Select economist that you disagree with and provide a biographic sketch of this person. Provide context for this school of thought …was it in reaction to something? What was the country it originated? …what else was going on during this period of history? Highlight contributions from chosen economist and develop argument that you think counters main idea or central tenant of thought. Provide conclusion
INTRODUCTIIN
Adam Smith is considered to be the Father of Modern Economics and Capitalism. He was an exceptional political philosopher during the 18th century. He wrote several books related to Economics such as “The Theory of Moral Sentiments” and “The Wealth of Nations.” He advocated that the market should be made free without the interference of the government. His laissez-faire philosophy, written in 1759, is popular among capitalists all over the world. His ideas are still practiced by people all over the world (Berry).
As Mercantilism was failing, it gave rise to capitalism (Magnusson). The mercantilism economic philosophy encouraged balanced trade for the prosperity of a nation. From the 1600s to 1800s Mercantilism was practiced all over the world which determined how much wealth a country had based on its silver and gold deposits. Smith disagreed with mercantilists and gave rise to capitalistic ideas. Smith introduced the idea of gross domestic product (GDP), which promoted free trade between nations. The GDP system is followed by every country today, through imports and exports in the free market. Smith’s economic theories were followed by many great political thinkers, including Karl Marx and David Ricardo (Marx).
Smith is known as the father of Capitalism which is based on the wage relation between the employer and the employee. Before capitalism people gave their land to feudal lords and slave-owners, but now the capitalists pay wages to the laborer for his labor. Now getting a job under the capitalists has become a basic necessity as some land that the people had was taken away by the enclosure movement. Today, a person would have to work under the pay rate set by the market, unless many workers bargain collectively to raise their wages. Full-time employment has become a basic necessity. Many capitalist corporations today exploit workers for their benefit.
ISSUES OF CAPITALIST SYSTEM
Smith was of the thought that the government should not interfere in the free market or minimize its role. He promoted the idea that instead each person or corporation should be free to regulate the market based on self-interest, competition, and supply and demand of the products, in his book “The Theory of Moral Sentiments,” he wrote that an “Invisible Hand” guides the supply and demand in the market. His ideas were that every person should be able to obtain maximum returns without any regulations and taxation set by the government.
Smith contributed a lot to modern economics, and most of his policies were excellent, but his theory of a full capitalistic market that favors only self-interest to boost returns is flawed. What we witnessed during the great depression can be seen as an example as to why no interference by the government can be disastrous. During that time there was no SEC, FDIC and no compensation for unemployment in the U.S. Today, the government has countless policies in place to protect the poor against rich corporations. Whereas, during the great depression, there were none due to which millions of people suffered from poverty. Smith’s theory of “The invisible hand” was widely popular during that period, and which is why advocating that government should let the market be free can be dangerous for the nation.
Smith argued that if a person looks out for himself and works solely for self-interest, he will benefit the entire society as he would produce products based on demand. In his book, Smith gave an example of a butcher, brewer, and a baker, and how if they looked after their self-interest, they would be satisfied with the reward they get in the end. It would not only make the consumer happy, but also the supplier. He argued that every person in society could become wealthy if he worked hard enough and looked after his self-interest. Smith’s idea of self-interest and supply and demand is somewhat good, but if there were no regulations set by the government, then each corporation would misuse the freedom they’re given. Supply and Demand even with regulations are making people want to buy things they don’t even need, while scarce natural resources are going to be wasted. We produce things by the hundreds of tons daily, most of the things that people are tricked into buying. Each day tons of food are wasted even though there are laws set by the government if each or company were free to produce as much as they want, then the rich would keep getting richer while the poor would become poorer. It is still occurring today, which is why capitalism is not always the answer. There should always be laws set by the government so everyone can benefit from the wealth that is being generated by wealthy enterprises.
Today, unemployment is on the rise and the government is constantly criticized by people for not creating enough jobs (Iwai). Many argue that if the government were to let the market regulate freely, then many of the problems could be solved. Smith’s “The Invisible Hand” is a theory promoted by capitalists all over the U.S. Smith says that if ideal transactions between two parties were allowed in the market, both the consumer and the supplier would be satisfied with the result and gain maximum benefit. The idea itself is flawed because unless it benefits both the parties in any way, no one will make the transaction. If the government were not to interfere, then there could be many dangerous implications for the working class.
The reason why the government interferes is to keep everything in check by force. Only a person who does not want to follow the regulations set by the government and has evil intentions would want to have a fully free market trade. The idea that the government should not interfere is flawed. Smith’s ideas are simply based on assumptions that every person is a moral being and has moral values, which may be true, but that cannot be said for every individual in the world. Smith believed that due to the moral nature of a human being, a person would not exploit the market, but I disagree with that, as competition gives rise to immorality. Most people who get ahead in a competitive society do so by lying, cheating, and stealing. We cannot guarantee that every human being would do the right thing if there’s competition; already so many corporations lie and steal despite the government’s interference. Immorality would always benefit the competitor. It is important for the government to keep everything in check so people cannot misuse the power they get in the market (Roubini).
CONCLUSION
In the end, it can be concluded that the government keeps a check on the market even today, but evil corporations are still exploiting people. Today everyone thinks they need to make as much wealth as possible to stay happy, but that’s not the case. Instead, people have become more stressed, depressed and unhappy as ever. People are making transactions that don’t benefit them or make them happy, just because that’s how the capitalists are controlling the whole market. More and more resources are being wasted in making things that people wouldn’t want, but they think they do. If the government does not interfere, society will keep heading towards the dark side. Everyone should be able to do business as he pleases, but that does not mean the government should now implement laws to keep things in check. In conclusion, the ideas that are associated with Smith have given him the title of “The Father of Modern Economics,” but some of his ideas, if implemented, could be disastrous for society.
Work Cited
Berry, Christopher J. The Oxford Handbook of Adam Smith. OUP Oxford, 2013.
Iwai, Katsuhito. “Global Financial Crisis Shows Inherent Instability of Capitalism.” Tokyo Foundation. Tokyo Foundation, 8 December 2008. Web. 5 October 2018. http://www.tokyofoundation.org/en/articles/2008/global-financial-crisis-shows-inherent-instability-of-capitalism.
Magnusson, Lars. The Political Economy of Mercantilism. Routledge, 2015.
Marx, Karl. Marxism, Socialism and Religion. Resistance Books, 2001.
Roubini, Nouriel. “Laissez-Faire Capitalism Has Failed.” Forbes. Forbes, 19 February 2009. Web. 5 October 2018. https://www.forbes.com/2009/02/18/depression-financial-crisis-capitalism-opinions-columnists_recession_stimulus.html#4f1ad76c22ef.
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