The Politically Differences In Thinking Policy Politics

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The legacy of 19th century thinker Karl Marx has been one that has been shrouded by controversy. Marx is regarded as one of the most radical and dangerous political philosophers of our time, given his theories on radical communism and as for Adam Smith, today's capitalist economic system have been shaped by Smith's theories on the role of the state and market forces.

Though politically these two thinkers differ exponentially, but somehow they have been placed under the same purview of classical economics. The school of Classical Economics has been called the "first modern school of economic thought." [] It emerged during and because of the transition of feudal society to a capitalist one. During this transition, thinkers were posed with the tasks of resolving the problems of the new system, which mostly was to bring a consensus between the needs of the producers and consumers.

Economists and philosophers, throughout decades, have tried to argue upon various theories on economics in an attempt to find one that will be the most efficient for the society's economy.

Many-a-theories regarding value, natural price, and monetary theory, were held by the Classical Economists. All related to the new economic processes brought on by Capitalism.

Marx and Smith had their own theories regarding the above, which in some aspects were similar, however, also divergent.

Karl Marx, born in 1818 in Trier, Germany, studied law, history, and philosophy at the universities of Bonn, Berlin, and Jena [] , and became famous for his revolutionary ideas and as one of the formulators of communism. He is renowned for his book on economic theory, Das Kapital. As members of the Communist League, Marx and his friend Friedrich Engels authored the Communist Manifesto-which discussed the class struggle and the need for a revolution of the proletariat. [] 

Marx's problem with Capitalism -the dominant system all over the world, presently- was greatly to do with the system's production aspect, which he regarded as troublesome. It was his belief that in a Capitalist society, the production aspect was always tilted favourably towards the rich factory owner. For him, this tilt effectively meant the exploitation of the poor worker by the factory owner who always benefited more. "All the bourgeois economists are aware of is that production can be carried on better under the modern police than . . . on the principle of might makes right. They forget only that this principle is also a legal relation, and that the right of the stronger prevails in their 'constitutional republics' as well, only in another form." [] 

According to Marx, the workers in the Capitalist system were exploited, and thus, dehumanised.

The exploitation or dehumanisation of the poor worker leads to the path of alienation. Exploitative labour, leads to alienation from the society, estrangement from the human race and lastly, separation from the object that the worker himself produced. This concept of estrangement or alienation figures greatly in Marx's work on economic theory.

According to author Jonathan Wolff, Marx didn't agree with these five core ideas of Capitalism:

"1. Under Capitalism, the wages of the workers are literally minimal. This is a consequence of the fact that the capitalist is in, by far, the better bargaining position and to avoid starving the worker must be prepared to accept the very low wage that will be on offer: a wage just sufficient to keep the worker and family alive.

2. Work is punishing. For the same reason, the worker must accept appalling conditions, leading to overwork and early death.

3. Labor is degraded and one-sided. As the division of labor becomes more advanced, labor becomes more machine-like . . .

4. Labor has become a commodity. It is bought and sold on the market like any other commodity.

5. The worker's life has become subject to alien forces. The demand on which the worker's life depends is founded on the desires of the wealthy and the capitalists." [] 

Marx's grouse with Capitalist thought can be understood in the context of the working condition of his time, where workers worked sixteen hours a day under harmful conditions, and most workers couldn't quit given the survival of the family.

According to him, it was only revolution by the exploited working class (proletariat) against the comfortably benefited wealthy factory owner (bourgeois) that could overthrow the exploitative capitalist process. And economy, education and media were the most crucial areas where this revolution was to be created.

Overthrowing the capitalist regime was the only way that the worker could improve his life, and in its place they must place a new system - Communism. Stateless and classless, Communism, is a system where means of production are not in the hands of the few, but is common. Communism also meant, for Marx, that every worker will have equal access to everything, whereby, competition will be eliminated.

Class-consciousness is produced by Capitalism, as according to Marx, it is an unfair system, which side-lines the workers and benefits the rich. Thus, there is this constant struggle between the classes, where the bourgeois wants to keep and make maximum profit by exploiting the worker who struggles to get adequate wage and working conditions.

According to Marx, each side has a right to what it wants and "between equal rights, force decides." [] Marx finds fault in the ideology and practicality of capitalism; its basic tenets are little or no interference in economic affairs by the government, free and consistent market competition, private ownership, and the ability for each individual to attempt to maximize profits. [] Â Ownership in the hands of a few, maximum profits, and the deficiency of central planning were the areas where the points of contention for the thinker.

According to him, Inequality and greed were the result of the Capitalist system, as the system rested on the foundation of profit motive. Marx believed that this exploitative system was sure to fail under the heavy revolutionary crusade of the exploited proletariat.

1. Competition . . . implies winners and losers . . . causes the rise of monopoly capitalism.  2. The lack of centralized planning . . . results in the overproduction of some goods and the underproduction of others . . . causing . . . inflation and depression. 3. The control of the state by the wealthy. 4.Creates social problems because of the great gap between the rich and the poor. [] 

This greed and inequality, was the basis of Marx's faith in Communism, which he believed would create ideal economic, social and political situation in the society.

Adam Smith, born in 1723, studied moral philosophy at the University of Glasgow and Balliol College, made a name for himself as a traveling lecturer, later becoming a professor of logic, ethics, rhetoric, jurisprudence, and political economy. [] Adam Smith released his Inquiry into the Nature and Causes of the Wealth of Nations in 1776, the United States of America also came into being concurrently. "A political democracy was born on one side of the ocean; an economic blueprint was unfolded on the other." [] 

Adam Smith as is widely known created the "economic blueprint" that extrapolated the devices of the free trade economy, but it is not so widely known that he was also a moral philosopher. Living in mercantilist England, Smith had the foresight and wisdom to see that the mercantilist system was flawed and he thus began to write his treatise on free trade economic system.

He theorized that in free trade economy, a person will acquire the ability to earn money or capital, which he will then use to purchase goods or his own business and thus have equal opportunity and contribute to the growth of the nation. It was his belief that by doing so the economy will be stimulated to grow.  

Like Marx, he also realized the importance of production and vied that it was the key to growth in the economy. In his ideal free-trade society, people would be allowed to start enterprises, free from government intervention, and the laws of supply and demand will decide the price of products.

The simple theory of supply and demand is the mechanism that allows for the efficiency of the market in a free market system. In his theory the market, because of the unbiased law of supply and demand will only allow the success of the most competitive manufacturers. The free market is supposed to reach equilibrium on its own and planning and government intervention is considered hampering in this system.

One of the most controversial aspects of Smith's theory is his attribution of the invisible hand guiding the decision making of each individual, which apparently guides the us in such a way that the decisions are made for the benefit of the economy as a whole without our knowing it. In Smith's own words:

'Every individual necessarily labours to render the annual revenue of the society as great as he can. He . . neither intends to promote the public interest, nor knows how much he is promoting it. He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.'  [] 

Smith thought that capitalism was the most logical, lucrative and moral political and economic system. He believed this because in the free market economy, individuals are free to own property and do with it what they wish and have the freedom to spend and earn in the manner they see fit.

For Smith, capitalism is not a system that benefits the rich exclusively. He thought that because of the existence of private property everybody in the economy had the chance to rise and better his standard of living. Smith relied heavily on his belief of virtue commanding the decision making of people.

Smith may well have played a crucial role in setting the kinds of arguments to which Fodor (1996) calls attention. But anyone who reads past the opening chapters of The Wealth of Nations will see at once that he did not intend the arguments to sweep everything else from the board. (Like Marx) He was suspicious of bankers, wanted to control interest rates, insisted on public works and knew the importance of education. His own moral philosophy, based on notions of sympathy and benevolence, provided a strong notion of community. He meant to see market activities as ways of increasing benevolence, but he knew that they could only do this in an established social context. [] 

Smith's capitalism is a moral system and he sees no need for a revolution of the proletariat, unlike Marx, and does not think that one would even be necessary as his system provides equal opportunity to everybody.

Not unlike Marx, Smith was not pro rich and in many ways was in favour of laws, rules and regulations which aid the poor and the working class. He is for a higher standard of living for the working class. Hence, for example, he can be in favour of higher taxes upon the rich, for example:

'A tax upon house- rent, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.' [] 

Marx was deeply impressed by Smith, but he thought that Smith had forgotten the relationship between economics and power - that power goes to those who control the means of production. Power slipped from the hereditary aristocracy because the new trading classes which emerged in the eighteenth century could not be easily controlled by the traditional devices which enable an aristocracy to control the land, and, as industry spread, the situation became even more difficult. [] 

That Smith was not a strict, dogmatic advocate of laissez- faire policies is also quite clear. As Spencer J. Pack and others have stressed [Viner (1928); Rosenberg (1979); Muller (1995)], there are many things the government can and ought to do. Among other things, the government should take steps to ensure the integrity of the money- commodity through coinage; just as it has taken steps to ensure the quality of other key commodities such as woollen and linen cloth. Special regulations on the banking industry concerning bank reserves and the proper issuance of bank notes are needed. Just as the government enforces the building of fire walls to prevent the spread of physical fi res, so here special regulations are needed to help prevent the spread of financial fires and panics. [] 

Adam smith envisioned a capitalistic world governed by the dictum of the free market, while Marx envisioned a classless mega-state actively governing the economy. Both these forms of government were realized, but never in their pure form as envisioned by their theorists.

Since the fall of communism in Eastern Europe and the former USSR, wages for the average worker in the capitalist West have largely stagnated. There is less fear of a communist or socialist revolution by the ruling class; thus emboldening capitalists and/or their managers to become more aggressive in resisting demands for wage increases. Increased globalization, and the potential and real threat of international capital flight, also plays its part in limiting and/or preventing increased wages for the average worker in the advanced capitalist countries. [] 

The trends of globalization seems to be a logical outcome of the free market economy preached by Adam Smith but market economies have a chilling outcome, too. As Marx extrapolated, 'the "globalization" of the market has reduced still further the power of competing institutions, especially the state. By 1992 world trade in the most easily marketable commodity - currencies - had risen to at least 35 trillion dollars against a tenth of that in other commodities and services. The effect of this has been to reduce the power of governments to regulate their economies since the cost of their debt can fluctuate widely as the need to use interest rates to keep currencies at a desirable level increases. Jacques Chirac, the President of France, has described this as "the AIDS of the world economy"' [] 

One of the major causes of the recent near global financial crisis was the proximity and dependence of various financial markets on the United States economy and the U.S. dollar being virtually the world currency as is explained by the following passage.

'As far as money is concerned, both Smith and Marx are correct that the exchange of commodities will necessarily generate money, a universal equivalent, and then in a global economy, a world economy, a world money will be generated. The system apparently cries out for a world universal equivalent. There is evidence that since the end of the Bretton

Woods system, the US dollar is in the process of becoming world money. To the extent this is true, then the US will generally have a balance of trade and/or current accounts deficits. Hence, it makes approximately no sense to try to 'correct' these deficits. Moreover, this means that the Federal Reserve Board will to some extent further lose the control of the supply of money in the US. This fact should further dampen any residual monetarist dreams that the Fed can and should target the money supply in its efforts to pursue its economic goals. This also means that to some extent US currency is equivalent to gold coins under the old international gold system. Moreover, the US debt is in some ways similar to gold, since it is a store of value which is extremely liquid, and easily convertible into US currency/world money. To the extent this is true, it means that the US can borrow its own money extremely cheaply. It is as if the US government owned its own gold mine. Indeed, it is even better than owning a gold mine since the US government can produce its money for basically zero cost. This also suggests that changes in the value of the dollar vis- à- vis other currencies could change world price levels. This would happen particularly in those raw material and commodity markets that are global and deal in standardized contracts. Similar to changes in the value of gold under the old gold standard, one would think that changes in the value of the US currency will tend to cause changes in the general worldwide price level. [] 

This proves Marx correct and shows that the U.S. is poised at an unfair advantage in the global economic framework. Marx thought that 'rules and regulations on capital must be general, covering all capital, is also pertinent. In the absence of relatively common global rules and regulations on capital, capital will tend to migrate to where wages are lowest; to where taxes, especially on property income, are lowest, thus weakening the tax basis of the modern liberal welfare state; and to where regulations are fewest and/or the least capably enforced. This is what the international finance practitioners openly call wage, taxation and regulatory arbitrage. How to achieve fair and equitable global, international rules and regulations on capital throughout the entire world will be one, or perhaps, the, major economic challenge of the rest of the 21st century.' [] 

Marx believed capitalism to be a crisis ridden system and predicted that this would in turn be its down fall, just as the weakening of the Russian empire by the strains brought on by the first world war, worked as a catalyst in the making of the Russian revolution, Marx had predicted such crises and in-fact thought these to be the opportunities for revolution and the eventual downfall of capitalism.

'Understanding the drive toward crisis is central to Marx's analysis of capitalism and to his arguments for the possibility and necessity of revolutionary change. For Marx, the existence of inequality or poverty alone is not what turns workers against the capitalist system. These problems have always been a part of the everyday workings of any "healthy" capitalist economy. Of greater social and ideological impact is the insecurity, instability and ruin that economic crises periodically inflict on the lives of working-class people. And so in Capital, Marx argues that capitalism dispels all fixity and security in the situation of the laborer…it constantly snatch from his hands his means of subsistence, and...make him superfluous. We have seen... how this [class] antagonism vents its the incessant human sacrifices from among the working class, in the most reckless squandering of labor power and in the devastation caused by a social anarchy which turns every economic progress into a social calamity. In short, crises mean that the very functioning of the capitalist system cannot guarantee even the crumbs that are thrown to the worker. Crises have an impact on the capitalists' fortunes as well. They break up what Marx called the "operating fraternity of the capitalist class" and produce an all-out fight for survival between capitalists themselves, and of capital against the working class. Because of this, even relatively minor economic crises can lead to political instability, ideological confusion among the ruling class, an intensification of the class struggle and war. Marx argues that crises "carry the most frightful devastation in their train, and, like an earthquake, cause bourgeois society to shake to its very foundations." Thus it is out of the impact of capitalist crisis that the possibility of revolutionary change emerges, not as a guarantee, but as a possibility in the hands of the working class. As the Russian Marxist Vladimir Lenin once noted, "oppression alone, no matter how great, does not always give rise to a revolutionary situation in a country. In most cases it is not enough for revolution that the lower classes should not want to live in the old way. It is also necessary that the upper classes should be unable to rule and govern in the old way." This condition is created and furthered by economic crisis, along with the instability, polarization and conflict it generates.' [] 

The process of massive downsizing by corporations in the aftermath of the crisis proves Marx correct and shows that in a market economy labour has indeed been dehumanized.

Smith if he comes upon the global financial crisis would look upon it as an attempt by the market to correct itself by the forces of supply and demand and would be critical of the government letting such a situation arise as he was in favour of government intervention to prevent 'financial fires'.

Marx on the other hand would deign this development as the result of the greed of the ruling classes gone berserk. Furthermore, it is my opinion that Adam Smith would not look kindly at the bailout packages given out by the United States government as this is in effect a manipulation by government intervention of the market mechanism which in effect is supposed to fix itself by letting the affected institutions die and letting competition raise new ones in their place. The bailout packages to a layman like me seem to be a very un-capitalistic, even somewhat socialistic manoeuvre employed in this instance to aid the affected institutions, by the greatest self-proclaimed champion of capitalism of the world.

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