How We Create the Wealth of Nations
Chapter 8: The Division of Labour
Adam Smith did not discuss the idea of creative destruction as such. That did not come until the work of Sombart and Schumpeter. Nonetheless, Smith’s Wealth of Nations does indeed contain a discussion of what we could now describe as the creative destruction caused by the division of labour. Book I contains his well known discussion of the creative side of the division of labour, while Book V contains the less well known discussion of the destructive side. Smith discusses this contrast with such care that it is worthy of a short chapter here. PRODUCTIVE POWER Adam Smith put the division of labour at the heart of his theory of wealth creation. In Book I of the Wealth of Nations, he analyses in detail how the division of labour can lead to massively increased productivity. I quote him at length because he explains all this with such clarity (Smith, 1776/1904a, pp. 5–6): The greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed, or applied, seem to have been the effects of the division of labour …
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