Adam Smith often referred to the father of capitalism believes that labour = value which means the amount of work you put in something gives it its value for instance you are making a table the amount of time it takes to cut the wood, paint it and put it together is what makes the wood valuable. Therefore the more time and effort equals more value.
According to Adam Smith if a factory worker makes chairs, and in 10 hours they might make up to 10 chairs and their wage is $100 for the day. Meaning $100 should be added to the cost of the chair along with other factors of production assuming other factors of production like wood and others costs additional $200. The value of the 10 chairs should be around $300( $100 workers wage + $200 additional costs) that's $30 per one
But in the real world Adam Smith assumptions are not realistic it usually happens that a worker in a factory makes 10 chairs, in 10 hours and additional production costs is $200 which makes total cost to be $300 assuming workers wage is $100 instead for the owner to sell for $30 per one he would rather sell for $50 each or even more.
Therefore the worker created $500 worth of value but only received $100 and out of the remaining $400 about $200 is for additional cost and $200 is profit extracted from the workers' labor .
This leads to Marx's concept of exploitation because the extra $200 isn't given to the worker but kept by the factory owner and the factory owner is earning more than the worker.
As a result factory owners grow wealthy not through their own work but by pocketing this Surplus value and this as an inherent feature of capitalism and Karl Marx believed that this exploitation would eventually lead to Revolution
Adam Smith saw capitalism as a tool that can foster economic growth but Karl Marx saw it as exploitation which will lead to revolt and produce a classless society (socialism).
Initially Adam Smith didn't pay attention to profit and other costs because he was describing a primitive economy that factors in only labor but later added other production cost and profit to his theory describing profit as a reward for risk taking but Karl Marx maintains his stand that profit is exploitative.
Based on today's world capitalism drive growth and innovation so Adam Smith was correct about that.
But unchecked capitalism will definitely lead to exploitation so Karl Marx theory is correct here.
But Karl Marx communism alternative has not worked well and no capitalist country has naturally transformed into a communist state
Adam Smith paid little attention to exploitation and inequality that capitalism can cause.
Why Karl Marx was driven by his love for Communism.
Congratulations @levidesmond69! You have completed the following achievement on the Hive blockchain And have been rewarded with New badge(s)
Your next target is to reach 90 posts.
You can view your badges on your board and compare yourself to others in the Ranking
If you no longer want to receive notifications, reply to this comment with the word
STOPCheck out our last posts: