Why did Adam Smith think capital was necessary for the division of labour?

Adam Smith, the Scottish philosopher and economist, argued that the division of labour is the primary source of a society's ability to increase productivity. However, he maintained that this process cannot occur unaided; it requires the prior accumulation of capital—which he referred to as "stock"—to function effectively.12

Smith identified two essential roles for this accumulated capital in facilitating the division of labour:

• Payment of Labourers: Capital is necessary to provide the wages required to support workers while they are engaged in specialized tasks.12
• Provision of Tools and Machines: Capital is required to purchase the necessary equipment and machinery that enable workers to specialize and increase their output.12

By accumulating this stock, manufacturers can organize production into specialized roles, such as the famous example of the pin factory, where specialization allows a small group of people to produce significantly more than they could individually.12