This section is from the "Elementary Principles of Economics" book, by Richard T. Ely and George Ray Wicker. Also available from Amazon: Elementary Principles Of Economics: Together With A Short Sketch Of Economic History
In the foregoing discussion of the organization of labor, it will perhaps have been noticed that the organization of labor is intimately associated with the organization of capital. That division of labor would never have developed without that organization of capital in the form of machinery which is characteristic of modern industry, is well illustrated in the description of divided labor in the needle industry. We need not concern ourselves further, therefore, with a separate consideration of the organization of capital.
Territorial Division of Labor.To a certain extent the same is the case with the organization of natural agents as with the organization of capital. Labor is human effort applied to natural agents, usually aided by capital. Organization of labor, therefore, generally involves at the same time organization in the use of natural agents and capital. But there is one form of organization of production that is so generally conditioned by the factor, nature, that we may well treat it as a form of organization of the natural agents themselves. The two names most commonly applied to this form of organization are localization of industries and territorial division of labor. As with the division of labor, so with localization of industries, the tendency is toward increasing specialization of function, in the one case among persons, in the other among places. Thus the territorial specialization by which country districts supply the towns with food, receiving manufactured goods in exchange, society thus dividing its labor into country work and city work, is like the primitive divisions of occupations, among savages, into man's work and woman's work. And the finer territorial specialization by which certain agricultural regions produce almost exclusively some one product or some few special products, while certain manufacturing centres similarly devote themselves to making some one commodity or some few commodities, may, in the same way, be likened to that form of division of labor which we have described at length.
The last United States census contains many interesting illustrations of territorial division of labor or localization of industry. According to the census, more than half the gloves of the country, measured by their value, are made in the adjoining towns of Gloversville and Johnstown, in east central New York. Moreover, the value of the gloves manufactured was more than two-thirds of the total value of all manufactured products in the case of Gloversville, and more than one-half in the case of Johnstown. Troy, New York, produces nearly three-fourths, in value, of all the collars and cuffs made in the country, and nearly seven-tenths of all the manufacturing workmen in Troy are engaged in this one industry. Philadelphia makes over 45 per cent of the country's carpets. Nine-tenths of the wage-earners in South Omaha, Nebraska, are engaged in slaughtering and meat-packing.
Among the causes which lead to such localization of industry, the following, mentioned in the census volume, are probably most important: nearness to materials, nearness to markets, water-power, favoring climate, local supply of the kind of labor needed, local supply of capital for investment, the momentum given by an early start. Inasmuch as most of these causes have to do with geographical considerations, rather than with labor, it will be understood why we have treated localization of industries as a form of organization of natural agents, rather than as a phase of the organization of labor.
Just as advancing civilization brings increased specialization or division of labor, so we may expect that the future will witness an ever growing specialization of industry on geographical lines. Increasing stability of governments, improved methods of rapid transit, the breakdown of interracial antipathies and prejudices, are making world markets possible, and with the world markets will come a condition of affairs in which every country and every section of every country will confidently produce to the utmost those goods in the production of which it enjoys the greatest relative advantage.