Karl Marx versus Adam Smith - Essay Example

Insert Karl Marx versus Adam Smith Karl Marx is a 19th century philosopher whose contributions attracted controversy throughout the 20th century. As an undisputed revolutionary whose ideology castigated Capitalism, the philosopher found himself on the wrong side of the Capitalist-inclined modern Western societies. Adam Smith, on the other hand, is known for being the founder of the scientific aspects of economics. As a key architect of the classical economics, Smith integrated economics with ethics in his definition of the ideal life of man. Smith’s descriptions of economic factors in the market and the functions of national authorities in economics have contributed to the current Capitalist system of economy in most of the Western countries. These philosophers have cut their respective niches in the faculty of classical economics, since their works have some ideological commonalities. On political theory, however, these philosophers are far apart. This paper explores the similarities and differences of economic theories of Marx and Smith. Background of the issue Throughout the history, economics theorists have presented a number of concepts, in an attempt to establish the one that will bring about the most tangible development. This has placed classical economics as one of the most contested theoretical subjects. The idea spawned what became of the current economic concepts of Capitalism. Adam Smith and Karl Marx are attributed to the creation of the theory of modern economics. The two philosophers are, however, different in thought, with Smith rooting for Capitalism and while Marx castigating it (Lu 96). As Kenny has argued, classical economics is said to have been created during the evolution of governance from feudalism to capitalism (1). Throughout this evolution, economists found themselves at pains to choose which system would give either side of producers and consumers a fair bargain. This undertaking was so challenging that the society had to coin a system under which most consumers who had gotten used to the culture of dependence under feudalism would now be empowered to have their own assets, and eventually turn the property into a source of living (Marx 383). In light of this transformation, classical economists coined different theories relating to pricing, value theory, and pecuniary theory that would fit well in the new Capitalist economic system. It is upon the fundamental economic goals of enabling people in the society to take a proactive role in the society and reap fair benefits that has pitted Marx and Smith against each other on issues such as liberal market, power and coercion, and evolution of work. Of voluntary exchange through the market Adam Smith’s Wealth of Nations dwells on the need for a liberal market, where producers have the freedom to achieve maximum production and modify commodity prices as they deem fit. Smith argued that this freedom of the “invisible hand” would create the most viable and appropriate economic result for both producers and consumers (Smith 351). The basis for his theory was that either side of the bargain would be persuaded to work tirelessly in order to get the most gains. As a result, consumers would have the freedom to invest in the commodities depending on their value and producers would have the power to sell their produce at appropriate prices above producing costs. In his fervent theory, Smith charges that the resulting voluntary market would have no surplus or shortfall of supply or demand: that this would create equilibrium markets, and the gains that each side of the production scale stand to benefit from will be at its maximum levels. In such a voluntary exchange through the market, the government’s role would be less important. By contrast, in Capital Marx posits that producers would exploit consumers under Capitalism by raising commodity prices, more so if there is market monopoly in the market (Lu 96). In essence, Marx charges that a few Capitalist producers would base their actions on the advantage they enjoy already by virtue of their riches to create an unfavorable economic system for the underprivileged classes in society (Kenny 2). The rich producers, according to Marx, would obtain more wealth while the poor consumers become economically emasculated by high commodity prices. In addition, Marx condemned Capitalism for always carrying the tools with which the rich in society can use to negotiate and keep workers’ wages at the very low. Marx’s labor theory of value posits that the value of a commodity is directly connected to the level of effort needed for its production. This, he argued, is not always the case, because under a capitalist system, producers are more at liberty to fix their commodity prices, which often results in high pricing to the disadvantage of the weaker underprivileged in the society (Lu 98). The end result would be a society in which a powerful coterie of producers who control the economy at the expense of the hardworking classes who toil more. Power and Coercion Capitalism arguably delivers power to few producers in the market and they in turn exercise it to coerce the economically less-privileged in the society. As Marx argues, the end result is the creation of two distinct classes of people in an economy; the proletariat and the bourgeoisie (Kenny 1). In addition, Marx suggested that due to Capitalism, the economic gap between the two classes will forever remain wide (Kenny 3). The better-endowed bourgeoisie owning property would control key sectors of the economy including factories, the media, higher learning institutions, polities, and bureaucracies in society. This unchallenged power would be used to coerce the underprivileged in society into adopting concepts that they would not in a genuinely free environment (Smith 158). The solution to this inherent coercion, according to Karl Marx, should be the proletariat mounting a revolution to challenge the power that is entrenched in a few individuals as a way of establishing a new system in society where all people have equal opportunities - a social system that eliminates such classes. Marx argued that by demolishing capitalist structures, the coercion of the proletariats by the wealthier and the more powerful bourgeoisie would end. On his part, Adam Smith was opposed to the use of revolution to end coercion of the underprivileged in society as a means of restoring justice and power to the lower social classes; instead he rooted for the maintenance of order and stability as opposed to relief of the disadvantaged people from persecution. On his part, Marx pointed out strongly that capitalism spawns greed among the powerful elites and creates discrimination. He added that the idea of competition under a Capitalist system harbors greed, which would precipitate natural instability and inequality in a society (Kenny 4). According to Marx, the individualistic approach in a capitalist system was the origin of skewed production and subjective planning, which then precipitate inequitable distribution of resources. The resulting situation under capitalism would widen the gap between the better-off bourgeoisie and the disadvantaged proletariats. Regardless, Smith’s theory did not underscore the importance of land ownership or the wealth amassed by aristocrats as Marx did. This could be the reason behind Smith’s insistence on law and order among the proletariats, when it is apparent that the more economically powerful are keen on misusing the power they have against lower social classes. Evolution of Work On evolution of work, Smith held the argument that an individual could earn economic gains reflecting the amount of effort that one makes and thus contribute to the average wealth in an economy (144). Smith suggested that in a liberal labor market, people would be better placed to freely fill the employment positions which they have the capacity to serve in and claim a fair bargain in compensation in as much the same way as a consumer would seek to benefit from goods and services they want. According to Smith, the gains that an economic party stands to obtain would “employ” other people and not necessarily through direct channeling of funds to persons who are not in employment. This means the original laborer would spend their earnings, which would then be received by another person offering a commodity; this would enable the second economic party to spend the money which they have received, and participate more proactively in growing the economy several times through circulation of money. On the other hand, Marx noted the weaknesses of the production versus labor theory of Capitalism as suggested by Smith. Marx was of the opinion that a Capitalist system of economy witnessed workers being subjected to persecution, exploitation and alienation by the better privileged in society (Lu 101). As an individual labors, the new commitment alienates them from the general society, humanity, and the items they produce. Contrary to Smith’s assertion that laborers would forever have the capacity to make the best employment bargains throughout their relationship with the producer-employer, Marx notes that Capitalism would keep the employee earnings at the bare minimum. This is in contrast to the fact that under Capitalism, laborers have a far greater capacity to bargain for better terms. In the real sense, in order for one to sustain themselves economically, laborers have been reduced puppets of the wealthier classes under Capitalism, a development that prompts the proletariats to abandon their resolve to bargain fairer deals in favor of poor wages proposed to them. Such earnings are just adequate for the basic needs. Smith argues that work will forever remain rewarding to both the producer and the laborer, but Marx says work is harsh to the latter (14). Contrary to the widely held belief of fair conditions of employment, the world has undergone through substantial evolution to the chagrin of the laborer. Stiff competition under capitalism has reduced the worker to a position where they must accept unfavorable conditions such as overwork, which lead to their burnout and low life expectancy. As the labor needs become more complicated, human services have taken the commodity trajectory, however The current economic system witnesses people buying and selling their labor like it happens with any other goods (Kenny 4). As a consequence, life of a laborer is being dictated by forces that are beyond the understanding and or capacity of the individual in question. Capitalism, as predicted by Marx, has turned the demands upon which the laborer’s life has a bearing on the wishes of the better-endowed and the agents of Capitalism. Conversely, as Adam Smith had predicted, the current workplace environments have essentially evolved to the better, spare for remuneration. This is in contrast to the 19th Century working conditions when Marx came up with the weaknesses of Capitalism with regard to workplace environments. The 19th century economy saw many people rendering their services under appalling conditions for more than 15 hours a day. The hard-pressed workers could not abandon their jobs because that was their only source of livelihood. But in the current world of labor rights and stiff competition among Capitalist entrepreneurs, workers have immensely benefitted from the reforms (Lu 107). Owing to the massive economic opportunities that Capitalism has for capable people in society, I prefer the system as supported by Smith as opposed Marxism. This is because genuine competition yields fair-priced goods and services of better quality and relegates the role of government, which could otherwise reverse the economic gains and keep production levels lower than the optimum capacity. Conclusion Adam Smith and Karl Marx are great philosophers whose contributions of the concepts of the modern economic theory define current trends in the world. While both theorists converge on a few major values, they hold different views on openness of the market, power and coercion and the evolution of work in a modern economic system. Marxism holds that a revolution by the economically weaker proletariats against the better-endowed bourgeoisie is not only posh but fair and would create an equitable society. On the other hand, Adam Smith advocates for the retention of the status quo. Either way, a liberal market under Capitalism would yield fruitful competition and precipitate equity within a society. Works Cited Kenny, Charles. Marx Is Back. Foreign Policy, 204 (2014): 1-5. Lu, Xiaohe. Business Ethics and Karl Marx’s Theory of Capital – Reflections on Making Use of Capital for Developing China’s Socialist Market Economy. Journal of Business Ethics, 91.1 (2010): 95-111. Marx, Karl. Capital: A Critique of Political Economy - The Process of Capitalist Production as a Whole. New York: Cosimo, Inc, 2007. Smith, Adam. Wealth of Nations. New York: Cosimo, Inc., 2007. Read More