Adam Smith’s theory of free markets suggests that when the markets are left alone, they will self-regulate by depending on supply and demand, self-interest and competition. This means that business owners will make money by providing goods and services that that people are interested in purchasing. Smith argues that when the business person makes products or services that are appealing to the market in the right quantity and quality, then they are serving their self-interest since they benefit from the revenue income. Similarly the business owner supplies goods and services to meet the market demand and create job opportunities for workers, which allows them to create wealth for themselves and the nation. Thus, the theory of the free markets is based in the notion of “invisible hand” as coined by Adam Smith, who explains that by eliminating the government intervention markets will interfere with the supply and demand of goods and deny parties from both ends from pursuing the interests in doing business.
The pursuit of profit reinforces the capitalist economic system. In a capitalist society, profit is perceived as the driving force that inspires people to become productive or invest in activities that are financially and economically beneficial for them. This ideology contributes to Adam Smith’s theory of free markets as it implies that people are driven to do business due to the benefits associated with it. For instance, a business person will create products to meet the supply and demand in the market place as well as generate substantial revenue income. Therefore, regulations in the free markets such as taxes, quotas and tariffs will interfere with the people’s natural ambitions to take part in business.
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Free markets support the notion behind the pursuit of profit as governments that do not impose any restrictions on the freedom of business people conducting their business and industrial activities. This policy allows business owners to produce large quantities of goods and make as much revenue as the can without any restriction. Thus, they are able to pursue profits to the best of their capabilities – since in the free markets; supply, demand and completion act as the invisible hand that influences the markets. Pursuit of profit is a sign of whether or not people have the ability to promote their self-interests by focusing on producing goods that create wealth for them and the rest of the society.
The limited role of government in free markets increases the level of competition between sellers of good and services. The lack of government restrictions in the free markets promotes the rights of the citizens and maintains an organized business environment that promotes the efficient functioning of the markets. As a result, there is free entry and exit of sellers in the market place as business firms have the freedom to supply their goods at any given time. Thus, sellers of goods have the opportunity to maximize the social welfare, which includes the joint benefits of both producers and consumers. Free markets create an environment that allows sellers to produce goods that are not only beneficial for the masses but also in high demand. Therefore, sellers that produces quality goods in high quantities using the most efficient approach benefits from as the gain the largest market share and profits.
The competition among sellers of goods and services is relatively high in free markets as producers strive to supply products at competitive rates. Free competition among sellers does not pave way for sellers to determine their prices, since each seller is producing goods and services that are currently at the highest demand within the market place. However, both sellers and consumers have the power to influence the price markets for the goods and services produced. For instance, when the supply is high than the demand, then the prices in the market place will drop since there are many sellers compared to buyers. On the other hand, if businesses are producing goods and services that are at the highest demand, they have the power to command the prices and increase their profits.
The market mechanism whereby both the buyers and sellers have influence dictates the prices through a decentralized approach. The interaction between the buyers and sellers affects the pricing approach as both parties naturally seek to preserve their self-interests. Therefore, as buyers and sellers seek rewards from the market they impact the allocation of resources and revenue income. Furthermore, the freedom to choose in terms of consumption, supply and investment equips buyers and sellers with the ability to influence the market trends. For instance, customers have the chance to purchase other products and services in instances whereby they are dissatisfied; whereas business people and investors have the option of pursuing other lucrative opportunities and employees can resign from their current jobs to pursue other career ventures with better pay and prospects.
Adam Smith’s theory of free markets and invisible hand establishes that government intervention and regulation in the economy is neither beneficial nor mandatory. In a free economy, individuals have the freedom to operate in the market place, make decision that are focused on promoting their self-interests and contribute to activities that benefit the society. Although the advantages of a free market are not the specific focus of those that participate in them, both sellers and consumers gain from them either directly or indirectly. Nonetheless, Smith suggests that intentional government intervention and regulations aims at benefiting the society as a whole by protecting its members; however, in the long-run, by denying the public the benefits of free markets the government creates an economy that is harmful to the people.
Question 2: Marx’s Theory of Alienation
Marx coined the theory of alienation to explain how the human actions are the driving forces behind the dominating factors within the society. Through the theory of alienation, Marx reveals that even though the various factors of the society appear natural and independent, they occur due to the influence of past human actions. Marx implies that it is only human actions from the past that has contributed to the development of the modern world, and will shape the future world to be alienated from the impacts of capitalism. Marx theory affirms that human beings are a product of the society that they live in, and also have the potential of changing the society through their actions. According to Marx’s theory, alienation is associated with loss of control over labor
Marx’s argues that work has robbed people of their freedom, since most workers perceive labor as an inevitable necessity to survive. Marx’s arguments imply that people should not perceive work as an unpleasant activity as it could be meaningful and allow the laborers to be creative and express themselves. However, in the reality of capitalism, work is not fulfilling and satisfying for most people. In the theory of alienation, Marx identifies two reasons why work denies people the freedom to lead a content and fulfilled life. He describes capitalism as an economic system that heightens the division of labor, and reduces production levels into small series that are assigned to workers with specialized skills and knowledge as a strategy of increasing profitability. As a result, the laborers are forced to stick to one-sided functions and appropriated to them for the rest of their lives; thus, depriving them of their ability to pursue a well-rounded lifestyle that allows them to live fulfilling lives.
The first type of alienation that Marx explains is the one that the employees experience by the when they are separated from the product of their labor. The goods and services that the workforce produces by investing their labor is meant for another party to enjoy as it is ultimately produced for the market. In this case, alienation is revealed through the goods or services that are produced through the work performed by the labor force. Once the workers have performed their duties, the end product is out of their control as they do not own the rights of the final product; thus, it becomes an alien object.
Workers experience alienation from the final object, which works against their self-interests and whose hostility is felt the more the worker invests their time and effort in producing them. As a result, the more the worker is invested in producing the goods and services, the more they lose control and become powerless in the ownership of the produce. Marx asserts that this occurs since the workers lack control of the commodity they create as well as the exchange value that the produce has in the market place. Therefore, increased productivity among the workers means that the capitalist is enriched since they own the rights and value of the final produce. The commodity that the workers produce multiplies the wealth and power of the capitalist who has the ability to control the benefits of their labor and the purchasing power of the market. The capitalists sell the end produce for their own survival and to fund the reproduction whereas the laborer is deprived of the privilege of taking pride in their production. Besides, the worker assists in preserving the system and the methods of production that produce the alienation and work against their self-interest.
Marx explains that workers experience a second form of alienation that occurs as they do not have the power to control the labor process or production methods. The alienation at this stage is experienced since the workers lack control of the products, which suggests that a laborer cannot control the production process used in creating the final commodity. Thus, the employee cannot find satisfaction and fulfillment that emerges from controlling the production and work activity involved in producing goods and services. This aspect of alienation is reinforced by the fact that workers lack control of their job responsibilities and decision-making in the production activities. Moreover, the reality of workers cannot be separated from the concept of alienation since the workers are forced or coerced to produce and sell for survival. The labor-power is not intentional but rather arises from forced labor, which they need to make an income for their living.
Alienated labor according to Marx is also derived from an individual’s human nature. The capitalist relations of production within the society reinforce alienation from the social relations that human beings form. According to Marx the human nature and conscious is integrated in the social framework since people are social beings since birth. Therefore, the alienation is manifested through the competitive nature of workers and members of the society that leads to hostility. For instance, in the work setting, workers will become competitive when they are contending for the same job position. Thus, in alienated labor each person perceives the other based on the standard and the position in which they position themselves as workers.
