Ideas of Adam Smith and Karl Marx to Understand Capitalistic Economies
Much has changed since Adam Smith and Karl Marx first postulated ideas on capitalist economic systems. First, was Smith, interested in groups maximizing self-interests, which ideally maintained that state at an equilibrium indefinitely. Consequential academia comes to both compliment and clash with Smith’s theories and approaches, both directly and indirectly. Nowhere is this more evident than in the works of Marx, he reasons a combination of shortcomings and inaccuracies within capitalism. He reveals how the system allows for the exploitation of many members of within a society by a select few. Smith and Marx both produced ideas that have helped to shape our modern world. While both recognize workers as primary value, not the owners, however, they are profoundly different in their handling of goods and resources. As a result, the best guide to understanding capitalistic economies is through a synergy of theories and ideas of both Adam Smith and Karl Marx.
Adam Smith’s Nature and Causes of the Wealth of Nations, written 1776, details the benefits and outcomes of capitalist expansion. Karl Marx, with Friedrich Engels, then in 1848, wrote The Communist Manifesto; exposed is how workers would be overtly manipulated by capitalists because they are poor. While Marx accurately predicted the enormous power of capitalist groups, he was unable to forecast twenty-first century economic influences, as well as increased police and government interpolation. Adam Smith, likewise to Marx, was unable to foresee the lobbying power that the major players in capitalist economies will come to have, causing discrepancies in his guide. Despite this, Marx asserts both illuminating and prophetic truths which work to reflect on and unpack theories that Adam Smith had keenly developed and interpreted; relating and contrasting their works provides a contemporary understanding of the capitalist economic system and its origins.
Rationalizing each of their theories on primitive accumulation of capital describes which of the two provides a more descriptive approach. Both Smith and Marx indicate it is the workers, not the capitalists, that produce value. However, Smith saw primitive accumulation of capital as occurring quietly through the hard work of individuals. Marx, in contrast, places this primitive accumulation as a result of turmoil and ultimately colonialism. Marx uses his approach to identify the harms of exploitation that must occur to initiate profits from surplus labour. For Smith, it was simply those who advance themselves beyond the statistical norms that become the capitalist. While Smith neglects the impact of colonialism in order to foster capitalism in a positive light, Marx exposes the levels of perversion that would already be present in the most primitive states.
Both Smith and Marx describe theories on the value of work that serve to represent the crucial impact of the workforce on the value of the product. Smith explains values of goods in relation to the amount of labor required to produce, which is then subjected to supply and demand. In contrast, and while value of goods still reflects the amount of labor, Marx exposes capitalism as inherently preventing workers from being compensated fairly for their contribution. Smith deduces a platform for societal and economic gains to be used in capitalist endeavours, but this is facilitated at the expense of the common members within the society. Marx emphasises how capitalists’ owners will neglect and devaluate workers in order to increase profits. As a result, harmful class structure and ideologies will continue to and further degrade worker status. Smith’s theory illuminates the power that a capitalist owner can have over their workers; Marx then exposes the fundamental need to protect workers against profit-motivated capitalists.
With Smith and Marx, there is distinct contrast between optimism and skepticism. Smith presents capitalist institutions as a benefit to all involved, noting, but wilfully ignoring the state of exploitation it brings about. Marx expands on these ideas to exhibit how capitalism enables worker exploitation for owner gains, fostering inequitable society. Smith’s solution was to use a measure of inequality; this was further accommodating to capitalist owners and promoted aggregate wealth within a given capitalist economy. Marx details capitalism as a malicious economic environment that controls workers through inescapable class structure. For the individual and for equitable societal progression, Marx is fundamental, while for the capitalist economy and its facilitators, Smith provides the model for them to remain in control.
Recognizing differences between Marx’s “communal mode of production” and Smith’s “ideal state of balance for any market” gives insight to the workings of a capitalistic economy. Adam Smith believed that economic equilibrium is “a natural condition, as in chemistry.” Marx was motivated towards the elimination of class distinctions. Smith explores the idea that economic agents would be dispersed naturally as value would slowly migrate from the rich to the poor. Marx takes issues with this indicating that for-profit capitalists coincides with inequality and the further development of social class distinctions. While the sentiment is there with Marx, in the process he overlooks the lobbying power of modern capitalists, which prevents his approach from progressing. Likewise, Smith avoids class issues in favour of economic gains and the well-being of members within the system, ultimately restraining their ability to be involved.
Marx’s encouragement of uprising and revolt against injustices challenges Smith’s appeal for stability and peace, further demonstrating the need for understanding both. For Marx, societal wage gaps and capitalism are profoundly connected to each other. Smith, in contrast does not challenge unfair treatment from capitalist facilitators. Marx indicates a different economic framework is required to eliminate wage gaps that result from for-profit capitalism. While Smith consequently lends a voice to the very thing that he wishes to avoid as he empowers capitalist owners. Instead of investing in technology, they will come to use government influence and lobbying to remain economically relevant, evading both market competition and contributing to the intended societal benefits of capitalism. Smith’s unregulated capitalist approach provides capitalists freedom to operate, but lacks the responsiveness to protect workers and consumers, while Marx, in promoting eliminating wage gaps and class distinctions, promotes communal oversight.
Equality for all, as promoted by Marx, challenges the riches of the aristocracy, undoubtedly this was also factor in Smith’s approach. Realistically, an ideal capitalist system should work towards eliminating exploitative practices rather than abet them, as Smith’s does. Smith provides little insight regarding assets of the aristocracy and capitalist owners. In contrast, Marx unpacks the inherent risks associated with capitalism. Smith argues that there are different social classes and they are essential to producing surplus value, while he was conscious of capitalist exploitation, ultimately, he protected the aristocracy and their riches. Marx exposes land holdings and excessive riches as leading to benefits for only select individuals. It was as a result of this, for Marx, that government intervention was crucial to eliminate class-induced hardship. Marx associated these risks with the need to liberate workers and eliminate social classes to achieve a more equitable society for all. Smith, on the other hand, was exclusively concerned with serving capitalist owners and their profits.
Despite these works developing almost 200 years ago, they continue to help us understand the influence of capitalism on education systems, the media, and much more. Smith’s work unsatisfactorily takes a more peaceful route, with the equilibrium theory used to maintain the capitalist market through supply and demand. Marx’s chief concern was workers being exploited through “surplus value” and exposes dangers that are associated with capitalism. Smith’s ideal system consists of “laissez-faire” government interference, positioning capitalist owners to shape emerging societal norms and beliefs. Marx in contrast shows how by instilling workers, that is, providing them with earnings that reflect the capitalist gains they help produce, they will become impowered, and are positioned to influence and contribute to the environment they subsist in. Smith’s tolerant-to-owner approach paralyzes workers and consumers to the mercy of capitalists and their influence, while Marx’s theories provide a means, and voice, for those workers to act and react.
In our current state of societal and economic affairs, science and economy become ever-more entangled. It cannot be a question of considering Marx or Smith separately, but rather how they interact with one another. Smith presented the idea of mutually beneficial trade, where both sides benefit from an exchange of goods. Marx took issue with this and shows how capitalism facilitates itself in such a way to maximize profit without consideration of the worker contribution or true worth. While Smith has ‘capital’ as stock and ‘profit’ being the difference between revenue and stock, workers receive no advantage. Marx opposed this and envisioned the “emancipation” of workers, achieving equality for all. Marx provides a means for workers to be prosperous, while Smith provides the means for owners to maintain power and control.
To understand capitalistic economies is to grasp the theories and ideas of both Adam Smith and Karl Marx. Smith empowered capitalist owners to remain successful and Marx empowered indiviuduals towards liberty. While capitalism for Smith coincides with optimism and sustainment, Marx’s skeptical stance insists that it will inevitably be overturned. Understanding the capitalist economic system from a contemporary standpoint requires acknowledging both Marx and Smith as both providing essential context and insight.