Division of Labour (1)

In the next couple of days, I will be posting some suggestions about how to prepare for a crisis. To understand some of the issues I raise, readers will need to understand the role of the Division of Labour in economic activity. I will explain the meaning of this expression in my next two posts before going on to talk about preparation.

Specialisation and Subsistence and Self-sufficiency
In a traditional society, people often live by substance. They do not depend on any other people for survival, because they grow or produce everything that they consume. If they cannot grow or make it themselves, they do not have it. Living on subsistence allowed the people to be self-sufficient, but this was quite limiting, because they spent so much of their lives producing food and shelter, they did not have time to develop and make other products that they may want.

Trade changes everything, because it allows people to specialise. One person specialises in growing grain. Another specialised in catching fish. A third person specialises in baking bread. Each one does what he is most skilled in doing. By focusing on one task, each person could increase their skills and find ways to do a task more efficiently.

The person who specialises can produce more than they need to survive. They can trade their surplus production with others to get all the things they want. Trade improves the situation of almost everyone.

Over the last fifty there has been a vast increase in specialisation and trade. The Japanese have specialised in making flat screen TVs, New Zealand has specialised in producing milk powder and special effects for movies. Americans have specialised in making autos. The Chinese have specialised in manufacturing clothing. This trade and specialisation makes most people better off.

I do not have a clue about how to make a computer or a flat screen TV. I could not make a decent automobile, if I worked on if for a hundred years. If I made my own clothes, I would look like a caveman. However, by specialising in tasks that I am skilled at doing, I can afford to buy all these things and many more.