Adam Smith and Karl Marx: Economic Theories Compared
Adam Smith’s Economic Theories
Adam Smith‘s work took place during the era of mercantilism and the physiocrats. Smith aimed to challenge mercantilist ideas, which viewed the world economy as a zero-sum game. He also opposed the physiocrats, who believed that agriculture was the only productive sector because it produced “nature,” while industry merely transformed existing materials.
The physiocrats advocated for free trade to address famine-related riots. Adam Smith generalized the concept of laissez-faire to various sectors, building upon ideas from thinkers like David Hume. He argued that economic interactions could be mutually beneficial. For example, agricultural overproduction could benefit countries experiencing famine by providing them with food, while the producing countries could eliminate surpluses. Smith extended this principle to many sectors.
Smith also explored the economic history of society. He noted that barter economies were inefficient, leading to the emergence of money to facilitate trade. However, the introduction of money and specialization also brought competition and self-interest. This progression shaped societal evolution: Money → Competition → Self-interest → Specialization.
Smith posited that labor did not inherently generate value. He believed that allowing individuals to pursue their self-interest through economic activity, guided by market forces, would lead to the most effective form of governance—a kind of “auto government” driven by economic incentives.
Karl Marx’s Critique
Karl Marx offered a materialist critique of society. He argued that the superstructure (ideological representations) arises from the infrastructure (material conditions). In contrast to Hegel’s focus on ideas, Marx emphasized social forces and material conditions as the driving forces of history. He also expanded on Adam Smith’s dialectic between rural and urban areas, asserting that this struggle fuels the entire historical process. Marx believed that history would only conclude with the abolition of class-divided societies.
Regarding the enigma of value, Marx stated that commodities possess both use value and exchange value. He argued that labor is “abstract labor”: social rather than individual, lacking a tangible presence, and essential for capitalist production. Understanding the commodity form is key to understanding society. Commodities are dualistic, possessing both use value and exchange value, and are interconnected in the market through money. Abstract labor is the source of value and shapes society, enabling the interaction of people and things in the market.
Marx used the term “vampirism” to describe capital, as it uniquely possesses the ability to increase its own value. However, since capital’s growth depends on labor, it is essentially dead labor (past labor brought back to life). This dead capital controls the living, meaning the past governs the present.