The Clemson Institute for the Study of Capitalism

The Division of Labor

The division of labor describes the process by which individuals choose to divide among many men the tasks required to sustain and promote individual human survival. The result of a division of labor is an expansion of the productivity of labor through specialization. As each individual commits himself to a specialized task such as agriculture, he acquires a higher level of skill at that task and can soon outperform in eight hours, for example, what eight other men could collectively accomplish in one hour each. By avoiding having to gather grains for an hour each day, the other men would likewise raise their productivity in whatever tasks they chose for their specialized labor. Without such a division, it would be difficult if not impossible for long-range productive action to take place. No man in a primitive society would have the time to sew fishing nets, plant seeds, or build shelter if he had not yet reached a level of productivity beyond eating the fruit he found on the trees and the fish he caught each day. The products of each individuals’ labor would then be available for trade with other individuals, thereby allowing each individual to reap all the benefits of specialization.

Even though human societies have practiced some form of the division of labor since ancient times, capitalism plays a special role in securing and promoting the benefits of such a division. In primitive societies, the division of labor might take the form of some individuals spending their productive energy gathering berries and fruits while others hunted for meat, and still others built and maintained shelters. In a complex, civilized society, it takes the form of some individuals specializing in radiation oncology while others spend their productive efforts making computers, and still others by producing works of philosophy. In both cases, all productive individuals benefit through trading the products of their specialized labor.

As an economy grows and becomes more complex, the division of labor plays a vital role in promoting higher and higher levels of productivity. As individuals join together in business firms, one of the key roles of an effective business manager is dividing, organizing, and coordinating the tasks undertaken by the firm in their production, a job that in earlier stages of economic development would have been performed by each individual producer. Likewise, the task of dividing, organizing, and coordinating how to allocate capital among competing firms in a complex society is not performed by all businessmen, but is left instead to those whose specialized occupation is to be a capitalist—i.e., someone who manages and provides capital in the marketplace. The presence of entrepreneurs as a distinct category of occupation in an economic system also represents a highly specialized economic order.

The unique advantage of the division of labor can only flourish under a system of capitalism, with its protection of individual rights. Because the division of labor depends on individuals choosing to forego current diversified self-sufficient production in the expectation of future trade for divided production, each individual must be certain that he will in fact be able to make that exchange. The system of property and contract rights instituted by capitalism is the means by which this long-range behavior is protected. In the absence of the rule of law and the protection of individual rights, the division of labor economy would collapse. If a man were not certain that his specialized production of computers, for example, would be safe from forced redistribution and that his daily needs for food could be purchased freely in the market instead of doled out by decree, he would never choose to specialize and agree to divide his labor. By protecting rights, capitalism allows the division of labor to flourish to its fullest extent, thereby benefiting all producers with higher standards of living and wealth.