Thefall of the feudalism system make the new economic system being invented byAdam Smith, the Father of Economic. The new economic system was calledCapitalism.
Capitalism is a system that allowed the private sector to conductthe limited resources and produce goods and service without being interruptedby the government. They can have all the resources, property and wealth. Theirgoal is to use less cost but still can maximizing the profit. The competitionbetween the society is really tough because everyone want to get the limited resources and does notwant to be left out from the competition. We can view the capitalist systemfrom two perspective. First is from Adam Smith’s perspective,we can see that he did not agree with the physiocrats that saying the mainproduction is coming from agriculture. For him, the main production is comingfrom the human behaviour which is selfishness. Being selfish has no danger andloss but it can stabilise the economy growth.
This is beacuse when someone isbeing selfish, socialise tend to compete more. He even said about the theory ofinvisible hand that will stabilise the economy. Second is from Karl Marxperspective, he uses the marxisme to give out the ideas of capitalist andsocialism. Marxisme is based on Karl Marx thinking and teachings. There are afew ideas of marxisme. First is about when the labor were forced to work forthe wealth. They even produce more product and work over time and earn moreprofit than they intend to. It may be beneficial for the owner but not for thelabor.
This is when Karl Marx called it as ‘surplus value’. This has lead tothe hatred come from the labor workers. Second is about law of value.
Allproducer have certain target on how many units of product and goods that theywant to produce. To achieve their target, they will adjust the labor work hourwith the amount of production that they want to produce. Third is about classawareness. If there is any class that want to have a good transformation, theyneed to have their own awareness in the society first.ForKarl Marx, the government should participated more in the production circle.
This is why Karl Marx is more to socialism rather than capitalism and want tocontinue as communism. He said that the capitalist that being taught by AdamSmith is more based on the exploitation of labor power. He sees that thissystem allowed the more powerful authority which is the richess society hasbeing using their power to force more labor to work under them. This has makethe poor society become more poorer. He does not like the social system used inthe era of Adam Smith because for him it does not appropriate to have the gapbetween the richest and poorest. The capitalist system has too many weaknessthat it could be replace by other economic system. KarlMarx and his friend, Friedrich Engels had joint force to write and published abook that have been attracted many economist and philosopher from around thewolrd called as ‘Das Kapital’ They published three volumes of Capital.
InCapital volume I it talks about Karl Marx review on Capitalism. In this volume,Karl Marx also talk about the theory of surplus value and more that haveconnection with manufacturing. Next two volumes were being published by hisfriend, Friedrich Engels after he dies. Second volume is about the labour whoworks for the private sector being as the consumer and also as the labor force.Marx even wrote a letter for Friedrich Engels that said:’InBook 1, we content ourselves with the assumption that if in the self-expansionprocess £100 becomes £110, the latter will find already in existence in themarket the elements into which it will change once more. But now we investigatethe conditions under which these elements are found at hand, namely the socialintertwining of the different capitals, of the component parts of capital andof revenue (= s).’ (Engels, 1967)Involume three it talks about the procedure of capitalist as overall.
Ifwe see from Adam Smith’s perspective, we can see the pureness of capitalism butit is different when we see from Karl Marx perspective beacuse he is more toradical. Even John E.Roemer said that the contrast between both of them is as follows:”Smithargued that the individual’s pursuit of self-interest would lead to an outcomebeneficial to all, whereas Marx argued that the pursuit of self- interest wouldlead to anarchy, chrisis and the dissolution of the private property-basedsystem itself. Smith spoke of the invisible hand guiding individual, self-interested agents to perform those actions that would be, despite their lack ofconcern for such an outcome, socially optimal; for Marxism the simile is theiron fist of competition, pulverizing the workers and making them worse offthan they would be in another feasible system, namely, one based on the socialor public ownership of property”. (Roemer, 1988)