Adam SmithArticle Free Pass Smith’s explanation of economic
growth, although not neatly assembled in one part of The Wealth
of Nations, is quite clear. The core of it lies in his emphasis
on the division of labour (itself an outgrowth of the “natural”
propensity to trade) as the source of society’s capacity to
increase its productivity. The Wealth of Nations opens with a
famous passage describing a pin factory in which 10 persons, by
specializing in various tasks, turn out 48,000 pins a day,
compared with the few pins, perhaps only 1, that each could have
produced alone. But this all-important division of labour does
not take place unaided. It can occur only after the prior
accumulation of capital (or stock, as Smith calls it), which is
used to pay the additional workers and to buy tools and
machines. The drive for accumulation, however, brings problems.
The manufacturer who accumulates stock needs more labourers
(since labour-saving technology has no place in Smith’s scheme),
and, in attempting to hire them,