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ADAM SMITH'S FREE MARKET CAPITALISM
Adam Smith's upheld the concept of free market capitalism at a time when the world did not trade in such complex environment. Each state was economically independent of the other. In saying that market capitalism could remain unregulated stem from the fact that at the time governments were too keen on taxing its nations. During the Gold system, a nation depended on the free flow of coinage to be able to trade. A stoppage in the free flow would mean there is hindrance to trade and hence a slump in the economy. On the adverse side if government provides free flow of the coinage system even to "foreigner" then it would mean to cut down barriers to trade and allow foreigners to trade freely with the local market thereby increasing competition to the level that local market would become suffocated. His rationale for this was that competition was important for the local industry to come up to par with industrial standards. Of course, Smith was speaking in context with the industrial revolution where the flow of the economy was very much in the hand of the government.
A free market capitalism cannot exist in the face of the new economy because, the world have changed in both economical and social systems. The new social system does not allow the existence of free market capitalism because it proves too threatening to the local government. IN maintaining a free market capitalism, it would mean to give up all authority to the market so that there is free competition among traders. Provided...
This is not possible and hence his market capitalism cannot exist on its own.
SOCIAL CRITIQUE
To enumerate his theory, later economists like Karl Marx and John Maynard Keynes came up with their own theories. Starting from the socialist point-of-view, Marx upheld that market capitalism always have a tendency of boom and slumps because it is subjected to demand and supply. In the modern economic system, there is no fixed system that is either totally capitalist or totally feudal. There must be a mixed economic system in order to maintain productivity. The social critique also enumerates that in times of tough competition and military conflicts aggregate demand and supply tend to waver drastically. Even if a nation follows a free market capitalism, it cannot survive because there would be too much concentration of supply or demand. Here Marx was referring to the World Wars when the unique productivity level decreased drastically to endanger the status of free market capitalism in many of the European States and Britain. As a result of this the state had to protect its own interest by regulating it. [Wood, 1999].
Using the Communist Manifesto, together with Engels, Marx explained the consideration for geopolitical and military conditions of the world. For instance Britain have enough wealth to maintain a capitalist state but countries like France and Germany…
References
Wood, Ellen Meiksins. Unhappy families: global capitalism in a world of nation-states. Monthly Review July-August, 1999
Hodgson, Geoffrey M., Varieties of capitalism from the perspectives of Veblen and Marx.. Vol. 29, Journal of Economic Issues, 06-01-1995, pp 575(10).
UCHITELLE, LOUIS In Reality, a Model Of Flexibility Adjustments Made by Keynes What if Spenders Don't Spend? February 21, 1998
Adam quotes that small republics have derived considerable revenue from profits of mercantile projects. Adam lists Republic of Hamburg, Venice and Amsterdam that had made profits from profits of a public wine cellar and apothecary's shop. Even Great Britain has said to make profit this way. Adam quotes "Postal Office as a perfect mercantile system"; the government advances the expense of establishing the different offices, and of buying or
Give me that which I want, and you shall have this which you want, is the meaning of every such offer" (Smith, 1776, p. 118-119). The unintentional consequence is thee same as it was before: an increasingly respectable and thriving nation, one so much so that it is as if shaped by what Smith deems the "invisible hand," from which Smith thus concludes that "it is the necessary, certain propensity
Adam Smith He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases,
The roadways and other such necessities which are constructed by the government at the government's expense, and of which the private individuals are unable to finance, ultimately are predicted by Smith to come at higher and higher costs to the society. SUMMARY & CONCLUSION Smith, in his work, demonstrates how it is that self-interest is held at bay to an extent by rivalry of economy results in a prosperity that is
His lectures were a success as many eminent people of Edinburgh attended them and earned him a decent income. During the course of his lectures on English literature, Smith perhaps realized that his real vocation was economics. Hence, addition to English literature, he started to deliver lectures in economics in 1750-51 in which he advocated the doctrines of commercial liberty, based largely on the ideas of Hutcheson. It was also
Adam Smith's Economic Philosophy: Just as Smith's moral point-of-view was ahead of his time with respect to ideas that others would popularize later, Smith presented matter-of-fact observations on the nature of work and the relationship between working people and society at large. More than one hundred years before Henry Ford revolutionized modern industry with his production line, Smith had explained the mechanism that accounted for its success. Using the example of manufacturing