It was Marx who coined this term ‘classical economics’ to refer to the economics of Smith, Ricardo and Mill. These three classical economists argued that free markets regulate themselves confining their labour theory of value. On the contrary, Marx considered capitalism to be a historically specific mode of production that would eventually be replaced by communism. In his writing on the communist Manifesto, Marx criticises capitalism and believes that labour exploitation will be the driving force behind a revolution for a socialist economic system. Adam Smith’s writing is structured around his economic metaphor of the ‘invisible hand’ which perceives the marketplace to be self-regulated.
So could communism be a practical idea? On the other hand, capitalism remains to be the dominant concept and continues to be exercised on in numerous countries. Adam Smith and Friedrich Engels are two Philosophers who contributed to the sub structuring of the two opposing economic systems. Smith, who wrote ‘’Wealth of Nations’’, is known for his strong belief in capitalism. In his book he specifies that ‘’if every does what he or she does best, the society as a whole would become more productive’’.
Karl Marx believed that the means, relations, and mode of production all relate to the inequality in a capitalist society. What he is talking about when he says means of production in society are physical non-human inputs used to produce goods. A means of production could be a natural resource or it could also be technology. Whoever controls the means of production is going to have the most power. The capitalist owned the means of production in capitalism and therefore basically were able to control the economy.
Origins One evident inconsistency with communism and consecration is the source of ideas. Karl Marx was raised with a belief that “man’s innate goodness and reason was blocked only by social, political and religious barriers, and other artificially created rules” (Miller et al. 18). From his schooling at the University of Berlin to his family life, he continually pushed for his ideas. He wanted to establish a “dictatorship of the proletariat,” which means that the working class majority would rise to power over capitalist minority.
This theory was the first school of thought for economists and one of the major theorists and founders of Classical Economics was Adam Smith. Smith stated, “By pursuing his own interest, he (man) frequently promotes that (good) of the society more effectually than when he really intends to promote it. I (Adam Smith) have never known much good done by those who affected to trade for the public good.”(Patil) Classical Economic theory assumes three basic ideas: Flexible Prices, Shay’s Law, and Savings-Investment equality. Flexible prices in Classical theory suggests prices will rise and fall as needed but is not always true, due to, the interference of government agencies including unions and laws. Smith stated in the Wealth of the Nation (1776), “Civil government, so far it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor, or of those who have some property against those who have none at all.” (Patil) Shay’s Law implies supply creates its own demand and demand is not based on production or supply.
A principle in which the suggestion is that the market should be proficient in providing society with all the goods and services that is needed. This should be done efficiently and through the markets relationship with the individual. Neo Liberalists believe that state interference could cause economic problems for its government as it offers a financial incentive without working, thus, delivering a pessimistic moral and social outcome (Powell and Hewitt, 2002). Additionally, there should be an emphasis on individual choice with a free market. With the choice of competition that the global market creates, there would be fewer restrictions on businesses to operate by the government.
Capitalism is a liberal-market system: an economic system based on the private ownership of the means of production and distribution of goods, characterized by a free competitive market and motivation by profit. Capitalism has three essential features: 1. Private ownership- where individuals own land, machines, and factories. 2. Marketing competition- competing with one another, where the own decide what the price is and what product is produce.
Neoliberalism refers to the concept of restricting government involvement in stimulation of the economy, allowing the ‘invisible hand of the market’ to dominate, believing this will lead to greater economic prosperity and growth. The model stresses the efficiency of private enterprise, liberal trade and free markets and therefore looks to maximise the role of the private sector in leading the economy, rather than the public sector. Of course there is an element of overarching government regulatory control in place however the model is very much capitalism driven. One of the most prominent factors of neoliberalism is the rule of the market. As mentioned previously, Adam Smith, a highly regarded economist, demanded that in order for economic success, the”invisible hand of the market” must be in control, rather than the government.
Crime and deviance is defined by the ruling class to protect their own interests. Traditional marxists believe the reform act introduced throughout the 19th century worked in favour of the capitalists, laws were passed to strongly protect private land while very heavy penalties were imposed for minor theft, extreme poverty was not taken into account. They would also argue that the working class have unequal
Marx agreed with the liberal economic viewpoint that a free-market is “good” with benefits gained from competition. The distinction is in a liberal capitalistic system without government intervention there is an inevitable abuse of the lower class by the capitalists. On the other hand, the lack of an invisible hand in a socialist economy can lead to things like lower quality of goods produced, scarcity etc. This grey area is what often divides liberals from Marxists. Does one value equality between his peers at the cost of certain freedoms?