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Critique on Smith and Marx’s Ideas

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Qichao Zha

Richard Gaskins

10/05/15

Critique on Smith and Marxs ideas

        Two hundreds years after Adam Smith published The Wealth of Nations, which introduces many of the fundamental concepts of modern day economics, Karl Polanyi wrote The Great Transformation. In this famous work, Polanyi argued that throughout history markets has existed in human  society but only recently did the market system emerged as a result of government intervention. Unlike Adam Smith, who held optimistic attitude towards the future of the free market system, Karl Polanyi witnessed the destruction brought by Great Depression and WWII, believing that the market system leads to economic and social crises.

Adam Smith attributed the coming of market society to the division of labor. In Book I of The Wealth of Nations, Smith proposed that an individual can never satisfy his own demand by himself so that he has “propensity to barter, truck and exchange one thing for another.This division of labor firstly appeared at the primitive stage of human society and improved itself over the course of history. Smith concluded that the increase of dexterity of workers, the saving of production time and the invention of machines facilitate this process, allowing one man to do the work of many with the same means of production at hand. Smith then illustrated his theory by giving the example of a pin factory: one pin maker could only make few dozens of pins per day; however, the pin factory allocates specific task to each pin maker so that they could produce thousands of pins. Through this example, Smith certainly suggested that the division of labor bring improvements of output without changing the amount  of capital.

Smith then discussed that the surplus of productivity was all reinvested to land, labor and capital. The supply and demand mechanism facilitates this allocation process, enabling each person of the market to satisfy his own demand freely. As a result, people would accumulate more capital and have the incentives to expand the extent of market. However, this also creates gap between the capitalist and the workers in market system. Smith subtly mentioned the downside of the division of labor:

In the progress of the division of labour, the employment of the far greater part of those who live by labor, that is, of the great body of the people, comes to be confined to a few very simple operations…” (Bk5, Ch1)

In response to this dislocation of  social coherence, Smith advocated the government to take responsibility of providing social welfare system and educating the ordinary people.  

         Karl Marx approached the coming of market system in ways similar yet more radical to Smith’s. Marx concurred that the division of labor is a major force for the coming of market system and improved the productivity since the first day. Hunter-gatherer societies only have little means of production so that the degree of division of labor was simple. As the productivity of market system increased over time, however, people adapted to complicated forms of specialization. In The German Ideology, Marx analyzed the effects of the division of labor in different historical periods. Although there were different classes in each periods, Marx concluded them into two categories: the oppressor and the oppressed. Marx put

            “…The history of all hitherto existing society is the history of class struggles. Freeman and slave, patrician and plebeian, lord and serf, guild-master and journeyman, in a word, oppressor and oppressed, stood in constant opposition to one another(Communist Manifesto)

Those who own the private property, the ownership over the means of production, would inevitably oppress those who work for subsistence.

For Marx, the advantage of the market system was that the Bourgeois class, who has been continuously revolutionizing its means of production, put an end to the fixed feudal relations and collapse of state control, making labor and land commodities. Marx agreed with Smiths theory that surplus of division of labor goes back to market allocation, while adding that the Bourgeois reaps all the benefits. Thus, the Bourgeois class has the means to expand to its market until all the frozen production relations melts away, drawing even the barbarians into a civilized world.

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