This article will briefly discuss relevant world history to provide context, then present an analysis of the works of both Adam Smith and Karl Marx, in contrast to one another — in order to present a theoretical understanding of the foundations of modern capitalism and basic economics. Following this, I shall draw my own conclusions on the matter regarding progressive reform.
As this article will draw from various sources, a complete list of references is available at request — email in bio — specifically for those who wish to further educate themselves on this matter.
Historical and Religious Context
Initially, the prevention of a capitalist system becoming dominant in early medieval Europe can be attributed to Christianity, and the notion that the pursuit of wealth is both sinful and does not coincide with maintaining a dedication to the Christian faith. Throughout the medieval period, the Church held a captivating grip and broadly substantiated influence on political, economic and social affairs — making the prevention of such a system entirely possible. Said notion is embodied by the story of Jesus visiting the temple of Jerusalem, on which its steps and surrounding area is a marketplace filled with money-changers. Jesus himself then expels the merchants after overturning their tables of commerce, and accuses them of converting the temple into a “den of thieves” as a result of their financial pursuits.
Then Jesus entered the temple courts and drove out all who were buying and selling there. He overturned the tables of the money changers and the seats of those selling doves. And he declared to them, “It is written: ‘My house will be called a house of prayer.’ But you are making it ‘a den of robbers.’”
In the years prior to and certainly following the Protestant reformation across Europe, traditionally attributed to the publication of Martin Luther’s Ninety-Five Theses in 1517, the pursuit of wealth and understanding of financial and monetary systems was soon regarded as a science to be researched and understood, as opposed to a sin. This was due to the realisations by contemporary intellectuals regarding Catholic Church’s true nature and consequential pursuit of wealth, through the sale of indulgences that purported to offer a method of prevention of temporal punishment in purgatory, following one’s death.
In the decades following the wide-spread publication of Martin Luther’s Theses, protestant virtues were established that would later become the arguable bedrock for capitalism; hard-work, self-denial, patience, honesty and duty. In the 1550s, a protestant preacher from Geneva, John Calvin, argued that being good at business is preferable in the eyes of God, to that of a life as an aristocrat or monk. Calvin also argued that in order to avoid using profits in the pursuit of a lavish lifestyle and therefore stray from one’s faith, one must reinvest all disposable income back into the business as an investment.
In a rather large leap forward, in 1776, the book “An Inquiry into the Nature and Causes of the Wealth of Nations” by Adam Smith, a Scottish philosopher, was published — as a means of breaking down the mythological-esque understanding of wealth creation. In short, he discusses by what means capitalist economies grow.
Adam Smith argued that specialisation was a necessity for the increase of productivity and efficiency. As a result, national economies would significantly increase in total accumulated wealth. Following the industrial revolution, the concept of specialisation and increase in labour force lead to the workers much lower down in the economic hierarchy to feel similar to that of an lonely cog in a much larger machine, as opposed to that of a successfully contributing and vital member of a workforce. As a result, Smith assessed that those in charge of said specialised business in the new industrial age have an increased responsibility to their workforce to remind them of the value of their labour.
The increased productivity and efficiency resulted in the production of luxury goods specifically for the ever-expanding middle-class. Whilst many were critical of such expansion, Smith argued that luxury consumerism would facilitate surplus wealth that would in turn, allow societies to support its weakest members. Despite the frivolity of consumer societies, he believed they did not allow the young and old to suffer. However, Smith also deliberated that the frivolous state of consumer capitalism was not a permanent one. With the understanding that humanity as a species has a higher need for emotional education, self-understanding and requirement of rewarding socialisation, in order to function properly, a capitalist society would therefore need to facilitate those aiming towards their vital ambitions that coincide with the capitalist want to generate sizeable profits — permitting the fulfillment of the human experience.
Sidenote: the book “Sapiens: A Brief History of Humankind” by Yuval Noah Harari discusses in significant detail the dependency on rewarding social lives for the success of our species.
As corporations present an inherently evil nature to consumers, they are consequently the target of blame for a lack of socioeconomic progress; low-paying jobs or environmental abuse. Smith argued that in actuality, our taste or lack thereof facilitates the continuance of such evil economic practices. If we changed our consumer appetite, to a much stronger focus on the want of higher quality items with the correct price-tag, the impact and resultant burden on workers and the environment would be increasingly less significant. A good capitalist society should therefore not simply offer choice to the consumer, but teach the citizenry the ethical impact of their choices. Elevating the quality of consumer demand, therefore prevents said evil corporations from continuing in their ‘inherently evil’ ways.
Adam Smith condemned slavery on both moral and economic grounds. Whilst the morality of slavery is not something that requires discussion, as it is quite obvious to any person with a shred of decency that it was both a disgusting and cruel enterprise with poor religious substantiation— Smith also held economic reservations. He argued that the slave trade in its entirety was economically inefficient. Fear of pain and pain itself did not prove better than money as an incentive for a work force, whilst the cost of buying and maintaining slaves far exceeded the cost of wages. Smith argued that capitalists were certain to make more money by treating their workers equally regardless of race.
During capitalism’s youth, in 1848, Karl Marx (and Friedrich Engels) published their work ‘The Communist Manifesto. It provided an in-depth political and economic criticism of capitalism. Whilst the work of Karl Marx has since laid the foundations for disastrous economies and brutal dictatorships, he must not be dismissed entirely. If one considers his work as a mere critical analysis of capitalism in its infancy, it will provide a basis from which progressive reform can be made to our current system — that is arguably obsolete. Regardless of how capitalist reform is approached, the concepts presented by Marx will inevitably contribute to a solution.
Whilst work can be a source of joy, workers must see themselves in their work for this to be the case. Labour offers us a means to externalise our core values. In the modern post-industrial society in which we reside however, this is increasingly rare. Whilst specialisation as presented by Smith increases efficiency, doing so results in the worker being unable to consciously understand their contribution to the needs of both society and humanity, through their work. Marx argued it is simply not enough for a corporate officer to remind a worker of their worth and value to a company — as Smith stated.
The expendability of a human worker is exacerbated through capitalist endeavors. A labourer is replaced immediately following a rise in production cost or a technological development that increases efficiency. The result is a consistent fear of economic abandonment. If communism, as Karl Marx presented it, is not simply understood as an economic theory but also emotionally, one can note that it allows the worker to retain a deep-rooted longing for a permanent place in society without fear of being cast aside.
Marx’s most evident argument against capitalism was the unequal increase in wealth. He argued that capitalists shrunk the wages of the worker without impacting production or efficiency, in order to create a larger profit margin at the worker’s expense. This practice was entitled ‘primitive accumulation’. This process could only be corrected if the workforce was rewarded in a manner that is reflective of the profit made as a result of their labour.
Capitalist societies by nature are defined and categorised by a series of crises, often presented as a rarity or economic anomaly as they are supposedly not representative of the wider capitalist system. Marx argued that such crises are in fact the defining nature of capitalism for several reasons. Primarily, our efficiency and productivity pushed forth by Smith, has led to an abundance of product that is far more than an individual is required to consume. What enraged Marx is that our system allows there to be enough for everybody, yet not everybody has enough. This is the context behind Marx’s most historically notable claim, for the redistribution of wealth. To tax the richest 20% at a higher rate in order to redistribute said wealth to the poorest 40%. Here lays the distinct difference between the theoretical arguments of Smith and Marx — the treatment of the wealthy. However, the wealth accumulated from taxation would not be directly transferred to a low-income family’s bank account. It would instead be re-invested in infrastructure, education, public services, and so on.
Smith argued that the wealthy must be treated with honour and respect accordingly, as a means of subtle social manipulation that would result in the rich utilising their wealth in an nontraditional manner; through investment in public education and hospitals that would ultimately benefit ‘society’s weakest’ — in his words. During both the era of Smith and Marx, the radical left approach was to tax them heavier, for which of course Marx was a staunch advocate.
However, Marx did not believe that capitalists themselves were inherently evil, as the curse of bourgeois marriage was business over love, leaving infidelity to be an unfortunate yet accepted practice. In a trickle-down fashion socially, he argued that capitalism therefore as a whole requires its participants to replace economic and financial interests at the heart of their lives, resulting in a lack of education in deep and honest relationship building. He argued that ‘commodity fetishism’ required us to value objects with no intrinsic value. By means of solution, he believed that the perpetuation of human misery and suffering should be counterbalanced through the permanent option of leisure when required, in addition to a more progressive cultural understanding regarding time-off and work-leave.
Capitalism is no longer just an economic system. Following the Cold-War between the United States and the USSR — in the name of capitalism and communism — one could argue that a consequential byproduct of this conflict was each becoming more ideological in nature. Whilst most beliefs at the core of capitalist societies are simply value judgements, they are deeply etched into the minds of its participants and reflect the modern nature of the human psyche; unemployment is simply laziness, leisure is sinful, materialism results in happiness. In conclusion, live to work and do not work to live.
As a means of merging elements of both Smith and Marx, progressive reform therefore requires not only economic developments — but cultural advancements also. A culture that reflects a more empathetic and ethical way of life, embedded in an economic system that reflects such core values in parallel fashion to a peaceful lake providing a mirrored image. In short, synergy is required between both work-culture and our economy, and one would argue that this will only be possible through meaningful political dialogue and reform.
In the pursuit of a successfully ethical capitalist society in the western world, a restructure of democracy is necessary. While I am not suggesting we knock the house down, I’m simply suggesting we re-build the foundations and revamp the supporting infrastructure. If we take the United States as an example, it is evident that the relationship between democracy and capitalism is a toxic one, emphasised by the increasing influence and political capital of special interest groups and lobbyists — alongside the mentality of ‘re-election over progressive governance’ witnessed in recent years. Fortunately, the technological advancements in communication and therefore capabilities of sharing reformist ideas and beliefs, is now one of the cornerstones of modern democratic understanding for both the electorate and their progressive understanding, in the 21st century. This provides the most recent generations with an increasingly vital platform for said political dialogue and resources for change, to create a more equal and fair society — as both Smith and Marx intended.
Why is this important? Following on from the article by umair haque “Can Americans Stop Their Society from Collapsing”, one would argue that the concept of an “American Spring” is a reasonable hypothetical for the near political future, one that is crucial to the course-correction of our world’s democracies — as the US is arguably the global leader in that regard, Capitalism is therefore a key element that would require correction also.
Disclaimer: This article was originally submitted and graded as a university paper at Universitat Pompeu Fabra (UPF), and has since been edited for publication on the Medium platform.
For other articles in this series, check out:
Understanding Modern Finance, in Theory
“He is well paid that is well satisfied” (IV.i.433) Portia, in The Merchant of Venice.