Understanding the #UnitedStatesofAmerica - The Wealth of Nations: Book One, Chapter Three "The Division of Labor is Limited by the Extent of the Market"
BOOK I: Of The Causes of Improvement in the Productive Powers of Labor, and of the Order According to which Its Produce Is Naturally Distributed Among the Different Banks of the People
Chapters: 11
Length: 180 pages
CHAPTER THREE: THE DIVISION OF LABOR IS LIMITED BY THE EXTENT OF THE MARKET
Pages: 4 (13 to 16)
Pg 13
Because the power of exchanging is what gives rise to the division of labor, the extent of this division must be limited by the extent of that power—i.e. by the extent of the market. When the market is very small, no-one can be motivated to dedicate himself entirely to one employment, because he won’t able to exchange •all the surplus part of the product of his own labor for •the parts of the product of other men’s labor that he needs.
Some kinds of work, even of the lowest kind, can be done only in a large town. A porter, for example, can’t find employment and subsistence anywhere else; a village is far too small, and even an ordinary market-town is hardly big enough to keep him constantly employed. In the solitary houses and tiny villages scattered about in such a desert country as the highlands of Scotland, every farmer must be butcher, baker, and brewer for his own family. In such situations we can hardly expect to find even a smith, a carpenter, or a mason less than twenty miles from another in the same trade. The scattered families that live eight or ten miles away from the nearest of them must learn to do many little pieces of work for which in more populous countries they would call in the help of those workmen. Country workmen often have to tackle all the lines of work that involve the same sort of materials. A country carpenter deals in every sort of work that is made of wood; a country smith in every sort 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 wheelwright, a plough-wright, a waggon-maker. The smith’s employments are even more various. There couldn’t possibly be such a trade as that of a nail-maker in the remote and inland parts of the highlands of Scotland.
Pg 14
[Smith calculates that a nail-maker would need more than a year to sell or exchange the nails he made in a day. He then moves to the theme of how the division of labor and the consequent improvements in industry develops first ‘on the sea-coast and along the banks of navigable rivers’, and explains why:]
A broad-wheeled wagon attended by two men and drawn by eight horses takes about six weeks for a return journey between London and Edinburgh with a 4-ton load. In about the same time a ship navigated by six or eight men can sail between the ports of London and Leith (both ways) with a load of about 200 tons. [Leith was Edinburgh’s port.] To do that by land one would need 50 broad-wheeled waggons, attended by 100 men and drawn by 400 horses.
Thus, for the cheapest land-transport of 200 tons from London to Edinburgh (one way) one would have to pay for three weeks’ worth of the maintenance of 100 men, the maintenance and (nearly as great) the wear and tear of 400 horses and 50 large waggons, ·and the cost of insurance·.
Whereas to carry that load by water only would only have to pay for three weeks’ worth of
the maintenance of six or eight men, the wear and tear of a ship of big enough for that load, and the cost of insurance (which would be higher than for the land-journey).
If London were connected to Edinburgh only by land transport, the only goods that could be transported between them would be things whose price was very considerable in proportion to their weight; that would be a tiny part of the commerce that now goes on between them, so it would give only a tiny part of the encouragement that they now provide to each other’s industry. Even London and Calcutta have a very considerable commerce with each other, creating a market through which they give a good deal ofencouragement to one another’s industry.
Pg 15
But if there were no water-transport, none of that would exist. What goods could bear the expense of land-transport between London and Calcutta? And even if there were things precious enough to support this expense, how safely could they be transported
through the territories of so many barbarous nations?
Thus, the first improvements of art and industry are made in places where water-transport is available to open the whole world for a market to the product of every sort of labor; for a long time the only market that inland places can have for most of their goods is the immediately surrounding territory separating them from the coast and the large navigable rivers. . . .
According to the best authenticated history, the first nations to be civilized were the ones spread around the coast of the Mediterranean sea. That sea was extremely favorable
to the infant navigation of the world, for two reasons. (i) Its many islands and the proximity of its neighboring shores were helpful at a time when sailors, ignorant of the compass, were afraid to go out of sight of land. (ii) Having no tides, and consequently no waves except those caused by the wind, the Mediterranean had a smooth surface which was reassuring to sailors who, given the imperfection of the art of ship-building, were reluctant to abandon themselves to the boisterous waves of the ·Atlantic· ocean. To sail out through the straits of Gibraltar was regarded by the ancient world as an amazing and dangerous exploit of navigation. . . .
Of all the countries on the Mediterranean coast, Egypt seems to have been the first in which agriculture or manufactures were considerably cultivated and improved. Nowhere
in Upper Egypt is more than a few miles from the Nile; and in Lower Egypt the Nile breaks itself into many canals, which—with the help of a little art—seem to have
enabled water-transport between all the large towns, all the considerable villages, and even many farm-houses. . . .
Pg 16
The extent and easiness of this inland navigation was probably a principal cause of the early improvement of Egypt.
[This theme is continued, with a page of remarks about the probable role of water-transport—including inland, by canals—in the commercial development of various countries in Asia and Africa. Remarks about why there hasn’t been more commerce of that kind end with this:]
The commerce that any nation can carry on by means of a river that. . . .runs into another territory before it reaches the sea can never be very considerable, because the nations
who possess that other territory can always obstruct the communication between the upper country and the sea. The navigation of the Danube is of very little use to Bavaria, Austria, and Hungary, compared with what it would be if any of them possessed the whole of its course until it reaches the Black sea.
You can read Volume I the Wealth of Nations for yourself here → https://www.earlymoderntexts.com/assets/pdfs/smith1776_1.pdf