The Economic Revolution
In the economic revolution, Heilbroner explains what factors affect the organization of society. The first way is tradition; professions are passed down from father to son generation to generation. For example, Adam Smith says, “Every man was bound by a principle of religion to follow the occupation of his father and was supposed to commit the most sacrilege if he changed it for another” (13-14).
This system allowed for certain jobs to always be filled causing balance between occupations in society. The second way of organizing society was based on command/authoritarian. If things were not getting done, the dictator had the authority to use whatever means necessary to get tasks finished. For example, Heilbroner explains how the pyramids of Egypt and the Five Years Plans of the Soviet Union didn’t come into existence voluntarily, but because Russia and Egypt were both command societies, and they ensured economic survival through punishments dictated by the authorities.
The third method of organization and survival came “upon the development of an astonishing arrangement in which society assured its own insurance by allowing each individual to do exactly as he saw fit—provided he followed a central governing rule” (14). Thus, the market system came about. Before this idea, personal gain was non-existent because people only grew up to simply survive; work was a means to an end.
The concept of gain didn’t exist yet because the idea of a nation had not fully emerged, and the Catholic church condemned personal gain as the enemy. However, it finally started to emerge as nationalism increased, separation of secular and spiritual life came into play, businessman became valuable, and the people became eager to advance intellectually. Markets gave the meaning to means of production: land, labor, and capital.
Adam Smith contributed to the economic world by exploring the concept of self-interest and “The Invisible Hand.” The invisible hand acts a force that promotes society. He believes that not everything must be planned to be orderly; order will emerge as a consequence of the interactions of individuals. Everyone is led by an invisible hand to “promote an end which was no part of his intention” (Handout).
Smith also states how humans are selfish and no one does anything out of kindness, but they do it out of their own best interest. When trying to persuade someone, we make it seem as if it will benefit them to do us a favor. For example, Smith writes, “It is not from the benevolence of the butcher, brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest” (Handout). They work to make money and benefit themselves.
Smith’s laws of self-interest and competition being the driving force of the market are also crucial to economics. Both factors ensure the market meets consumer needs. Although businesses have the freedom to charge items as they please, they cannot do so without the fear of another company swooping in to steal business.
Therefore, the market is self-regulating; one can do whatever he or she likes, but actions will have certain consequences including losing customers or workers. The competition imposes restrictions on price and quantity. Smith also discusses the Laws of Behavior: Law of Accumulation and the Law of Population. People will always want to accumulate more riches and economic prosperity, but population regulates this accumulation.
Adam Smith also talks about the bourgeoisie’s admiration of “Laissez-Faire” or “free fair.” Because they are businessmen with lives centered around money, they believe the government shouldn’t interfere in business relations but only in safety aspects. Due to this, Smith worries that the working class will be taken advantage of.
Although republicans love Adam Smith, he himself disliked capitalists because they lead to monopolies which were the market’s biggest enemy. Monopolies undermine competition which is necessary to regulate the market. Smith thought the government shouldn’t be pro-business but should strive to be pro-market. To accomplish this, business men shouldn’t be in charge because they will look out for themselves rather than society.
Thomas Malthus was another idolized economist that built on the workings of Adam Smith. He believed humanity will eventually outstrip natural resources because population will outnumber everyday things such as land and water. Therefore, overpopulation would be the prime factor negatively affecting the prosperity of the system. On the other hand, Ricardo disagreed with Smith’s philosophy on the basis that humans cannot harmoniously work together.
For example, Heilbroner writes, “Society to Adam Smith was a great family; to Ricardo, it was an internally divided camp” (47). He compared the world to an escalator; people are ruthlessly fighting to get to the top as they kick others back down. This introduced the idea of class mentality. His main contribution was “abstract mentality” where there is no feelings or humanity in his works. While Smith believed in finite progress, Malthus and Ricardo saw infinite progress and evolution.
The German scholar, Karl Marx, stated that Capitalism is destined to fail. His two main reasons for this were the rebellion of the proletariat class and concept of surplus value. In Marx’s world, child labor was extensive to the point where kids were tortured. This was a result of Capitalism because the bourgeoisie made everything money oriented. Marx writes how the bourgeoisie have “torn asunder the motley feudal ties that bound man to his “natural superiors,” and has left no other bond between man and man than naked self-interest, than callous ‘cash payment'” (Handout).
Regarding surplus value, people are being exploited to work more than they get paid for. In big C Capitalism, the price of something equals the labor put in. However, this system is flawed because there is no profit resulting in no incentive to work. Therefore, this is not how Capitalism works today because people are exploited to make money. He predicts both of these problems will lead to the fall of Capitalism. Another one of his greatest ideas is “Dialectical Materialism.”
He believed that although ideas shape the world, the world also shapes the ideas; reality affects our ideas and vice versa. Things are always evolving around society’s superstructure: Capitalism. Another aspect of Dialectical Materialism is finding the moderation between two things.
For example, the moderation between Capitalism and Communism is Socialism. Marx is well known for his laws of motion as well. These laws discuss the following: constant need for innovation, incessant need for new techniques, the business cycle going into depression, huge corporations such as Amazon and Disney coming into play, and the idea of small businesses dying.
