Division of labour or specialisation makes exchange necessary. In ancient times, human wants were limited and each person produced himself whatever he required. There was no need for exchange or commerce.
With the changing times, human wants increased. It was no longer possible for a person to produce all his requirements himself. Therefore, each person began to specialise in one occupation.
1. Specialisation in one trade:
The first stage in the division of labour occurred when men began to specialise in some selected trades or crafts e.g. carpenter, weaving, farming, pottery, leather making, etc. This type of specialisation required exchange of goods.
For example a weaver could not eat his cloth and had to exchange it with the wheat of a farmer. Producers of different goods began to exchange their surplus goods with other goods. This system of exchange is known as Barter system and it gave birth to commerce
2. Specialisation in specific processes of production:
After, the Industrial Revolution, the techniques of production changed. The production of a commodity was now divided into a number of separate processes. Each process was performed by a different person.
This type of specialisation led to tremendous increase in output. With increase in output more exchange became necessary. Thus, the second stage of specialisation resulted in substantial expansion of commerce
3. Localisation of territorial specialization:
Large scale industry could not be run efficiently at home. It needed to be located at places where natural advantages existed. As a result industries started concentrating at particular places.
This process of concentration of industries is known as localisation or territorial division of labour. Localisation enables firms to specialise in single process. This led to considerable increase in production. Commercial activities expanded to distribute the increased output.
4. International Division of labour:
In the fourth and last stage, specialisation occurred at the international level. Different countries began to specialise in some particular lines of production.
The surplus out-put of every country began to be exported and its requirements of other goods began to be imported. For example, surplus agricultural output of India is exported and industrial goods are imported.
International specialisation led to the growth of international trade. The scope of commerce widened considerably.
Thus, each stage in the growth of division of labour or each type of specialisation is closely connected with the evolution of modern industry and commerce.