Man has unlimited wants and needs. It is through these selfish desires that man becomes individualistic. Man then coexists with other human beings with individual intentions in order to satisfy such needs. While the irony and precariousness of human behavior is on self-centeredness, human life compels men to cooperate with one another in order to coexist. In turn, this leads to what is called "struggle" (Heilbroner 18).
In light with the evolution of capitalism, two thinkers in the names of Adam Smith and Karl Marx published works that have influenced new methods of thinking, doing and for Smith, the eventual development of economics.As father of economics, Smith's The Wealth of Nations became the primary basis of economical theories and development. For Marx, his work The Communist Manifesto criticized the relationship between the bourgeoisies and proletariat and how the capitalist exploits and alienates the working class. These two influential thinkers have contributed much to the advancement of economics, as well as to criticisms on capitalism.
For Smith, his concepts on his work remain the foundation for economics, with no presumptions on the eventuality of capitalism.However, since its evolution and its recognition as an economic system, Marx critiqued the working of capitalism, specifically how the working class loses its freedom as it is exploited by the proletariat. Capital evolution During the early civilizations, there were already several concepts concerning capitalism. In Ancient Rome, the expansion of the empire relied heavily on obtaining goods cheaply by crossing out business transactions from middle men.
During the Middle Ages, feudalism became the major economical trend, although it was not recognized as a formal economic/political system.Feudalism involves kings, barons, vassals, and soldiers. A king's priority is to increase military power to defend properties over rival clans or families. In order to do so, kings grant loyal subjects pieces of land called feuds or fief (hence feudalism). In turn, these subjects (usually given the term barons or lords) give a small part of their lands to vassals and knights in return for their military services and agricultural labor.
However, this system did not last, for the manor lands were continually fought and disputed over in order to maximize property benefits and production.Feudalism may have been the basic tenet for the rise of mercantilism in the 15th century and is considered as one of the more prominent economic systems that gave rise to capitalism. Mercantilism is a system based on trade profit. Merchants capitalize on buying and selling of goods in increasing their profit backed by state policies and market monopolies.
In terms of nation wealth, a nation depends on its monetary capital and relies on the unchanged volume of the world economy and policies on international trade. Mercantilism also relies on government for regulation and protection.It also emphasizes on the power of state and conquests as the principal aim of economic policy. If a nation cannot produce its own raw materials, its action should be conquering unknown lands in search for these materials.
Colonized lands not only supply raw materials but also act as an available market for finished products. Competition and trading were prohibited in a colonized land so as to maintain economic advantage and superiority over competing empires. Thus, mercantilism also presents several characteristics that are inherent to capitalism.In Smith's Nations, he argued against the doctrine of mercantilism and bullionism. According to Smith, these imposed tariffs on trade and other government restrictions would hinder industrial expansion. Mercantilism is opposed to the idea of free market, where there are no actual restrictions on trade and no government policies hindering economic growth (Smith 35).
Smith also disagrees with the idea that a nation's economic success solely depends on its bullion or precious metal stock (e. g. gold, silver) that can be traded to other nations.Export volume should be considerably higher than import so that foreign buyers will have to pay the difference in bullion. According to Smith, there should be a use of the free market economic system in order to advance industrial development.
As such, the publication of Nations also coincided with the American Revolution. Still, not everybody was convinced of free market trade policy, as Britain still clung to mercantilism. This argument of Smith however, is not that of the anti-government sense. Indeed, Smith advocated on the government to be active in sectors other than the economy.This would enable more opportunities in nation growth by properly allocating resources needed. Capitalism entails to be fundamentally individualistic.
The idea of the self revolves around 18th century enlightenment idealisms where all individuals are different and pursue their own interests. In the capitalist sense, this is known as economic freedom where producers are free to manage their own products without restrictions or impositions. Meanwhile, in the democratic sense, individuals pursuing their own interests will guarantee the interests of society as a whole (Proudhon 22).As a way of thinking, capitalism mainly revolves on large-scale social goal of producing more wealth and income. A person (the capitalist) who opens and sets up a business not only focuses on generating profits but also create jobs as well; for the business to keep going, it needs manpower. In its basic sense, capitalists generate or earn money continually and they use this money to buy labor, which is essential in maximizing production.
As a result, the rich become richer.Capitalism is also based on the idea of laissez-faire which means literally “let do. It is understood as a response against economic intervention and imposition of taxes by the government in order to maintain liberty, freedom, security, and property rights (Smith 42). In modern economic terms, this means that it is solely the market that would move the economy. It also refers to the various market forces which dictate the activities within an economy and these activities are stimulated primarily by the private sector and businesses. Capitalism also encourages the smooth exchange of goods and services and products between consumers and suppliers, new investment opportunities, and livelihood for the people.
There is also a global exchange of products from different markets around the world which facilitate international trade. However, there may be also an abuse of power by business owners over their employees and over-pricing of products. With regards to over-pricing, because of the continual growth of income by individuals, it may lead to the formation of monopolies. Monopolized companies would then become measures of control over other products and essentially the market. Prices would be dictated by a single individual, making revenues even higher as a sole producer/distributor.
Today, most industrialized nations are considered "mixed economies" which combine capitalism/free markets with government intervention. The market cannot entirely decide for itself as to what it wants to happens because there is a higher force which ultimately decides on what is best for the economy; the government is not always correct just like the market; so these sectors should always meet halfway This is the result of Keynesian economics by British economist John Keynes which advocated government intervention and regulation that proved effective in the US during the Great Depression of the 1930s.The Invisible Hand In his work, Smith discusses the basic precepts of economics, which during his time, was not yet recognized as a formal study. In Nations, Smith emphasized labor instead of giving to importance land. For Smith, labor is important in increasing the mode of production. He used the example on the production of pins, where an 18 men work force for every stage of pin-making can make 48,000 pins compared to the 20 per day of a single laborer.
If the production line is distributed and broken down into small stages, maximum productivity and profit could be achieved (Smith 5).Although some negative effects would manifest because of excessive distribution of labor (e. g. depletion of the worker's intellect because of the monotonous duties he has to accomplish everyday) Smith advocated on the need for public education system. Moreover, his work also tackled the principles on the law of supply and demand. To Smith, although not specifically stated as the law of supply and demand, is the product of competition and self-interest in harmony.
As Smith argues, the Invisible Hand acts as a benevolent, deistic figure that works upon the universe where human happiness is maximized.He emphasized in his writing that in order for the Invisible Hand to work, there must be a harmonization of social structure and adherence to moral norms; punishment on violation of such norms would result in penalties. Basically, in a harmonious human society with no injustices whatsoever, the hand favors upon any system through increasing happiness. It is an involuntary movement regulating business practices.
This happiness is thought of as the amount of economic satisfaction for both the businessman and the national economy.Smith's Invisible Hand theory can also be related to concepts in religion as Smith was deeply religious. But the theme revolves purely on social structure and the eventual development of economical understanding. The outcome of a certain conditioned human behavior in a specific social framework can result to definite and foreseeable scenarios.
Every man is absorbed in his own individuality and in a given society, man works only for himself for personal gain. However, in a society with these individualistic notions, in a worst case scenario, there could be a squabble on superiority over achieving these goals.But according to Smith, these individual goals are regulated by competition, man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only (Smith 2). For example, with the invisible hand theory in relation to the free market system—in a classless society with no presumptions in race, color, gender, and others—the natural inclination of man is to protect self-interest.
This creates an atmosphere of competition mixed with self-interest in a business-like atmosphere.This results in the production of human wants and needs and the varying degrees of change it has to undergo in order to satisfy both price and demand. However, because of self-interest, it would create a ramble over the production prices and hold consumers ransom of their own need. However, the regulator is competition; because of competition, there is a need for competitive advantage and a tactic in alluring consumers. Over 300 retailers of a single product compete over buyers with different methods to promote their product.Their selfish interests are somehow eradicated and harmonized with the other, creating another form of human consciousness.
Every single retailer provides the same product but the difference lies in quality, quantity, and above all, price. Competition regulates the self interests of man and bestowing upon consumers burden of choice and the ability to shop smartly. The free market, which may be considered chaotic and unrestrained in terms of no clear defined policies on trade, export, import, and others, has the invisible hand as a guiding principle.The invisible hand acts as a natural response in the market system. Producers are guided by this principle in order to produce the amount of goods and services needed in society. This is one of the most basic foundations of economic development based on human action and socially-conditioned human behavior.
As such, Smith's theories also led to the development of the modern market systems (Proudhon 15). Social Class Struggle Russian political philosopher and communism co-founder Karl Marx mentioned in The Communist Manifesto that society is the history of class struggles.Together with collaborator Friedrich Engels, they theorized that social classes and positions need not matter in a pure communistic view of society. In the earlier epochs of history, we find almost everywhere a complicated arrangement of society into various orders, a manifold gradation of social rank (Marx 4). He was concerned ultimately with human freedom wherein human beings could fulfill their cooperative roles within society without fear of exploitation.Using Darwin's evolution, Marx conceives of man as the product of nature that gradually evolved.
The original social structure is communistic—that man lives in a community and labor. His essence is the one that sustains the community (Marx 4). Marx defined capital as accumulated surplus value; the difference between the cost of manufacturing a product and the price for which it sells: a difference accruing to the private owner of the factory in which the product is made, instead of the workers who create not only this value but all existing wealth.In accordance with this concept, Marx analyzed society under capitalism as consisting fundamentally of two classes at war with each other – the bourgeoisie or property owning class (including capitalists), a minority which through institution of private property acquired ownership of the means of production, and the proletariat or the working class, constituting the vast majority who, in order to live, must sell their labor to the owning class.The interest of these two classes are irreconcilable and it is from the unceasing struggle between the two classes that the dislocations of society under capitalism are derived, including the extremes of wealth and poverty, strikes, economic depressions and war. Marx declared that the latter problems originating in class struggle could be solved only through the establishment of a classless society to be created through the assumption of power by the working class.
This would liquidate the bourgeoisie as an owning class by establishing socialism – that is by establishing public instead of private ownership and operation of the means of production (communal). With regards to the interpretation of history, the nature of any given society including its culture is determined by its mode of economic production which is basic. For example, slavery in ancient Greece and Rome as the prevailing mode of production gave way to the feudalism of the succeeding medieval period also changed.Eventually, feudalism's major modes of production that were based on serfdom and the medieval guild handicrafts gave way to the discovery of new lands and new trade routes to capitalism with its machineries and factories.
Capitalism in turn would be succeeded by socialism and socialism eventually be succeeded by communism (Avineri 146). The social class is shaped into a triangle where the bourgeoisies (capitalist) occupy the small, top part while the proletariats (working class, labor) occupy the large bottom part of the triangle. This representation is not of the sociological.He distinguishes between objectification, the premise of material existence, and alienation as a state of consciousness (Avineri 97). For Marx, the nature of man is that of a tribal or communal system (hence communism). Man's prevalent nature is to stick with his own kind and develop a communal society – where every labor produced by man is for the benefit of the group.
This also applies to communism as it also aims to eliminate any kind of social classification and the economy would be dictated by the working class. Man cooperates with the group in terms of food, water, and shelter, among others (Avineri 97).For Marx, the essence of man is his labor - his ability to work. For the poor man, he is left with no monetary income or property.
Thus, a poor man has nothing but his essence; and in order to survive and regain lost property, he has to sell the only one that he has left. In a capitalist society where labor is needed in order to increase production, man's freedom is delimited when the capitalist buys the poor man's labor. Man then is for sale and becomes a commodity for labor. The capitalist pays for the worker's labor but according to Marx, the capitalist pays less for the labor produced by the worker (surplus value).
Thus, the capitalist exploits the working force by paying less than they have earned. This exploitation is referred to as the exploitation of a social class by another. Also, through exploitation, the social class in question is also alienated. They are alienated in a sense that their freedom is delimited or taken away. In capitalistic sense, the working class need not feel that they are being exploited or bought.
What is important is the capitalist pays for their labor without any question and they in turn work for their own gain.They sacrifice their freedom for monetary advantages. This alienation causes serious disruptions in the social class. As described before, the majority of the social triangle is mostly the working class while the little percentage of bourgeoisie remains at the top. Further, Marx also tackles the idea of class consciousness.
It refers to the awareness, both the class consciousness and the social world around it. A social class has the capacity to act in its own rational interests based on this awareness (Heilbroner 122). Class consciousness is needed in forming a revolution.This revolution espoused by Marx however, is not that of a bloody type.
This revolution comes in social reform and the elimination of the classes. As communism suggests, the ruling of the higher class should be eliminated, since their buying powers eliminate freedom in the working class (Marx 47). Capitalist steadily grows richer because of the surplus value earned from labor while the proletariats continue to sell their misappropriated labor for a small amount of money. Marx's ideologies concentrate on the control over the working class, since they are the primary units for production.
