Session 1 Early debates:

Smith, Marx
ID475 Organizational Theory
Dr. Daniel Beunza

The pin factory

Writing in the wake if the Industrial Revolution, Smith
writes about the division of labor, which he credits for
the phenomenal rise in productivity he was witnessing.
To take an example, therefore, from a very trifling
manufacture () the trade of the pinmaker. A workman not
educated in this business could perhaps make one pin a
day. But in the way in which this business is carried on, not
only the whole work is a peculiar trade, but it is divided into a
number of branches. One man draws out the wire, another
straights it, a third cuts it, a fourth points it, a fifth grinds it at
the top for receiving the head and the important business
of making a pin is divided into about eighteen operations.

Smith, 1776, p. 8.

Specialization
What division of labor allows is
specialization. In turn, this generates
there forms of advantages: learning,
savings in switching from task to
task, and greater possibilities to
automate the simplified tasks.

Self-interest
Smith goes beyond the division of labor,
to discuss the possibility of a society
based on free exchange of goods -commerce. He poses that in contrast with
a society based on altruism, generosity
and other typed of bonds that had shaped
pre-modern societies.
In this, Smith opens up the door to the
rise of economics and methodological
individualism.

Kapital, Ch. XIII

Marx writes almost one century about
Smith, and mounts a phenomenal
intellectual attack. He starts by attacking
capitalism and division of labor -- the
"factory system."
It is not because he is a leader of industry
that a man is a capitalist; on the contrary,
he is a leader of industry because he is a
capitalist.

Marx, 1867p. 386

Kapital, Ch. XIII

He argues that it leads to exploitation because once
the capitalist (owner of the plant) contracts with the
individual employees they receive the same wage
they would get if they worked for a non-factory
artisan. And because their productivity is higher,
they are being paid less than what they contribute.
The capitalist, instead of buying the labour-power of one
man, buys that of 100, and enters into separate contracts
with 100 unconnected men instead of with one he pays
them the value of 100 independent labour-powers, but he
does not pay for the combined labour-power of the
hundred.

Marx, 1867 p. 386

Sect. 2: The detail

laborer and his implements
Marx criticises division of labour in that it leads to
less employee satisfaction and alienation
(separation, distancing) with the product and fellow
workers. It also obscures the "whole picture" of that
the organization does.
The workmans continued repetition of the same simple
act, and the concentration of his attention to it, teaching
him by experience how to attain the desired effects with
the minimum of exertion on the other hand, constant
labor of one uniform kind disturbs the intensity and flow of
a mans spirits, which find recreation and delight in the
mere change of activity.

Marx, 1867 p. 391

Sect. 5: The capitalistic

character of manufacture
The division of labour in the
workshop implies the concentration
of the means of production in the
hands of one capitalist the division
of labor in society implies their
dispersion among many independent
producers of commodities.
Marx, 1867 p.
393

Sect. 5: The capitalistic

character of manufacture
More importantly, Marx argues that
the division of labor that the world
exhibited at the time was not
natural, as Smith argued, but
imposed on people to exploit them.
He gave the examples of the French
guilds, and the Colonial system.

Final takeaways from the

readings
Whos right? Smith or Marx?
Different scholars and citizens have different views.
One can argue that the world has progressed in ways
that offer a mixed picture. The growth and rising
standards of the West suggests Smith was right. But the
rising inequality, even in the West, suggests that Marx
was also partly right.

What is the takeaway for Organization Theory?

Overall, one can make the point that organized
economic activity (division of labor) has both advantages
and disadvantages over artisanal production
As a manager, how can you benefit from it while
minimizing the dysfunctions?

Relationship between the case and

the readings
The two illustrate different ends of Organization
Theory
The beginning: industrialization, its promises and
limits, rise of division of labor, early structures
Today: financialization, promises and limits, culture,
the problems of managing simply by structural means

During this course our discussion will go through

a series of authors and ideas that will take us
from one to the other
Both illustrate the importance and significance of
well-run organizations for society