The thought. Both Marx and Smith were conscious

The pivotal and revolutionist theories of Adam Smith and Karl Marx, introducing novelty in
economies, became the fundament of political and economic thought. Both Marx and Smith were
conscious of the crucial role the economy has but their development of the idea largely differed,
in a social and political level. In this essay, we are going to critically compare the theories of this
two pivotal “century away” economists and revolutionist thinkers, Adam Smith and Karl Marx.
We will analyse their general research agendas by going through the similarities and the
differences in the theories and ideas, exposed by them in major works. Moreover, we will compare
the two and develop the idea of the way in which each of these two revolutionist thinkers helped
and contributed not only in their epoch but also in the modern economic context by becoming the
bandwagon in the economic thought. It is important to note that by analysing Smith’s and Marx’s
theories, we are comparing and relating works published during the, respectively, 18th and 19th
century which reflect the analysis’ of the context and Era in which they individually lived, that
lead them to two different approaches.

Adam Smith, also known as “founding father of Political Economy”, introduced his ideas in “The
Wealth of Nations” (1776) – considered as the basis of his thought and also reckoned to be his
magnum opus. Smith’s critique was chiefly focused against mercantilism, (predominant during the
18th century). This theory is centralized in the belief that the trade plays a significant role in the
wealth of a nation, positively augmenting its prestige. Albeit, Smith did consider the foreign trade
as a way of helping a nation’s economy prosper and government stabilize, he associated this to
mercantilism. Furthermore, as introduced in the Wealth of Nations, a crucial concept of Smith’s
thought was the “Invisible Hand”. This is the idea that the individual does not tend to promote the
public interest, the only thing he seeks is his own security, wealth and happiness but, driven by an
invisible hand, he involuntarily, by pursuing his own gains, promotes that of the society (Smith,

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1776)1. This would lead to free market and enterprise where, Smith argues, the government should
have a “hands-off” approach since it would distort the economy. “Although each individual
undertaker “intends only his own gain,” he is led by the ‘invisible hand of competition to promote
an end which was no part of his intention'” (Sackrey et al, 2004, p.46).2 Marx strongly disagrees
since in his ideal economy, there is no free market like we see in a capitalist society. In Smith’s
view the government with its regulation – privileging the few – should let the market regulate itself
and linger onto public works, allowing the invisible hand to guide the economy. From this, the
concept of “laissez-faire” (let them do) is born, wanting capitalistic forces to naturally compete
with one another; for Smith, a core requirement for economic growth. Smith’s idea, and his belief,
as stated in his “The Theory of Moral Sentiments”, was that every individuals goal was happiness.
In nuce, Smith’s idea was that the consumer, through consumption, drives the economy. Similarly,
to Marx, in his theories, he emphasized the class struggle and gap caused by mercantilism (with
Marx this is replaced by capitalism), asserting that a nation’s economic trade earnings lavishly fall
into the richer class’s hands, leaving the working class with no prospering possibility. Thus, Smith,
in part alike Marx’s ideal economic system, sought for a government whose main role was helping
social growth and individuals, believing that public goods (i.e. canals and roads), and the
maintenance of the state, were something the government had the duty to provide to its people.
The way he believed this was going to be accomplished was via the use of a taxation system akin
to the contemporary one. Through this system, the discrepancy between the upper and working
classes was of main importance since the richer, which are thought to benefit most of the
government goods, as a result, have a higher taxation. Smith (1776) states that “it is not very
unreasonable that the rich should contribute to the public expense, not only in proportion to their

1 Smith, A (1776)

2 Sackrey, C. Schneider, G and Knoedler, J (2004)

revenue but something more than in that proportion”3.

Marx lived during the 19th century, witnessing the condition of workers in England and the Spring
of Nations in 1848 (events that contributed to fund his ideas). Following the study of Smith’s
theories, and other pro-capitalist economists, he believed that capitalism was per se imperfect and
uneven, on an economic and mostly social level, he affirmed that “the history of all hitherto
existing society is the history of class struggles” (Marx, 1867)4. In his new social and economic
approach, he envisioned the transit from a capitalistic society to a socialist society. He dwelt his
ideas by publishing two major works Das Kapital (1867) and The Communist Manifesto (1848),
here he presents his ideal approach to a new economic system, also criticizing the capitalistic one,
in which he finds numerous flaws. Chiefly, he thought that capitalism produces the phenomenon
of “under-consumption” and strongly believes that working classes receive less than what they
produce. As a result, the consumption will lessen and capitalism will provoke a struggle through
the social classes alongside a profound crisis in the economy. Moreover, Marx thought that the
value of a commodity is measured properly when taking into consideration – by measuring – the
total hours of labour took to get the finished product, this is referred to as the “labour theory value”.
Thus, Marx believed that what workers do in, and for, the market is selling labour to capitalists in
return for a wage. In Marx’s framework, this is viewed as the “labour power”. However, he
believed that capitalists exploit the workers to a level that this rate can be measured and to do so
he created the “range of exploitation” concept (surplus value divided by the variable capital).
Marx also believed that “…this primitive accumulation of capital represented…the transformation
of human labour into a commodity”5 (Milgate and Stimson, 2009, p.80). Moreover, he disdains

3 Smith, A (1776)

4 Marx, K (1867)
5 Milgate, M and Stimson, S (2009)

capitalism and its free competition since this triggers exploitation, thus he asserts that “unlimited
exploitation of cheap labour-power is the sole foundation of their power to compete” (Marx, 1867,
p. 520)6. Furthermore, Marx believed that individuals – born creative, spontaneous and free – in
the capitalist system are limited, alienated and treated in a ludicrous way, to the point they become
objects (Prychitko, 2008)7. What leads Marx’s fundamental idea is the people’s need to form a
communal society, where the state owns and controls the major means of production – differently
in Smith’s ideal capitalist economy, in which property and business are owned and controlled by
individuals. In relation to Marx’s ethos, every individual, in the willing to fund a greater society,
would give up, partially or wholly, their happiness, from here the idea of Communism, which
offered in his view the best political-economic model. In spite of this he affirmed that “we call
communism the real movement which abolishes the present state of things” (Marx, 1845, V. I
p.1)8, referring to the predominantly capitalistic society. Karl Marx also had his dire political view,
differing from Smith’s. He affirms that the bourgeoisie and the proletariat will never veer to a
better class position since the true nature of capitalism keeps them stuck at their original social
status. Marx’s answer to this problem was a proletariat revolt with the intent to build new, just and
unbiased social order in which no distinction in segments of society would be present. Smith
disapproved any revolutionary action to re-build a system since stability was the key to resolving
the problem of social oppression. Furthermore, Marx theorized the rigidity of capitalism which,
not only breeds the discrepancy between the social classes but also, gives the chance to the
proletariat to keep the wages as low as possible while maximizing their wealth.

6 Marx, K (1867)
7 Prychitko D., 2008, http://www.econlib.org/library/Enc/Marxism.html

8 Marx, K (1845) Die Deutsche Ideologie by Karl Marx and Friedrich Engels
https://www.marxists.org/archive/marx/works/1845/german-ideology/index.htm

Using the analyses above, we can state that Smith and Marx agreed on few core ideas, such as
production and distribution of goods, services and resources and the role of the government. While
in Smith’s ideal society the distribution of resources would not be equitable or eliminate gaping
wealth levels between the different societal classes, Marx’s ideal economy would produce,
according to the directives from a central authority, and distribute resources according to the needs
of the public. In his ideal economy, Marx pictured the abolishment of any class distinctions and
an appropriate and just valuation of a labourer efforts, which in a capitalistic society cannot happen
since profit-seeking capitalists deprive the lower classes of their true earnings. We can assert that
they both similarly worked to sought for a just, equilibrated economy and government, also aiming
to reduce the discrepancy between the classes.

To conclude, we observed the agendas of two great economists, Adam Smith and Karl Marx,
analysing the differences between the two. Both vivid prospectus concerning the mechanisms of
the economic systems which embraces and analyses the opulence of the social strata and political
side of a state influenced the contemporary economy and policy. Moreover, we can assert that
most of the contemporary economy is founded upon their thoughts and revolutionary ideas and
critique. For example, we can observe how, nowadays, big capitalistic companies compete in the
market place and how profit incentive drives corporations to develop innovative new products that
are wanted by the consumer and have demand in the marketplace. In short, both ideas seek to reach
a stable economy and greatly influence modern economic system.