Critical analysis of Smith's views on modernity and Marx's rejection

¶ … Adam Smith's Views on the Rise of the Modern World

In the first three chapters of the Wealth of Nations, Adam Smith describes a model of the determinants of wealth creation as being an outcome of the interaction of the division of labor, human nature, and the growth of the market. This paper provides a review of Smith's Wealth of Nations as well as the relevant peer-reviewed and scholarly literature concerning these issues to explain Smith's views on the rise of the modern world contained in his theory of the progress of opulence in Book III of the Wealth of Nations. An examination concerning which parts of Smith's analysis Karl Marx would reject is followed by a summary of the research and important findings concerning these issues in the conclusion.

Review and Analysis

The Creation of Wealth

From Adam Smith's perspective, wealth was the totality of the material prosperity of the society as a whole (Clark 415). In Smith's conceptualization of wealth, the main cause of poverty is an insufficient production of real wealth, defined as "the annual produce of the land and labour of the society" (Smith 12). In order to reduce poverty (which is the fundamental purpose of economics and Smith's Wealth of Nations), the wealth of communities must be increased. According to Clark, "By defining wealth in terms of the production of goods and services, Smith was contrasting his notion of wealth with that of the Mercantilists, who defined wealth in terms of gold and silver" (415). This very basic view of wealth is akin to a dragon's hoard of gold or the treasure troves gold and silver of ancient kings. Indeed, Smith points out that, "In all countries, however, men seem at last to have been determined by irresistible reasons to give the preference to metals above every other commodity" (14).

The enlightened and expanded view of wealth provided by Smith described wealth creation of terms of three determinants, the interaction of the division of labor, human nature, and the growth of the market. In contrast to the prevailing views of wealth of the day provided by the Mercantilists that held the purpose of wealth was solely to enrich the state and the merchant class with little or no regard for the poor, Smith described a type of wealth that could not be monopolized by just a few members of society, but must be widely shared (Clark 417). In support of this assertion, Clark quotes Smith's observation that, "No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable" (quoted at 96).

Over time, the determinants of wealth can operate in ways that become mutually supporting and reinforcing, thereby accelerating the process. Interestingly, the creation of wealth is inextricably related to human nature and must therefore be guided in order to achieve sustainability. For instance, according to Sockwell and Tenger (2001), "For Smith, what is important is not self-interest per se, but the transformation of self-interest into qualities that encourage the development of commercial civic society with its primary benefits of advancement of technology and creation of wealth" (47). In sum, the creation of wealth is facilitated by people behaving in their own self-interests in ways that unintentionally but cumulatively promote wealth creation in a community or society. In this regard, Sockwell and Tenger (2001) advise, "Smith presents the social and economic benefits of a capitalist economy as unintended by individuals, but issuing from their interactions in the marketplace" (47).

Rise of the Modern World in the Theory of the Progress of Opulence

Human developmental theorists confirm that humans are wanting creatures that are never truly satisfied with their condition. Because no man is an island, the division of labor provided humans with the ability to gain competitive and comparative advantages in the production of goods and services in ways that contributed to the improvement of their condition by providing them with surpluses that allowed them to acquire things they could not produce themselves. As more and more people came together in towns, the theory of the progress of opulence held that these processes became further accelerated in ways that were mutually beneficial to farmers, merchants and craftsmen alike. For instance, in Book III, chapter 1 of Wealth of Nations, Smith writes, "The town, in which there neither is nor can be any reproduction of substances, may very properly be said to gain its whole wealth and subsistence from the country. . . . The gains of both are mutual and reciprocal, and the division of labour is in this, as in all other cases, advantageous to all the different persons employed in the various occupations into which it is subdivided."

Therefore, the division of labor and human nature combine to produce a natural growth of the market, and the more people that are involved, the more opportunities for growth there will be as a result. In this regard, Smith adds that, "The greater the number and revenue of the inhabitants of the town, the more extensive is the market which it affords to those of the country; and the more extensive that market, it is always the more advantageous to a great number" (Book III, chapter 1).

This point is also made by McLean (2006) who reports, "After discussing the division of labour, Smith moves on to point out that it is 'limited by the Extent of the Market.' This immediately leads to the deduction that the greater the extent of the market, the greater the productivity and income improvement permitted by extending the division of labour" (69). It is important to note, though, that Smith also emphasized that danger that the love of wealth can have on the public's morals (Clark 417).

Marx's Response to Smith's Analysis

As "the father of communism," it is not surprising that Marx was at loggerheads with Smith, "the father of capitalism," concerning some fundamental issues (Manton & English 468). Despite their differences, Marx would likely agree with Smith's attitude about religion that it was "an artefact of the human imagination" (McLean 12); however, Marx would be less likely to agree with Smith's analysis concerning the how the division of labor contributes to the creation of wealth and how the invisible hand operates compared to centralized planning. In this regard, Scaliger (2008) notes that, "The labor theory of value was used by Karl Marx to justify central planning since, if value was a strict consequence of labor invested, then 'correct' valuations could be determined by enlightened central planners" (33).