Ultimately Capitalist Society is Harmonious
Ultimately Capitalist Society is Harmonious
Capitalism can be described as an economic system in which the markets are free or largely unregulated, while the means of production are under private ownership (Hunt 2015). Capitalism has its roots in mercantilism and feudalism, as the state stopped having complete control of the economy and people gained freedom from obligation. However, this basic change in society, coming against the backdrop of a challenge on the aristocracy by forces below it, raised fears that capitalism would lead to chaos as it emphasised an individualistic mode of production (Fusfeld 2002). Adam Smith sought to array these fears by arguing that capitalism on account of its self-adjusting nature, would establish harmony amidst all the conflicts tied to it. However, Karl Marx was sceptical about capitalist society being harmonious.
Smith drew inspiration from various breakthroughs that followed the discovery of 'natural laws', proposed a theory that capitalism was a self-adjusting and naturally harmonious system (Smith 2011). Smith assumed a holistic perspective of capitalism, in which he viewed it as a network of interconnected and interdependent parts that rely on the market for equilibrium (Persky 2013). Smith was of the view that capitalism was harmonious on account of the self-regulating nature of markets. He also relied on his 'labour theory of value' to arrive at this bold statement. The theory holds that the economic value of a service or goods hinges on the 'socially necessary labours' needed to produce it, as opposed to the pleasure or use that its owner derives from such a good or service.
Smith was highly opposed to the feudalistic society and mercantilist policies in Britain. In particular, his fierce attack on hierarchy and the state's involvement in markets was instrumental in Smith's development of his perspectives on the possibility that capitalism would eventfully turn out to be harmonious. The serf, working under an obligatory system, was not motivated by the promise of profitability to produce more. Additionally, this system of obligation was without economic growth and innovation. These factors ensured that the serf remained in the dirt. Smith observed how the elite profited under mercantilism thanks while the workers wallowed in poverty. This is because the elite were politically connected and benefited from rigged markets and monopolistic market conditions. Clearly, these benefits were out of the rich of the poor. The fundamental misunderstanding was that whereas Smith was convinced that wealth is to be found in what money can buy, he was convinced that governments were of the view that wealth lies in metals and money. This led to subsidies and trade restrictions that totally impeded growth.
Smith was on the lookout for a system that advanced wealth and reduced poverty. Accordingly, the inflexibility of mercantilism was the flip side of restricted laissez-faire capitalism (Sackrey, Schneider & Knoedler 2005). Smith noted that a system of 'natural liberty' would motivate the worker to produce endogenous inventions. The capitalist would subsequently harness such inventions to generate wealth to such levels that it would disseminate across society. As a result, even the serf would benefit from this trickling down of wealth, thereby lifting them from dirt. This conception acted as the foundation of Smith's idea of a 'labour theory of value'. Smith was of the idea that the value of a commodity flaws based on how capitalism drove production up while also pushing wages down. Consequently, there were very many commodities that the working class who were underpaid at the time, could not afford. This led to overproduction. Certain areas grew richer, even as others were exploited, and hence became poorer. Wealth did not spread evenly across states and internationally. In other words, in order for one country to develop, it was necessary that another one had to be exploited. This is something that globalisation has done so well to bring to light.
Such an unforeseeable and spatial aspect of capitalism results in cycles of boom and bust. For this reason, Marx viewed capitalism as best described by crises. Sackrey et al. (2005) contend that because Smith considered labour from the bottom and top, the powerful capitalist and humble factory worker, this could explain why he assumed a harmonious and holistic perspective of commodity value. Marx was opposed to this view based on his observation that the bourgeoisie formed plutocracies and oligarchies their massive wealth, most of which was used to fund their luxurious lives. Hence, Marx advocated for the overthrow of the state which would in turn see the capitalist overthrown. On the other hand, Smith acknowledged the value of small states in supporting the 'Invisible Hand.
Smith's conviction of the self-regulating nature of markets acts as the foundation of his conviction of natural harmony. Fusfeld was also convinced that capitalism possessed harmony based on his belief that there is a 'natural price' attached to a commodity. This is the exact cost of capital, land and labour required to bring such a commodity to the market.
Based on this perspective, it becomes evident why Fusfeld believed in the harmony of capitalism. The capitalist, on account of his individualistic nature, is compelled to save for his individual sake. The same 'Hand' also compels the capitalist to innovate by way of executing various forms of inventions into manufacturing. Invention causes an increase in the market value of a commodity while its natural price or cost of production reduces. In the process, the capitalist reaps massive profits. The promise of 'extraordinary profits' compels other capitalists to also innovate in order to remain competitive in the market (Otteson 2014). Soon enough, they flood the market with commodities produced under an innovation manufacturing process. As the supply of the commodity increases beyond its demand, the price declines towards the natural price of that commodity, with the result that the capitalist reverts back to receiving 'ordinary profits' (Forman-Barzilai 2011). This compels the capitalist to start saving with the goal of innovating once more. Smith opined that this process would go on till the prices of all commodities had reduced. He was of the view that the state ought to support and encourage wealth accumulation by the capitalists, as long as the savings were ploughed back to the productive process, thereby driving universal wealth even further. Moreover, as other imitators flooded the market, there would be a rise in demand for labour, leading to rising wages since labour would become more valuable. Such a self-regulating nature would likewise result in the ideal allocation of resources, this tackling the issue of scarcity. Under a capitalist society, the consumer the consumer would get the opportunity to choose or vote the commodities produced by capitalists using their wallets. The capitalist produce based on their self-interest, as opposed to benevolence. Accordingly, they only produce that which the consumer desires in an efficient manner. However, owing to the holistic harmony that characterised capitalism, wages would rise, there would be a reduction on the cost of living, and there would be efficient allocation of resources, while competition would limit the profits earned by capitalists.
Karl Marx was however opposed to the harmonious nature of capitalism that Smith had envisioned. Marx, by assuming a materialistic approach, viewed capitalism as being essentially divergent. He also saw class conflict as being widespread in capitalism (Stilwell 2013). In total, Marx identified three key forms of contradictions of capitalism: deepening inequalities, worker alienation, and a defective 'labour theory of value'. Marx witnessed the wretchedness of the working class and quickly came to the realisation that the working class wished to topple the bourgeoisie. Marx further reported of a considerable contraction between social need and private profit.
Marx was equally opposed to Smith's idea that capitalism would enable the working class to overcome the poverty cycle, thereby resulting in harmony between capitalist and worker (Marx 2007). This was following his realisation of the widening gap between the poor and the rich, and that the two classes were divided by bitter conflict. The poor were enduring unnecessary suffering even as they witnessed the rich grow even richer. Increased competition made the capitalists even more oppressive of the working class, driven by the sole motive of profits. Consequently, there was a constant conflict between the workers and the capitalists. While workers worked for longer and harder, they were paid less (Hunt 2009). This convinced Marx of the unharmonious nature of capitalism, a development that resulted in the Hegelian concept which holds that man would not only lose his own 'human essence', but would also become alienated through specialisation, labour exploitation, and commodification. This is because the worker was compelled to work longer for less, sometimes without wages, while his labour and life was valued based on commodities and money (Stillwell, 2013). Consequently, man became separated from the commodities that he helped to produce, from his work, and from humanity.
In sum, the idea that capitalism is ultimately harmonious is quite contentious. Smith's conviction of the harmonious nature of capitalism was based on based on the flaws of the stifling and rigged contradiction of mercantilism, his idea of commodity value and conviction of the free market in terms of wealth generation. Conversely, Marx, based on his materialistic approach and observation, noted that a lot of what Smith before him had said turned out to be wrong. His idea of the 'Invisible hand' spreading wealth was not happening, while inequality was quite rampant. Also, the commodity theory as propagated by Smith turned out to be self-defeating as worker's labour and life resulted in his being detached from his 'human essence'.
References
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Hunt T (2009). The Frock-coated Communist: The Life and Times of the Original Champagne Socialist, London: Allen Lane.
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Marx K (2007), Capital: A Critique of Political Economy - The Process of Capitalist
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Otteson J (2004), What Adam Smith Knew: Moral Lessons on Capitalism from Its Greatest Champions and Fiercest Opponents, New York: Encounter Books.
Persky J (2013), The Political Economy of Progress: John Stuart Mill and Modern Radicalism, Oxford: Oxford University Press.
Sackrey C, Schneider G & Knoedler J (2005), Introduction to political economy, Cambridge, MA: Dollars and Sense, Economic Affairs Bureau.
Smith A (2011), An Inquiry Into the Nature and Causes of the Wealth of Nations, New York: Cosimo, Inc.
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