Capitalism: Karl Marx vs Adam Smith Essay
Capitalism, according to the Encyclopaedia Britannica, is “the means in which production are privately owned and production is guided and income is disputed largely through the operation of markets”. Capitalism saw the emergence after the feudal system of Western Europe can do a halt. Many economists, even today, dispute the simple beginnings of capitalism. Some theories range from religious reasons, such as the rise of Protestant Reformation in the 1500s, to the enclosure movement in England. How capitalism differs from the feudal system that preceded it is fairly simple.
Prior to capitalism the title in economic system at the time consisted of kings, lords and serfs. An example country would be ruled ultimately by a king who would have several lords in charge of various provinces. They would rule over the peasantry who never really had an incentive, other than their own subsistence, to work for the lord. For many complex events that underwent in Europe during the mid to late 1500s, this system came to an end and was replaced by capitalism.
Two of the most prominent people usually cited in the study of capitalism is Adam Smith and Karl Marx.
Adam Smith, often referred to as the father of modern capitalism theory, wrote his great work The Wealth of Nations in 1776. His belief was that capitalism arose out of property rights, allowing ordinary citizens to keep the rewards of all of the productive labor, and the division of labor, which changed the amount of time it took to produce goods. This division of labor meant that it was no longer necessary to have only an artisan craft goods because now you can split the task amongst the group of people who would all share the labor and produce that same good at fraction of the time.
Karl Marx had the luxury of coming after Adam Smith and thus was able to critique his idea when he gave his explanation of how capitalism arose. The main reason for Karl Marx was primitive accumulation, that is to say that the capitalist, many years ago “became possessed of money by some form…that took place independently of the unpaid labor of other people, and that this was therefore how he was able to frequent the market as a buyer of labor-power. ” It is not, therefore, possible that these two ideas can coincide with one another.
At an almost fundamental level Adam Smith believes that it is the power of the individual to determine his own success whereas Karl Marx would argue that it is those who were already wealthy to begin with that were able to make money and a capitalist system because they originally acquired capital. The overall theme for Adam Smith was that capitalism benefited everyone that was involved. His invisible hand idea meant that goods and services were automatically allocated to those who needed them most and us was efficient enough to run on its own.
Karl Marx did not see it this way. He saw the ability of the capitalist to exploit his own workers for profit and for him everyone did not benefit because there were winners and losers. It is wiser to say that Karl Marx had a more developed view of capitalism than Adam Smith. He had the ability to see the progression of capitalism passed Adam Smith. On top of that, his work is much more developed as it takes into account theories that compete with his own. Adam Smith comes off in a mere philosophical way describing capitalism from the ivory tower that he sat in.
In Karl Marx’s epic capital volume 1 he begins to discuss how he think capitalism originally arose. Chapter 26 titled the Secret of Primitive Accumulation is Marx’s attempt at describing primitive accumulation in detail. He states “but the accumulation of capital presupposes surplus value; surplus value presupposes capitalist production; capitalist production presupposes the availability of considerable masses of capital and labor power in the hands of commodity producers.
The whole movement, therefore, seems the turnaround in a never-ending cycle, which we can only get out of by assuming a primitive accumulation which perceived capitalist accumulation; and accumulation which is not the result of the capitalist mode of production but it’s point of departure” (Marx 873). This in turn means that Marx is looking for an explanation as to how a capitalist will acquire capital in the first place. He even likens primitive accumulation so that of original sin (Marx 873). Marx also begins to use the word class to separate the capitalists from those who are merely workers (Marx 876).
The following chapter, titled the Expropriation of Agricultural Population From the Land, has Marx discuss how capitalists were acquiring the land they use this capital. Under the feudal system cousins work for the Lords by producing whatever crops the Lords told him. Anything extra the peasants use for their own livelihood. Marx claims that at the end of the 14th century peasants were pushed off of the land that they had been tied to and were forced to find some other means of living (Marx 877).
But this was not enough to spur capitalism as it was only a small amount of free peasants roaming their home countries. In chapter 28 Karl Marx discusses how an even greater number of cousins begin to lose their land. He states, “the proletariat created by the breaking up of the bands of feudal retainers and by the forcible expropriation of the people from the soil, this freedom write this proletariat could not possibly be absorbed by the nascent manufacturers as fast as it was thrown upon the world.
Only other hand, these men, suddenly dragged from their accustomed mode of life, could not immediately adapt themselves to the discipline of their new condition” (Marx 898). It is now known that this breaking up of lands in 16th century England was due to the enclosure movement. People had to rapidly adapt from the rural life that they been accustomed to the harsh reality of urban cities. Marx even cites laws being passed to prevent vagrancy allows the person was either old or incapable of work (Marx 898).