Smith vs Marx
Adam Smith was British thinker who came up with ideas about economics (How it is determined who gets what and how in society). He was born in Scotland (Great Britain) in the 1720’s. Smith believed that people had a greedy side to them which could be used for good if channeled in the right way. He believed that if people were given an opportunity that they would work hard to get ahead- make more money, have more goods, have more job choices. Therefore, he believed that the government should not be involved much in making economic choices for people. They should have the freedom to make those choices for themselves. Their natural instincts would lead them to want to get an education, to work hard, to take some risks related to starting business and to give people jobs. Those who worked hard would receive more. The idea of non-government involvement in economics is called laissez faire (French for hands off). He realized that greed could lead to some problems if unchecked. However, he thought that a society based upon Christian values would lead people to pay a fair wage, to be concerned about the safety and well-being of their workers, to help the poor, and to care for those in need.
Until that time, nations believed that the measure of their wealth was in gold. Smith proposed that their wealth was determined by the amount of goods they manufactured or produced. Smith’s theories became the basis of the capitalist system in which people are free to invest their capital, or money, into business and industry in order to make a profit. This is also called the free market system.
In the mid 1800’s, Karl Marx, a German philosopher looked at the effects of the industrial revolution in Europe. People were not doing what Smith said they should do- pay a fair wage and help the poor. Workers were working extremely long hours often in unsafe situations. They were paid wages which kept them poor. Children were working long hours as well. Living conditions for the workers were very poor- crowded and dirty housing, little food, poor clothing. Life expectancies were low. On the other hand, the factory owners were becoming very wealthy. He urged workers to unite and take over the factories. They were to divide the wealth evenly among everyone. He realized that this could only happen through violent revolution so he encouraged revolution. The government would have to be overthrown and a new socialist government put in its place. The government would own all land and businesses and set prices. There would be no private ownership. This is also called a command economy because the government controls the entire economy and makes all of the economic decisions. Socialism is an example of this type of economic system. Communist countries are based upon a socialist economic system.
Karl Marx was born in 1820 in Prussia (modern day Germany). Marx later moved to France but he was exiled (forced to leave). He then went to London where he spent the rest of his life researching and writing. He saw a great conflict between the bourgeoisie (business owners) and what he called the proletariat (workers in factories). He believed the workers should unite in a revolution and overthrow the business and land owners. They should then control the ownership of land and businesses and divide the wealth created by these equally.
The theories of these two men have been in conflict ever since the Industrial Revolution. The United States bases much of its economy on Adam Smith. This is called a free market economy. Communist countries are based upon the theories of Karl Marx, and the government controls the businesses and property. This is called a command economy. Some countries combine the two ideas- the government controls some things, while the people are free to make some choices. This is called a mixed economy. One other type of economic system is called a traditional economy. It is based upon traditional practices such as barter or trade of goods and services without the use of money.
Make a graphic organizer comparing Karl Marx and Adam Smith.
Make a second graphic organizer comparing the four types of economic systems mentioned in the last paragraph.