and has enabled the rise of a more highly educated middle class.

Yet obviously one must bear in mind the critical tradition over this occurrence. Writers after Smith would mention that, although a productive increase is realized, the working man loses much in account to his connection with his product and with society. In his manuscripts of 1844, Karl Marx would describe what he called alienation, that is, when the worker is naught more than a cog in a machine and when in place of an occupation more human and natural, he is reduced to a work environment of steel and smoke.

Even in our days, there is constant condemnations of the physical and psychological condition of factory workers. Quite recently, much controversy erupted when it was revealed that Apple had used Chinese labor to produce its various iProducts; the working conditions were so poor that some number of workers had committed suicide over the years.

But economically even most of these factories are constructive for developing societies. Rural workers continue to come to work in maquilas or low-wage labor shops. Even though people in developed nations maintain a good bit of worry of the working conditions of foreign workers, those that do work in these sweatshop generally do gain much more than they would gain otherwise in agriculture or in other minor posts available. As an example, in the 90s many people became indignant when a private human rights organization announced that a clothing company in Honduras paid its workers only $13 every day; the important information that went unsaid was that at that time, the typical Honduran earned less than $2 per diem. Seen in context, it's relatively easy to see why so many people in poor countries are very willing to accept such jobs, jobs that we might consider degrading.

Having noted all of this, it's still important to evaluate the division of labor on the international scale, where the majority of these intuitions continue to be relevant. We already know that individuals can experience net productive gains by dividing tasks, but the same thing applies to different countries in the international environment.

This is what inspired David Ricardo to write on the now commonly known idea of comparative advantage. When there are two places that could theoretically produce different products, it's best for each one of them to produce one product and trade amongst themselves. In the classic example of modern economics textbooks, if England can make wool superior than that of Portugal and Portugal can produce more efficient wine, both should specialize and all would have access to a greater mutual supply.

This was illustrated in the last century more precisely by the economists Bertin Ohlin and Eli Heckscher in their well name Heckscher-Ohlin Model. According to the theory, the paths of specialization that any two countries will follow are generally based in the distribution of factors of production between them. For example if South Korea has a great deal of capital and Bangladesh has not much besides cheap labor, Korea should produce heavy machinery while Bangladesh produces textiles or other things requiring more human work. And in reality, this division is so complete that we have quite strange situation like that of the Canary Islands, whose economy is so specialized in tourist services that they produce only 17% of the products they consume.

Shortly after, Paul Krugman noted in his New Trade Theory the importance of economies of scale. Because of previous production and aggregated capital, an area can specialize somewhat arbitrarily. In north Georgia (US), the city of Dalton proudly calls itself "the Carpet Capital of the World" while Gilroy in California is called "the Garlic Capital of the World." There may be nothing particular beneficial in Gilroy for the production of garlic, but when one or two firms open up, a cascade may begin driving garlic-related production supplies and information technology to the town. This specialization is based on the fact that these developments of locational economies of scale provide for more efficient vertical integration.

Now it's a common lament among opponents of free trade treaties that these treaties do not open up markets to utterly unique products. The Vice-president of the Costa Rican Legislature, faced with the enterprise of a free trade treaty with Colombia complained that the two nations produce "competitive" and not "complementary" goods. The reason that this rationale is fallacious is that the principal goal of trade liberalization not simply to exchange different products, but to take advantage of economies of scale after the two countries have specialized. Obviously one must add that competition is not typically thought as something bad if we keep the consumer in mind. For the same reason, even if two countries have similar characteristics, it would be even better if then were to produce different goods to enjoy the economies of scale realized when the production of one item is aggregated in one place.

Of course there are some issues in international trade that are not merely commercial. Although the division of labor between the United States and Cuba would benefit both nations, for various political reasons the Cuban embargo has been American policy for several decades. The Department of State continues to say that this trade barrier will remain in place due to the past expropriation of the property of Americans on Cuban soil.

Similarly, there has always been a tendency to want to reduce one's nation's "dependence" on foreign goods, most recently Middleeastern petroleum. The Obama administration has been quite proud of its initiatives aimed at reducing said dependence by incentivizing domestic production. This domestic production stimulus contradicts the recommendations of Ricardo and the others, because it can be said to create redundant and inefficient economies. Nevertheless it could be in some of these cases, it is better to abstain from international trade if such trade might pose a social or political threat.

Concluding, we have briefly identified the key theoretical reasons and practices behind the division of labor in interpersonal and international levels. Our developed society is a product of the fact that effectively we have divided and shared the work that produces it. And perhaps this world where the interests of all are more and more interconnected due to international trade and the division of labor, we may be living in the most peaceful and productive time in recent centuries.