Adam of Adam Smith. Marx believed that in order

Adam Smith was born on the 16th
June 1723 in Scotland, also known as the father of classical free-market
economics. He was a Scottish economist and a professor at the university of
Glasgow. It is believed that Adam was the first thinker of the Classical
Political Economy. In his book “The Wealth of Nations” he tries to show how
poverty could be eliminated. He measured poverty with the rate of mortality among
the children of the common people, and found out that in almost all places
children die before 10 years of age. (page 27) According to him the elimination
of working class poverty could improve the society. Another economist and
philosopher, whose ideas will be compared with Smith’s, Karl Marx, was born on
the 5th May 1818 in Germany. In his book “Capital: Critique of
Political Economy, vol 1.” he criticizes the main work of Adam Smith. Marx
believed that in order to survive “we must work with what’s at hand in order to
make this today into tomorrow” and with this approach, he based most of his
main ideas. (page 52)

 

Four main laws of Classical
Political Economy were: law of self-interest; law of free competition; law of
supply and demand; and law of international exchange. Adam Smith was one of the
founders of Classical Political Economy. He opposed the view of mercantilism
which believed that “wealth consists in money or in gold and silver” (Sackr). According
to Smith this belief was the real reason why the working poor were prevented from
receiving higher real incomes. He
contradicted that “wealth does not consist in money or in gold and silver, but
what money purchases and is valuable only for purchasing” (page 33). Adam Smith’s
three main ideas were: free exchange; division of labour; and laissez-fair. Adam
Smith believed that the government should not promote collusions, like
governments during mercantilism, because it harms the economy. He said that, “whenever
there is great property, there is great inequality” in which great property
refers to firms that collude. He stated that the protection of the society from
violence, protection of every its citizen should be the actual role of the
government. What is more, the state should provide public goods since they will
never be supplied by the private firms simply because they are seen as
non-profitable (page
37). He also believed
that governments should invest in public education, in human capital, because
that would stimulate economic growth and development. (Page 40) What is more,
Adam Smith was in favour of free trade and came up with limited laissez faire
which translates as “let do” or “let the market regulate itself”. It suggests that
the government should not intervene with business and that a man is free to whatever
is in their interest thanks to “invisible hand” which is an invisible market
force that helps reach supply and demand of goods the equilibrium (The economic
times). Smith seems
to assume that markets would always be sufficiently competitive to generate low
prices, new innovations, and enough competition for labour such that workers
would be treated well and paid fairly. (page 43)

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Karl
Marx, and his critique of political economy main ideas were: class struggle, the
labour theory of surplus value and materialist conception of history, which “starts
from the principle that production and with production the exchange of its
products is the basis of every social order”.(Marx) In his view of Marxism Marx
argued that in capitalist economy there exist a phenomenon called the class
struggle between the bourgeoisie (the ruling class that own most of society’s
wealth) and proletariat (the working class). He said that the wealthy people
will get wealthier and that the poor people will get poorer. These changes in
income is what Marx meant by this struggle. (page 51). Marx criticizes the
capitalist mode of production and says that competition would actually have bad
effects on the economy. According to him competitors will corrupt and force
capitalist, people that hire wage labourers, to “close their
factories, reduce wages, break laws, buy the politicians or do anything that
will maximize their profit.” (page 60). Furthermore, Marx argued that capitalists
limit human labour. According to him workers in a capitalist society are
alienated meaning. Capitalists through monitoring their workers were able to
control their labour. If someone was not working well then, he could be
switched with another unemployed worker also called the industrial reserve army
by Marx. In his view capitalists had access to the “pool of unemployed” and
could use them, since they were desperate to find work, whenever they needed
to. Marx has seen the meaning of profit differently that other economists. He
believed that surplus value was the origin of profit. For Marx, surplus value
was the difference between the value of what the worker produces and what he is
paid. (page 64) If a worker is earning £2000 monthly salary but produces £6000
of profit, therefore, the surplus value is the difference between those two
numbers. In Marx’s view the price of a good or service was determined by the
amount of work out into its production.

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