ADAM SMITH AND THE NEW ORDER OF INDUSTRIAL CAPITALISM

The Classical Liberals, of whom the most well known is undoubtedly Adam Smith, author of The Wealth of Nations, supported the new economic order of industrial capitalism. Smith, whose definitive work was published in 1776- well before the industrial revolution hit its stride- made common the notion that governments should assume a more hands-off approach to governance. Recognizing that industrial technology would allow for capitalism to create, not just redistribute wealth, Smith thought it natural that capitalism be free to function of its own accord.

Indeed, a laissez-faire approach to economics was, in Smith's view, the essential way to ensure prosperity for the nation as a whole. In this, Smith rejects mercantilism (government supervision of the economy) as the best means by which a country may prosper. On the contrary: at the fore of Smith's concern was the creation of wealth, a process that he believed would be most efficiently rendered when free trade and free markets were allowed to allocate resources. Ultimately, when capitalism is allowed to run its course, the greed and self-interest of the capitalists would produce results in the economy that benefit not only the individual, but society as well.

Smith's ideas certainly fit in with the new economic order of industrial capitalism. Smith, in The Wealth of Nations, claims that the "greatest improvement in the productive powers of labor" seems to "àhave b

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ensure full employment; by raising or lowering its spending and taxes and by controlling it's investment spending, the government can proactively influence equilibrium, virtually guaranteeing that it will occur near or at full employment (Gregory, 1999, p. 106). Marx also critiques the capitalist system, though his thinking on the matter is markedly destructive; he advocates the obliteration of the existing system. For Marx, capitalism is an agent of self-alienation for mankind; under a capitalist system, division of labor and specialization reduces the individual worker to the level of a commodity. Because the average worker in an industrial capitalist system has been marginalized- with no craft or product that is uniquely his own- he therefore is resigned to sell not the product of his labor, but his labor itself, thereby enslaving him to whomever owns the factory in which he works. Under such a system, a property-owner is only obliged to pay his workers the bare minimum that they require to subsist, not an amount which reflects the value of the goods that they produce. Essentially, for Marx capitalism creates an environment in which the more a worker produces, the poorer he becomes. Thus the system must be overthrown ut
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Approximate Word count = 2275
Approximate Pages = 9 (250 words per page)

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