Karl Marx vs. Adam Smith

Karl Marx vs. Adam Smith

Introduction and thesis

How much authority should be placed in the state? German philosopher, Karl Marx, believed capitalism contained the seeds of its own destruction and that communism was the inevitable end to the process of evolution begun with feudalism and passing through capitalism and socialism (Beales Kaidantzis, 2008). Scottish philosopher, Adam Smith, believed that economic development was best fostered in an environment of free competition that operated in accordance with universal “natural laws” but also felt that the government should enforce contracts, copyrights, and grant patents to encourage inventions and new ideas as well as provide public works (Henderson, 2008). Analysis and contrast of the views of Karl Marx and Adam Smith reveal these philosophers’ markedly different views of how much authority should be placed in the role of state through their individual interpretations of how human nature morally interacts and how those actions determine the level of governance needed to create a society that produces the most benefit.

Karl Marx

Karl Marx’s views on how much authority should be placed in the role of state are intertwined with the symbolic role of money as a representation of social labor. Information retrieved from journal article: Marx and the Mixed Economy: Money, Accumulation, and the Role of the State, author Ann E. Davis ascertains that Marx notes the role of the state is in the issue of money (Davis, 2010).  The author quotes Karl Marx, “Coining, like the establishment of a standard of price, is the business of the State because money is “purely conventional” and must have “general acceptance”” (Davis, 2010). The author explains how Marx felt that money should be managed by the state in proper proportion to gold. The author discusses how Marx analyzed that the role of state is integral to the issue and management of money with money being the manner in which all contracts are settled including taxes as well as payments for wages and commodities (Davis, 2010). Information from the article also suggests that Marx felt that the gold and silver were typical substance that were the universally equivalent of the symbolic role of money as representative of social labor (Davis, 2010).  Marx believed in complete socialism where everything is owned by the people and private property should cease to exist (Ollman, 2004). Marx felt that all land, factories, mines, and businesses should be owned by the people (Ollman, 2004). Marx believed that all food and goods should be equally shared by all (Ollman, 2004). Marx felt that government should equal the people and there should be complete equality and no social classes (Otteson, nd).

Karl Marx’s view of the level of authority needed to ensure the most benefit within a society was one in which Marx felt that a powerful state should be assumed. Karl Marx believed that the role of state is integral to the issue and management of money with money being the manner in which all contracts are settled including taxes as well as payments for wages and commodities (Davis, 2010). Marx viewed capitalism as a systematic misrecognition by implying that individuals are taken not as human beings, but as means of production (Lofton, 2012). Marx contrasted capitalist views in that he maintained that people come to believe certain confused ideas about themselves in the world, and Marx felt those ideas were successful precisely because they seemed liberating, and not oppressing (Lofton, 2012).

Karl Marx rationale of how much authority should be placed in the role of state was one in which Marx believed workers were exploited and disadvantaged by a capitalist system (Davis, 2010). Marx believed that capitalism created problems through permanent social classes. Marx’s views also viewed that under capitalism the poor will suffer because they always be poor. Marx felt that the capacity to issue money is complimentary with other roles of the state such as protection of private property, adjudication of that private property, and the development and protection of foreign markets (Davis, 2010). Marx believed that the commodity form of labor power managed by means of legislation with the associated authority of the capitalist firm (Davis, 2010). Karl Marx believed “the prodigality of the capitalist never possesses the bona-fide of the open-handed feudal lord’s prodigality, but on the contrary has always lurking behind it, the most sordid avarice and the most anxious calculation” (Baumol, 1976). Karl Marx believed that economic forces predicted and determined the outcome of a society (Ollman, 2004).

Adam Smith

Adam Smith’s views on how much authority should be placed in the role is primarily based on the notion that the role of state should be limited but well defined.  In journal article: Unintended Order & Intervention: Adam Smith’s Theory of the Role of the State, author: Jeffrey T. Young, the author explains that Smith’s system of natural liberty stating that the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from the violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice and oppression of every other member of it, or the duty of establishing an exact administration of justice; and thirdly, the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society (Young, 2005).

Adam Smith’s view of the level of authority needed to ensure the most benefit within a society is derived from Smith’s avid belief that the role of state should be limited but well defined supporting the three natural laws of economics (Lipford & Slice, 2007). Smith three natural laws of economics include: the natural law of self-interest; the natural law of competition; and the natural law of supply and demand (Otteson, nd).  Smith’s view was one in which Smith believed in “Laissez Faire” economics in whereas free trade equals no government regulation or interaction and that nations do not grow wealthy from tariffs (Otteson, nd). Smith’s “Laissez Faire” economics include free market; free economy; and natural laws (Otteson, nd).  In an Independent Review journal article entitled: Adam Smith’s Roles for Government & Contemporary U.S. Government Roles, by authors: Jody W. Lipford & Jerry Slice find that Adam Smith viewpoint pertaining to government’s proper roles in one of which government’s proper role in society should be limited but well defined noting that Smith believed that government should provide national defense, the administration of justice and public goods (Lipford & Slice, 2007).

Adam Smith’s rationale of how much authority should be placed in the role of state is supported by Smith’s belief that limited authority enables the free market which is most economically beneficial to society by promoting self-interest (Lipford & Slice, 2007) Smith felt that the division of labor exploits knowledge and specialization leads to surplus and in turn surplus leading to increasing goods and decreasing prices resulting in “universal opulence”  (McQuillan, 1982). The rationale for Smith’s beliefs is one in which Smith proposes that that each individual would work in his own self- interest for his own benefit (Lipford & Slice, 2007). Smith believed by in doing so, that the people would in turn develop a market where only the value of the perceived benefit expected to delivered by the good and the producers would only sell products for as much as or higher than they would have spent on producing a good (Lipford & Slice, 2007). Smith felt that the obvious and simple system of natural liberty would enable more and more to ascend out of poverty (Otteson, nd).  Smith’s idealistic economy would be one in which there would be no surplus or deficit supply or demand; markets would always be equal, benefiting both consumer and producer (Lipford & Slice, 2007). Adam Smith felt that “it would be a serious mistake to entrust the economic welfare of a society to the good intentions of any man” (Baumol, 1976).

Key Contrasts

Key Contrasts of Karl Marx views and that of Adam Smith. Information retrieved from journal article: THE GOOD SOCIETY: LESSONS FOR INTEGRATED GOVERNANCE, author Christina Neesham notes that the key contrast of Smith’s vs. Marx’s views is Smith’s system of natural liberty and Marx’s political economy of human value (Neesham, 2009).  Smith felt that through the removal of state intervention in economic activities, the perfect system of natural liberty delivers invaluable benefits, such as fair distribution of wealth, equality and justice (Baumol, 1976). Marx’s view of the role of state as one in which government is only needed in the revolutionary and socialist stages (Neesham, 2009). The author states that Marx’s view implies that based on centrally planned economy, mature communism will have the resources to do away with both government and the market, and enjoy the triumph of civil society (Neesham, 2009). Marx believed in complete socialism in which everything is owned and shared by people including businesses and that all private property should cease to exist (McQuillan, 1982). Smith believed that all companies should be private and free trade, free competition, and the abolition of special privileges (state enforced monopolies will lead to economic prosperity for every one including workers (Otteson, nd)

Conclusion

Adam Smith proposed that the free market, where merchants and manufacturers are free to produce and trade as much as they want and the prices are based upon what the consumers are willing to pay, would result in the most efficient and desirable economic outcome due to the “Invisible Hand” (Baumol, 1976)..  Smith preferring stability, sought peace over revolution. Karl Marx believed that capitalism was fundamentally linked to a society in which it is essentially bound by segments of class which fueled his suggestion of a revolution by the working class against the middle class in hopes of creating a more equal society (Baumol, 1976). Analysis and contrast of the views of Karl Marx and Adam Smith reveal these philosophers’ markedly different views of how much authority should be placed in the role of state based is upon their individual interpretations of how human nature morally interacts ultimately promoting two very different philosophies on how human interaction determines the level of governance needed to create a society that produces the most benefit.

 

References

Baumol, W. J. (1976). SMITH VS. MARX ON BUSINESS MORALITY AND THE SOCIAL INTEREST. American Economist, 20(2), 1-6. Retrieved December 1, 2013, from http://ehis.ebscohost.com.ezproxy.rasmussen.edu/eds/pdfviewer/pdfviewer?vid=6&sid=4ced124f-189a-46df-aa35-5cacae46ec37%40sessionmgr4002&hid=4110

Beales Kaidantzis, J. (2008). Karl Marx (1818-1883) The Concise Encyclopedia of Economics . Retrieved November 25, 2013, from Library of Economics and Liberty: http://www.econlib.org/library/Enc/bios/Marx.html

Davis, A. E. (2010, July). Marx and the Mixed Economy: Money, Accumulation, and the Role of the State. Science and Society, 74(3), 409-428. Retrieved November 10, 2013, from http://ehis.ebscohost.com.ezproxy.rasmussen.edu/eds/pdfviewer/pdfviewer?vid=12&sid=2aeb0014-54b3-4332-8bdd-f951ae1f2ebd%40sessionmgr112&hid=15

Henderson, D. R. (2008). Adam Smith (1723-1790) The Concise Encyclopedia of Economics. Retrieved November 25, 2013, from Library of Economics and Liberty: http://www.econlib.org/library/Enc/bios/Smith.html

Lipford, J. W., & Slice, J. (2007). Adam Smith’s Roles for Government & Contemporary U.S. Government Roles. Independent Review, 11(4), 485-501. Retrieved November 10, 2013, from http://ehis.ebscohost.com.ezproxy.rasmussen.edu/eds/pdfviewer/pdfviewer?vid=20&sid=2aeb0014-54b3-4332-8bdd-f951ae1f2ebd%40sessionmgr112&hid=15

Lofton, K. (2012). THE SIGH OF THE OPPRESSED? New Labor Forum (Murphy Institute), 21(3), 58-65. doi:10.4179/NFL.213.0000008

McQuillan, K. (1982). On the Development of Marxist Theories of Population. Canadian Studies in Population, 9, 109-116. Retrieved December 4, 2013, from http://www.canpopsoc.org/journal/CSPv9p109.pdf

Neesham, C. (2009). THE GOOD SOCIETY: LESSONS FOR INTEGRATED GOVERNANCE. Bulletin Of The Transilvania University Of Brasov. Series V: Economic Sciences, 2(51), 2:213-230. Retrieved November 10, 2013, from http://ehis.ebscohost.com.ezproxy.rasmussen.edu/eds/pdfviewer/pdfviewer?vid=17&sid=2aeb0014-54b3-4332-8bdd-f951ae1f2ebd%40sessionmgr112&hid=15

Ollman, B. (2004). Dialetical Marxism – The Utopian Vision of the Future (Then and Now) A Marxist Critique. Retrieved December 7, 2013, from New York Universtiy: http://www.nyu.edu/projects/ollman/docs/utopian_vision.php

Otteson, J. R. (nd). The Classic Liberal Tradition: Adam Smith vs. Karl Marx. Retrieved December 8, 2013, from Yeshiva University: http://c457332.r32.cf2.rackcdn.com/wp-content/uploads/2010/03/Adam-Smith-and-the-Classical-Liberal-Tradition-10-Read-Only-Compatibility-Mode.pdf

Young, J. T. (2005). Unintended Order & Intervention: Adam Smith’s Theory of the Role of the State. History of Political Economy, 37:91-119 ;. Retrieved November 10, 2013, from http://ehis.ebscohost.com.ezproxy.rasmussen.edu/eds/pdfviewer/pdfviewer?vid=25&sid=2aeb0014-54b3-4332-8bdd-f951ae1f2ebd%40sessionmgr112&hid=106

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