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Book 1, Chapter 2
Themes
Key
LitCharts assigns a color and icon to each theme in The Wealth of Nations, which you can use to track the themes throughout the work.
Labor, Markets, and Growth
Capital Accumulation and Investment
Institutions and Good Governance
Mercantilism and Free Trade
Money and Banking
Summary
Analysis
Human exchange (or the market) creates the division of labor. Thus, the size of the market determines how much the division of labor can advance. In rural Scotland, for instance, there are seldom specialized butchers or brewers, and never more than one stonemason or carpenter per region. Instead, people do most work themselves. Specialized trades develop first on coastlines and riverbanks, as shipping is the most efficient form of trade; six men on one ship can transport as many goods as 50 carts, 100 men, and 400 horses by land. This is why civilizations first developed around the easily-navigable Mediterranean coast. Inland navigation was also crucial: Ancient Egypt developed primarily because of the Nile, Bengal because of the Ganges, and Eastern China because of its many great rivers. But inland Asia and Africa remain “barbarous and uncivilized,” Smith contends, because they are not conducive to inland navigation.
Smith’s observations about the relationship between market size and the division of labor show that simply bringing a lot of people and resources to a single place is one of the best ways to promote economic growth. As he points out, this helps explain the geography of economic development: dense, globally-connected urban centers have long seen the fastest growth, while remote, small-scale towns and villages often see little economic progress over the centuries. Geography isn’t everything, but it’s quite important. Even if overland transportation has gotten dramatically easier and air transport has become possible in the centuries since Smith wrote this book, the same patterns he observes are still present across the globe today. Indeed, all of the cradles of civilization that Smith cites are still major population and economic centers, largely due to their geographical advantages.
Themes
