Tuesday, 1 March 2016

Adam Smith's Division of Labour Hits the Buffers

It would seem that Scottish Entrepreneurs are somewhat turning their back on the received wisdom that was once Adam Smith.

As part of a dissertation -part thesis on economics and society I have embarked upon, i am going to compare and contrast two great works in the light of the modern global economy down to the granular, personal economy. Firstly appraising ".....The Wealth of Nations" and then "Das Kapital " with what will - me being me- be taken together and in a modern hiatorical comparisonm as a critical consideration of ideology versus reality.

Adam Smith both observed early pratcices in industrialisation as well as theorising what would come to prevalence - in particular the division of labour in manufacturing processes and its relation to productivity and wealth creation. His theory would suggest that wealth generation grows as the division tends to zero- further division leads to further productivity gains to the point where the smallest practical component or value adding process is commanded by a single worker.

Marx and the Luddites took a partisan view of this particular pratice in jndustry, which they both saw as reducing the skill of a worker and rendering them automatons, and thus reducing their net personal value.
There is a contradiction in Adam Smith's own works regarding this- he viewed on the one hand cottage industries as the example of wealth limitation, as also per sum of output, national wealth, yet he identified that the real denominator in any exchange of value is that of labour rather than money per se.

The conflict here being with the Marx-Luddite view - a worker commands less value for their labour in the infintesimal process,  and is exposed to being overworked due to pressure to produce more or rapidly made obsolete by new machines, or competition from other workers prepared to work for less or forcing down the value of the process in other companies who enter the market.

Today we see a return to see exactly this dilema in western societies - skilled labour for a vast amount of products and primary extraction, are cheaper elsewhere, unskilled process workers also are cheaper, and the remaining unskilled service jobs have a virtually limitless supply of labour in populated areas. However there is a more or less natural movement away from this 'natural' process of finding the lowest common denominator in a global market. This is mannifest in different economical phenoma.

Firstly there is the huge push for qaulity and safety, which both the moderate right and socialist unions and left have driven forward in policy, while many reaponsible corporates have followed in order to avoid current day litigation and future policy shock costs. A big topic, suffice to say it employs cross process highly skilled HSEQ proffessionals, amd empowers operational workers with a higher skill set and hence value.

Secondly you have those areas which are highly linked to national public spending and protected markets - be that by tariff or cultural resistance. The biggest two areas remain defence and health-care . the supposedly private US health care system is arguably dependent on the large, high margin contributions paid for public workers, such as the  police and postal workers.

Getting closer to my otherwise pico-rant-point, the next is where cross process IT and financial market - sector  workers deliver a range of skills across a range of high value industries, projects or transactions and thus command a high price on their head. 

Finally we get to Scottish Micro Brewers, organic ski manufacturers, gin 'instillers', guerrila restaurants and personal therapists ....the nouveaux artisan, the modern craft business, the hipster economy.....here we are back to piss on the chips of Adam Smith.

We have reversed the process of wealth creation he described, in that in order to command a higher price for their wares while reducing cost to market by being local, the new cottage industries have evolved. Here workers carry out a broad specteum of operations and have an interest and ownership of the product and its high qaulity.

The free market dogmatists have relentlessly moved production to lower-labour-cost-countries, even from profitable western manufacturing companies, or centralised and scaled production, curtting out regional and even national  brands in the name of profit.  Now many skilled graduates and craftsmen miss out the corporate career ladder - moving to the super brewery in Belgium or the desing offixce in Shanghai, and get into these craft companies,moften negotiating share pay, stock options and cheap private equiuty buy in early.

New middle sized, regional brands with some kinds of authenticity, terroir or taste, will emerge and be inevitably sold out to big capitalism, but are likely to last longer and have higher worker equity ownership. Craft delivery and whole supply chains- twee shops, farmers markets, real ale bars, organic restaurants, the wee pie van....people will have less discretionary income if capitalism continues unabated to restrict the metropolitan property markets and lever it into being endless rental for many educated people, and there ia a trend to spend it on local experiences and quality food and drink.

Adam Smith of course didn't get it wrong- he could summise very well the lead indicator and peri-indutrial trends for the times, and in being observative and creative he thought through much logic in what was happening and the shape of things to come. An irony for his staunch ideological followers however, is his anomalous view on the fundamental time over nominal monetary value.

This is a comparative value of labour which has both a truth as an economic principle, while also fights against the way the capitalist system trends to accumulation of wealth and the reduction of value of that labour hours.

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