Model Answer
0 min readIntroduction
Adam Smith’s *The Wealth of Nations* (1776) laid the foundation for classical economics, advocating for free markets and individual liberty as drivers of prosperity. He posited that self-interest, guided by an ‘invisible hand’, would lead to optimal resource allocation and societal benefit. However, Karl Marx, a century later, fundamentally challenged this optimistic view. He argued that Smith only observed the surface level of economic activity, failing to recognize the underlying power dynamics and inherent contradictions within the capitalist system. Marx believed that the pursuit of individual liberty under capitalism inevitably created exploitation and alienation, casting a ‘shadow’ over the supposed benefits.
Smith’s ‘Sunlight’ – The Core of Classical Economics
Smith’s economic philosophy centered on the idea of laissez-faire, minimal government intervention, and the power of the free market. He believed that individuals, pursuing their own self-interest, would unintentionally benefit society as a whole. Key concepts included:
- Division of Labour: Increasing productivity through specialization.
- Free Trade: Promoting economic growth through international exchange.
- The Invisible Hand: The self-regulating nature of the market.
Smith saw economic progress as a natural outcome of individual initiative and competition, leading to increased wealth and improved living standards.
Marx’s ‘Shadows’ – A Critique of Capitalism
Marx, however, argued that Smith’s analysis was incomplete and ideologically biased. He believed that Smith failed to recognize the inherent class conflict within capitalism and the exploitative relationship between the bourgeoisie (owners of capital) and the proletariat (workers). Marx’s critique revolved around the following:
- Historical Materialism: Marx believed that history is driven by material conditions and class struggle. Economic systems evolve through conflict.
- Surplus Value: Marx argued that capitalists extract surplus value from workers – the difference between the value workers create and the wages they receive. This is the source of profit and exploitation.
- Alienation: Capitalism alienates workers from their labor, the products they create, their fellow workers, and their own human potential.
- Inevitability of Crisis: Marx predicted that capitalism is prone to cyclical crises due to overproduction, falling rates of profit, and increasing class conflict.
Contrasting Perspectives: A Table
| Feature | Adam Smith | Karl Marx |
|---|---|---|
| Focus | Individual Liberty & Market Efficiency | Class Struggle & Exploitation |
| View of Self-Interest | Beneficial for Society | Root of Exploitation |
| Role of Government | Minimal Intervention | Ultimately, the state serves class interests |
| Historical Progression | Gradual Improvement | Revolutionary Change |
For Marx, the ‘unimpeded exercise of individual liberty’ under capitalism wasn’t a path to prosperity for all, but a mechanism for the concentration of wealth in the hands of a few, leading to the immiseration of the working class. The ‘shadows’ were the social costs of capitalism – poverty, inequality, alienation, and the potential for revolution. The Opium Wars (1839-1842 & 1856-1860) exemplify how the pursuit of profit and free trade, as advocated by Smithian principles, led to exploitation and conflict in the colonies.
Conclusion
In essence, while Smith celebrated the potential of individual liberty to generate wealth, Marx exposed its darker side – the inherent inequalities and exploitative tendencies of a system driven by profit. Marx didn’t deny the productive capacity of capitalism, but argued that its benefits were unevenly distributed and came at a significant social cost. His critique remains relevant today, prompting ongoing debates about the ethical and social implications of free markets and the need for regulation and social justice.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.