Adam Smith and Karl Marx - Contrasting Views of Capitalism Research Paper

Adam Smith and Karl Marx - Contrasting Views of Capitalism - Research Paper Example Adam Smith was a great believer in individualistic abilities and in an economic system that was not directed but guided by an invisible hand. That was the system of classes- faire. Under classic- faire production and distribution among classes is all automatic. Smith’s idea was that government expenditure should be dominated by military procurements and rest of the expenditures and procurement should be automatic as individuals and institutions were capable of meeting the consumable and other demands. Interestingly, Adam Smith never used the terms lassis- faire and capitalism, though he was aware of the implications of these terms. Adam Smith believed that consumption creates demand and necessity to produce. Production will not take place unless there are raw material and demand for the product. â€Å"Prior to the industrial revolution, production of goods hinged on work completed by human hands. Today machines have replaced much of human capital, but that is not to say that human labour is not currently an important part of a production.† (LT, 2006)i. Even Marx realized that human capital is required to produce, though human capital does not have the capacity to bargain because of their being in surplus Karl Marx is very straightforward in his views on capitalism. He says there are only two classes of the society and these classes are in direct competition with each other. One class is of BOURGEOISIE and the other class is PROLETARIAT. According to Karl Marx, there is no middle class, and the proletariat is the exploited class in capitalism. Proletariat class is a class of labourer who finds work so long as their work increases the capital. There will not be any work when labourer stops adding to the capital under the state of capitalism. Capitalism does not regard proletariat as a class of people, and that is why they are exploited the most just to add to the capital. As per Alan W Erlt (2007) â€Å"Marx saw capitalism not as an institution and not as a result of organic economic laws, but as a phase of in the evolution of modern human society.† (page 314)