Becky Perry

GBT5, Paper #2

Paper Presentation Version

Summer 2000

Sovereignty in the Marketplace

An Essay on Economic Philosophy

Reeling from the laquiz jolts in NASDAQ prices, pictures of pinstriped investors splash the front page of the morning newspaper.Factory assembly lines generate new products cheaply and efficiently.Small businesses line the streets of American suburbs, each entrepreneur with his own vision for growth and prosperity.At the same time, desperate people flee the poverty found in crumbling societies to pursue new opportunity in a free market economy.In many ways, the economic system of capitalism has fueled the principles of freedom that promise the American dream.Two men have most dramatically affected popular understanding of the capitalist system: Adam Smith, the father of laissez-faire economics, and Karl Marx, the father of communism.Smith’s Wealth of Nations has been treasured as a handbook for economic principles of individual freedom.Marx’s Das Kapital proposed remedies to what he perceived to be the ills of the Industrial Revolution and the capitalist system.Studying the philosophies of Smith versus Marx provides an understanding of the capitalist system, its communist counterpart, and the value of a Christian perspective on economics.

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Born in Kirkcaldy, Scotland, in 1723, Adam Smith worked as a tutor and Professor of Logic at Glasgow University before retiring to devote his time to writing.His most famous work, An Inquiry into the Nature and Causes of the Wealth of Nations, has remained a beloved capitalist textbook for over two centuries.Smith’s 18th-century contemporaries measured the wealth of a nation by the quantity of gold and silver it possessed.Challenging popular conceptions about the nature of economic value, Smith transformed economic thought with his principles of individual freedom and limited government.He argued that personal, self-motivated decisions would benefit all of society.He extolled the merits of the diligent entrepreneur and the advantages of capitalist development.In doing so, Smith conceived economic principles essential to capitalism itself, branding him as a primary target for the criticism of Karl Marx years later.

Popular economic thought in Smith’s day focused on a system known as mercantilism.The economic goal of mercantilism was to maximize a nation’s holdings in gold and silver.Rulers operating on mercantilist principles sent explorers to claim vast, undeveloped territories, hoping to discover new sources of precious metal.They also attempted to export large amounts of goods while importing relatively little and pocketing the difference.If a nation exported more than it imported, it enjoyed a “favorable balance of trade.”Simply, mercantilism assumed that money is wealth.The greater the stockpile of gold bars, the richer the king, and the wealthier the country.Gold, however, cannot be planted as a cash crop or spun into clothing.Money has no inherent value; it merely facilitates exchange for the truly useful commodities of daily life.Smith correctly identified the flaw in this system: a country could acquire huge amounts of precious metals by exporting all domestic products and importing only gold in exchange.However, without those needed commodities, the people of this supposedly wealthy country would starve.As Smith states, “The increase of those metals will…be the effect, not the cause, of the public prosperity.”

Smith then presents his own thoughts on the meaning of economic value and the path to national wealth.If gold has no inherent value, then what does determine the value of any given product?The economic value of any commodity, Smith says, is equal to the amount of human labor needed to purchase it.The actual time, blood, sweat, and tears spent for a commodity to come into being determines the true value of that object.Does this value, however, always correspond to the price?A person may have spent years planting an orchard of apple trees, irrigating the land, grafting branches, and finally picking the apples when they are perfectly ripened.However, if the town grocery store is already stockpiled with fruit from the six apple orchards down the street, he will be forced to accept a lower price for his product, regardless of the countless labor-hours he has spent tending to the orchard.“[Price] is adjusted...not by any accurate measure, but by the higgling and bargaining of the market, according to that sort of rough equality which, though not exact, is sufficient for carrying on the business of common life.”This vital distinction between value and price substantially influences Smith’s economics.

Smith reviews the historical evolution of price to illustrate the difference between value and price.In an undeveloped society, determining price was relatively simple.If twice the amount of labor was required to kill a bear than was required to kill a deer, then one bear was worth two deer.In a tribe of nomadic Indian warriors, the entire produce of labor belonged to the laborer himself.The animals he shot, the baskets he wove, the moccasins he beaded, all belonged to the laborer to sell or keep as he saw fit.However, this situation changed in the course of industrial development.In a society where a handful of proprietors hires the laborers, the produce of the labor is divided.The laborer cannot own the entire value of a pair of beaded moccasins if the employer has provided the beads, leather, knife and thread.“As soon as stock has accumulated in the hands of particular persons, some of them will naturally employ it in setting to work industrious people, whom they will supply with materials and subsistence…In this state of things, the whole produce of labor does not always belong to the laborer.”Instead, the produce of labor is resolved into three component parts: wages, profit, and rent.These compose the three original sources of revenue.People labor to earn wages, lease their property to obtain rent, and invest their stock to yield profit.

The three original sources of revenue (wages, rent, and profit) are also the three component parts of the price of a commodity.Smith applies this idea to define his natural rate, natural price, and market price.The natural rate for the wages of a job, the rent of a piece of land, or the profit from a certain investment is simply their average rate.If the man who scoops ice cream gets paid $5 an hour at Baskin Robbins and $7 an hour at Marble Slab Creameries, then the natural rate for his wages is $6 an hour.The natural price of a commodity, therefore, is merely a compilation of the natural rates of the wages, rent, and profit.“When the price of any commodity is…sufficient to pay the rent of the land, the wages of the labor, and the profits of the stock employed in raising, preparing, and bringing it to market, according to their natural rates, the commodity is then sold for what may be called its natural price.”The “natural price” is a generic term for the common or ordinary price, the cost necessary to bring a commodity to market.“The natural price, or the price of free competition...is the lowest which the sellers can commonly afford to take, and at the same time continue their business.”The market price, on the other hand, is the actual selling price, which may be above, below, or exactly the same as the natural price.In a capitalist society, the flux in the supply and demand of any particular commodity determines market prices.Market prices for Mickey Mantle rookie cards and Tickle-me-Elmos skyrocket when excessive demand outstrips the limited supply of the commodity.“Whether the price is, or is not more, depends upon the demand.”Smith sees no moral connection between the natural and the market prices, a tenet of his philosophy that Karl Marx would later denounce.Although the natural price is a commodity’s “precise worth,” Smith does not argue that market values should necessarily correlate with natural prices.Natural and market prices may often align, but no ethical standard checks the caprices of the marketplace.

Smith’s position on natural and market prices significantly influences his view of wage value and the laborer.To determine the value of wage-labor, Smith again discusses the primitive “original state of things.”In the age before the appropriation of land, the accumulation of stock, the advent of the corporation, or the beginning of Wall Street, the entire produce of labor belonged to the laborer himself.Calculating wage value was very simple.The corn he grew was his corn; the wood he chopped was his wood.Whatever value could be derived from his labors was completely his own possession, his natural wages, as previously described.This situation changes, however; society does not continue in its primitive state.When a handful of capitalists controls the production of plows in a given country, their laborers cannot own the entire crop of corn.“But this original state of things, in which the laborer enjoyed the whole produce of his own labor, could not last beyond the first introduction of the appropriation of land and the accumulation of stock.”Instead, the produce of his labor is split into the same three divisions of price: rent, profit, and wages.With the produce of labor thus divided, what determines the wages of the laborer?According to Smith, wages are decided by bartering or contract between the employer and his laborer.The dictates of the market and the individual choice of the contracting laborer will determine his payment.The capitalist must increase the laborer’s wages if there is a shortage in the labor supply or decrease them if a surplus occurs.Mutual agreement and mutual self-interest are the foundation for their relationship.

Central to the examination of a capitalist society is the very definition of the word “capital.”According to Smith, all personal possessions, investments, and hard cash can be divided into two parts.The part from which a man expects to derive his income is known as capital.The other part supplies his immediate consumption: the grocery trips and utility bills.The capital portion of his stock is invested in an industry, where it is employed by the labor of an assembly of people.It is the labor of the factory workers who wind the thread spools in the textile machines, the labor of the farm hands who plow the soil that enables the capitalist to profit from his investment.

Smith makes an essential separation of the two types of labor: productive and unproductive.Productive labor yields a tangible result.“[T]he labor of the manufacturer fixes and realizes itself in some particular subject or vendible commodity, which lasts for some time at least after that labor is past.It is, as it were, a certain quantity of labor stocked and stored up to be employed, if necessary, upon some other occasion.”Productive industries include agriculture, fishing, forestry, mining, construction, and manufacturing.Unproductive labor, in contrast, produces no enduring value.In industries such as trade, finance, service, and government, no material commodity is generated.Smith does not dispute the necessity of these occupations, but he does distinguish them from “productive” enterprise.“Their service, how honorable, how useful, or how necessary soever, produces nothing for which an equal quantity of service can afterwards be procured.”The hairstylistprovides a service when she cuts hair; the bag boy at Kroger’s provides a service when he carries groceries to the car.Those same services, however, cannot be exchanged for a new hairstyle the next month or another free loading trip to the grocery store parking lot.

The distinction between productive and unproductive labor is essential to understanding the accumulation of capital.Industry does not necessarily entail the accumulation of capital.A given capitalist could work 60-hour weeks as the CEO for an oil company and be paid several hundred thousand dollars a year without increasing his capital worth.According to Smith, saving is the key to capital accumulation.The more a person saves, the more he adds to his total capital.“Capitals are increased by parsimony, and diminished by prodigality and misconduct.”Frugality makes the capitalist.Money-pinching not only benefits the capitalist himself, but profits the rest of society by providing employment and increasing productivity.“By what a frugal man annually saves, he not only affords maintenance to an additional number of productive hands…but, like a founder of a public workhouse, he establishes as it were a perpetual fund for the maintenance of an equal number for all times to come.”However, the capitalist must not only save his money; he must invest the capital in productive enterprise.“Whatever a person saves from his revenue he adds to his capital, and either employs it himself in maintaining productive hands, or enables some other person to do so.”Rather than devouring his money in unproductive expenditure, the capitalist scrupulously saves his revenue as his capital accumulates in productive enterprise.

In the same vein, Smith reproaches the man who distorts this system by dissipating his inheritance.“By not confining his expense within his income, [the prodigal] encroaches upon his capital.Like him who perverts the revenues of some pious foundation to profane purposes, he pays the wages of idleness with those funds which the frugality of his forefathers had, as it were, consecrated to the maintenance of industry.”The dissolute, spendthrift child becomes not only a disgrace to his family, but a threat to society, as the reckless turbulence of his lifestyle compromises productivity.“The conduct of every prodigal, by feeding the idle with the bread of the industrious, tends not only to beggar himself, but to impoverish his country.”The spendthrift prodigal is the supreme enemy of the state. 

Smith portrays the entrepreneur as a virtuous, thrifty, independent spirit.Perseverance transforms the penniless, industrious dreamer into a manufacturing giant, a public benefactor.Therefore, the risk that the entrepreneur takes by starting a business and gambling on the future entitles him to a financial recompense.Smith affirms this crucial point: “Something must be given for the profits of the undertaker of the work who hazards his stock in this adventure…He could have no interest to employ [the laborers], unless he expected from the sale of their work something more.”The entrepreneur has the rightto profit from his investments.Ultimately, the privileges of ownership are determined by capital investment.

Wealth of Nations also extols the national benefits of capitalism.The growth of commercial trade and manufacturing provides a large market for raw goods, thus encouraging cultivation of a nation’s natural resources.The multitudes of entrepreneurial small-businessmen and capitalists introduce a measure of freedom to the people.Instead of living in “servile dependency upon [his] superiors,” the influence of the individual citizen increases with his prosperity.Order and good government are introduced with the progress of industry and civilization.Smith highly praises the timesaving capitalist mechanism of division of labor.The division of labor greatly multiplies productivity by honing the dexterity of the individual worker in his particular field.It facilitates the invention of huge factory machines which enable one man to do the work of many.“The commerce and manufacture of cities…have been the cause and occasion of the improvement and cultivation of the country.”

The principles of individual freedom that Smith advocates in Wealth of Nations are crystallized in ideas regarding the “invisible hand.”Even selfish pursuit of personal interest, he claims, will aid society.Therefore, no regulation of commerce can increase the quantity of industry, because personal advantage already directs individuals to benefit the public welfare.“[B]y directing that industry in such a manner as its produce may be of the greaquiz value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”The invisible hand, rather than a specific, tangible precept, is the outcome of common individual goals.When prices are too high, the average consumer will buy less, reducing demand for the commodity and eventually lowering prices.This market equilibrium is maintained by isolated, individual choices that greatly enrich the economy.Trade, instead of being dubbed “favorable” or “unfavorable” based on the flux of imported gold, becomes a win/win situation, each party exchanging for a commodity they more highly value.Each individual or business pursues their own interest, and consumers benefit from the competition.Individual freedom of choice promotes general prosperity.

Adam Smith extends the concept of natural liberty to develop his principles of limited government.Smith carefully outlines the necessary duties of a government: to defend the country against foreign invasion, to protect individuals from societal oppression, and to maintain public works and institutions such as highways, bridges, and canals.Smith grants no power to the government beyond these three areas.“The sovereign is completely discharged from…the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society.”The government has neither the right to “protect” domestic industry or to make decisions for the individual citizen.This principle is reflected in the trade legislation of a capitalist country.“It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy...What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.”Instead of coddling domestic business by sheltering it from competition, Smith’s government would allow the people freely engage in foreign commerce and attempt to profit from the outcome.

In Smith’s capitalist society, the individual is free to profit from risk, suffer loss from a bad investment, and accumulate capital through frugal living.He possesses the right to pay or not pay the market price, to sign or not sign a wage contract for his labor.The mystic invisible hand constantly guides him, rerouting individual advantage to promote the general welfare of society.Smith’s economic principles are reflected in many passages of Scripture.The picture of the industrious, virtuous entrepreneur appears in Proverbs 6:6-8:“Go to the ant, you sluggard; consider its ways and be wise.It has no commander, no overseer or ruler, yet it stores its provision in summer and gathers its food at harvest.”The parable of the talents in Matthew chapter twenty-five illustrates a biblical concept of profit that resembles Smith’s belief in the rewards of diligent investment.“Well done, good and faithful servant!You have been faithful with a few things; I will put you in charge of many things.Come and share your master’s happiness!” (Matt. 25:23)However, the fundamental principle of Smith-era capitalism is that every man should be “left free” to pursue his own interest while responding to the fluctuating free market.Government is limited.Therefore, the principles of rugged individualism are a path to liberty and order in society.

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In the throes of an Industrial Revolution fueled by the writings of Adam Smith, another philosopher embarked upon a career as a radical economic analyst.Karl Marx was born to a Jewish family living in Germany in 1818, nearly forty years after Adam Smith died.When Marx’s father, a prosperous merchant, strategically joined a Lutheran church in order to stimulate his business, the faith of idealistic young Marx was crushed.Forever disillusioned with religion, Marx’s search for meaning led him to the belief that economic interests are what shape history.The Communist doctrines he developed had a tremendous impact on the 20th century.At one point in time, over two billion people were living behind the iron curtain and under Communist regimes.Marxian economics has captivated the minds, infiltrated the cultures, and demanded the allegiance of people all across the globe.Karl Marx’s revolutionary work, Das Kapital (or translated, Capital) outlines his economic suppositions and attacks the basic premises of free-market society.

Marx begins Volume One of Capital with a discussion of the value of market commodities.A commodity is an external object which satisfies a human need (i.e. a blender, a hatchet, or a ballpoint pen).Marx defines two measures of commodity value: use-value and exchange-value.The use-value of an object is determined by its utility to a particular person.This value is realized only in consumption, or use of the commodity: when the blender whips up a chocolate milkshake, the hatchet chops the firewood, and the ballpoint pen scribbles down a memo on a Post-it note.Exchange-value, on the other hand, is the proportion with which use-values are traded.The exchange-value constantly varies with time and place, because it depends upon the specific transaction.In order for the concept of exchange-value to feasibly exist, Marx asserts, there must be a “common element” in every commodity.If a bar of iron is exchanged for a cup of corn, some equivalent component must dwell in each commodity.“[A] common element of identical magnitude exists in two different things…Both are therefore equal to a third thing, which in itself is neither the one nor the other.Each of them, so far as it is exchange-value, must therefore be reducible to this third thing.”The common element which determines the value of a commodity is the human labor involved in the production.Hence, the Marxian labor-theory of value was spawned.

Although the concept of the labor-theory of value may seem relatively innocent, it has profound economic repercussions.Marx emphasizes the distinction between use-value and exchange-value.Use-values are measured by quality; a high-quality product is more useful to the owner.Exchange-values, on the other hand, are distinguished only by quantity.If all quality traits and remnants of use-value are stripped away, a single property remains: the fact that all commodities are products of labor.The commodity becomes an abstract object, merely a unit of expended labor.Labor itself is deprived of any specific, unique attribute.The quantity of human labor involved production, whether it be laying sheet rock or manipulating computer software, that quantity of labor determines value- regardless of mental activity, innovation, or popular demand.“Nor is [the commodity] any longer the product of the labor of the joiner, the mason or the spinner, or of any other particular kind of productive labor…[T]he different concrete forms of labor…can no longer be distinguished, but are all together reduced to the same kind of labor, human labor in the abstract.”The commodity becomes merely a residue, a “congealed quantit[y] of…human labor-power expended without regard to the form of its expenditure.”The final result of Marx’s human labor-theory of value is that all human labor becomes equal, regardless of the type, field, form, or quality of the labor.Productivity becomes an attribute, not an assessment of achievement.Value is dictated by an invariable formula where the same amount of worth is always created, despite fluctuations in labor efficiency.A brand-new shirt with the price tags still dangling from the collar will have precisely the same value when it has rips, speckles of paint and bleach stains months later, because the same amount of human labor was invested in its production.The essence of value becomes an empty measurement. 

Marx applies his theory of value to the industrialized workplace with the concept of surplus-value.According to Marx, the total number of hours in a working day is divided into two parts: necessary and surplus labor time.Necessary labor time is determined by the amount of time a laborer must work for his own subsistence.This amount varies in different societies, based upon a laborer’s physical stamina, mental capacity, and the public living standards.However, in a capitalist nation, the working day can never be reduced to a bare minimum of necessary labor time.Capitalist society assumes that the owners of the means of production are entitled to prosper from the labor of their employees.Capitalist entrepreneurs must profit from an excess or “surplus” portion of labor time.Marx declares that the laborer should demand the full worth of his labor.According to the Marxian theory of value, however, all value is determined by the quantity of labor invested.Therefore, the laborer should rightfully be paid the entire amount of worth he generates, not merely the portion agreed upon in an employer/employee contract.

Thus the clash over the amount of surplus labor-time in the working day becomes the crux of the working class struggle.While Smith recognized that the capitalist has a right to profit from his investments in an industrialized society, Marx claims that any attempt to extend surplus-labor time defrauds the worker.By increasing the portion of the working day devoted to capitalist profit, the laborer is deprived of greater percentages of his rightful property.Even the objective of increasing labor productivity stems from a depraved capitalist motive, because increasing productivity extends surplus-labor time and enriches the capitalist through continual exploitation.“The objective of the development of the productivity of labor…is the shortening of that part of the working day in which the worker must work for himself, and the lengthening, thereby, of the other part of the day, in which he is free to work for nothing for the capitalist.”This secret agenda embodies the nature of capital itself.“Capital therefore has an immanent drive, and a constant tendency, towards increasing the productivity of labor, in order to cheapen commodities and, by cheapening commodities, to cheapen the worker himself.” 

To Marx, any accumulation of capital results from a concept he dubs as “unpaid labor.”Because of the division of the working day into surplus and necessary labor time, the worker is paid for one day’s labor while the capitalist utilizes the worth of multiple days.The portion of the labor which benefits solely the capitalist is called “unpaid labor,” because the worker is essentially toiling for free.In short, unpaid labor is the stolen surplus-value confiscated from the worker, who is paid only a small percentage of the value of his own toil.In a capitalist system of production, a given capitalist invests his capital in tools, factory machines, or other means of production and provides the laborer with employment.If the capitalist is to continue providing that employment, he must be allotted some profit or return from his venture.In order for the capitalist to benefit, however, he must confiscate a portion of the produce in the form of unpaid labor.The very definition of capital accumulation, according to Marx, is “the employment of surplus-value as capital.”The attempt to financially profit from a business venture becomes a corrupt, swindling endeavor.Worker exploitation is inherent in the capitalist system itself.

Marx also depicts the development of capitalist production as the evolution of a brutal, criminal system.In the beginning, Marx says, there were two sorts of people: the “diligent, intelligent, frugal elite,” and the lazy, ignorant spendthrifts.All capital eventually accumulated in the hands of the industrious few, and the majority was left with no commodity to market but themselves.The wealthy minority, dubbed the infamous Marxian “bourgeoisie,” has long since ceased to work, and have contented themselves with profiting from the labor of the others.The very concept of private property is fraught with degenerate capitalist connotations.Private property is purchased with the enslavement of the working class, the proletariats.From this original division of the entire human race into the bourgeoisie and the proletariat, capitalism spreads to infect the nations, first through colonization, and then through manufacturing and the division of labor. Marx describes how European conquerors ceaselessly explored new nations and overthrew neighboring governments, leaving devastated remnants of vanquished peoples in their wake.He details cruelty to American Indian nations and the atrocities of the African slave trade, attributing all the barbarities of the colonization of the Americas to capitalism itself.“The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the indigenous population of that continent, the beginnings of the conquest and plunder of India, and the conversion of Africa into a preserve for the commercial hunting of blackskins, are all things which characterize the dawn of the era of capitalist production.”Force, oppression, and savagery are the roots of capitalist society.Shame and conscience are numbed by the eternal capitalist hunger for more property, more power, more capital.In one of his most candid moments, Marx states: “Capital comes [into the world] dripping from head to toe, from every pore, with blood and dirt.” 

The second way the capitalist system is perpetuated in society is through the development of manufacturing and the division of labor.Marx maintains that the division of labor begins with the dissection of an industry into disconnected operations which become isolated, individual occupations.“This accidental division…gradually ossifies into a systematic division of labor.”Eventually these laborers become merely supplementary, incapable of individually producing an entire product.“Manufacture…not only subjects the previously independent worker to the discipline and command of capital, but creates in addition a hierarchical structure amongst the workers themselves…the individual himself is divided up, and transformed into the automatic motor of a detail operation.”According to Marx, the worker no longer belongs to himself, but to the ruthless, crazed, salivating animal of a capitalist system which benefits the capitalist at the worker’s expense.“The social productive power…of capital…is enriched through the impoverishment of the worker in individual productive power.”Rather than making the free choice to enter a contract relationship, the employee is enslaved by his employer.Unable to provide his own maintenance or hack away his capitalist shackles, the worker remains a feeble, impotent appendage of the capitalist system

The Marxian distaste for the Industrial Revolution reveals itself with even greater clarity.Machinery, instead of being a helpful time-saver, is only another means to lengthen the workday, because expensive equipment cannot remain idle.The urban population explodes.Women and children are sucked into the vile system, paid only subsistence wages for their hours of labor.Snatched from their peaceful, pastoral wheatfields where chickens squabble in the farmyard and an occasional cow lazily chews her cud, these workers are confined in dark, smoky rooms in front of monstrous, deafening factory machines.They work from six in the morning until eight at night and walk home over muddied cobblestone roads to a tiny landing flat still within the shadow of the giant smokestacks.“[The] final form [of manufacture] is always the same- a productive mechanism whose organs are human beings.” 

Marx’s portrait of the capitalist is harsh.He defines a man as a capitalist if and only if his money constantly functions as capital.“It is only in so far as the appropriation of ever more wealth…is the sole driving force behind his operations that he functions as a capitalist, i.e., as capital personified and endowed with consciousness and a will.”The capitalist therefore exists solely to perpetuate surplus-value and increase his own profit.Healthy entrepreneurial motives are unknown.He defrauds his workers of their rightful wages, confines them in assembly lines in crowded factories, and suppresses all conscience in the vicious cycle of the marketplace.According to Marx, material gain is the enlivening passion, the focal objective, the very core of his entire being.“His soul is the soul of capital.But capital has one sole driving force, the drive to valorize itself…Capital is dead labor which, vampire-like, lives only by sucking living labor, and lives the more, the more labor it sucks.”Thus the ordinary American businessman, the embodiment of the American dream, is reduced to a mere parasite, the human incarnation of capital which lives by draining the lifeblood of others. 

Marx believes that in time capitalism will fall.He predicts that the enslaved mass of working citizens will rise up against the iron rule, smash the chains of private property, eliminate surplus-labor, and return the value of their labor to their own wallets.Hence the infamous cry: “Workers of the world, unite!”1Revolt against the despots; overthrow the bourgeoisie; unite as proletariats against the misery, the injustice, the tyranny of capitalism.

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Adam Smith and Karl Marx were both significantly influenced by earlier philosophers.Understanding the affect of G.W.F. Hegel on Karl Marx and the impact of Immanuel Kant on Adam Smith provides insight into their respective spiritual views.How do these philosophic ancestors transform Smith’s and Marx’s perspective on the church, religion, and morality?To which of these economic philosophies should a Christian adhere?Are the capitalist, free-market policies of Adam Smith or the revolutionary proposals of Karl Marx more conducive to Christian society and values?When examined, the moral deficiencies of both men are exposed.

In his writings about the progress of capitalism, Marx utilizes many of the ideas of philosopher G.W.F. Hegel and the Hegelian dialectic process.Hegel first advocated the notion that all philosophies and events in the history of the world moved in a coherent, recurring process known as “thesis, antithesis, synthesis.”The first phase, the thesis, contains the original, foundational ideas which are soon countered by an opposing theory known as the “antithesis.”Finally, the “synthesis,” the last phase, mingles and blends the thesis and antithesis into a harmonious compound.The synthesis then becomes a new thesis and the process begins again.Marx adopts this theory of progression, known as the dialectic process, in order to illustrate the evolution of the classes from the feudal Dark Ages to the Industrial Revolution to utopic Communist society.In distinctly Hegelian terminology, Marx describes history in terms of economic transformation.As philosopher and scholar Dr. R.C. Sproul explains, “[Marx believed that] history is driven not by the conflict of spiritual concepts or logical ideas, but by real, concrete, material concerns.”For Marx, the definition of human existence is pivotally related to work.He identifies his own being in terms of labor.A rural economy in which the subsistence farmer enjoys the fruit of his own labor forms the thesis of this cycle.With the transition to an industrialized economy, where people begin to work for wages, the antithesis is posed.In the antithetical phase, the market drives prices based on the principle of scarcity.Marx violently objects to this view of economic value.Instead, he argues that the value of commodities be determined by the amount of human labor invested in their production.Therefore, the laborer has a right to the value he creates, a title to the produce of his labor. The antithetical stage of this cycle violates this privilege by allowing the capitalist to profit from his investments, confiscating the value created by the laborers.According to Marx, the antithesis is the reinvention of slavery imposed by capitalist factory owners.

Marx identifies the existence of the two initial phases of the cycle, but the synthesis has not yet occurred.He foresees an overthrow of the current system by the proletariat and the common ownership of all property.Enthralled with the specter of this utopia, he proclaims the Communist mantra:“From each according to his ability, to each according to his need.”And yet, history refuses to comply with this dialectic process.Class warfare on a revolutionary scale does not occur.Here is the crucial difference between Hegel and Marx.Hegel believes that the dialectic process was a natural evolution; Marx declares that change requires assistance.Marx attempts to stir the masses, passionately denouncing their oppressors.He believes that the new world order must be ushered into existence with bloody revolution.Ultimately, according to Marx, capitalists are the root of all economic evil; the elimination of capitalism is the commencement of utopia.

The worldview of Adam Smith, on the other hand, is most visibly influenced by seventeenth-century philosopher Immanuel Kant.By rejecting metaphysics, Kant essentially founds modern secular thought.He formulates the “phenomenal/noumenal division” which denies any truth beyond the physical realm and confined man to his own five-sense experience.Man’s existence is determined by his mind, or, in Kantian terminology, his intuition.Smith echoes these ideas by urging man to be directed by his own judgement and experience, to “follow self-interest” in the true path to happiness.Any divine law, reference to God or Scripture, or appeal to divine authority is absent from Smith’s writings.He identifies no concept of the human soul, no theological perspective to his economics.In fact, Smith’s entire philosophy is defined by material acquisition and productivity.The implied result is that material society provides all blessings; the purpose of life is to accumulate wealth.Adam Smith marks the coming of the “material man,” whose only significance lies in productive exercise of the economy.

Unlike Marx, Smith has no vision of the “ideal” state.He analyzes reality by observing the world around him, but he makes no plea for a moral imperative.Smith is interested in the phenomena, rather than finding the noumenal realities that shape the phenomena.He does make many astute observations about human character and correctly identifies successful free-market principles.But devoid of a Biblical worldview, his philosophy centers on the material, rather than the divine.A single predominant maxim remains: to follow self-interest on the yellow brick road to blissful prosperity.

The conflict of the Smith and Marxian philosophies with a Christian worldview is eventually crystallized in the original question of economic value.For Smith, value is subjective, determined by popular consensus and the mystic dictum of the invisible hand.Each individual price tag is figured by the flux of supply and demand.Economic decisions are amoral; the marketplace reigns supreme.Smith attempts to construct a society from which economic moral standards are completely absent.His polite, casually descriptive writing style ultimately does prescribe economic thought by approaching those relationships without reference to any principle except that of self-interest.The influence of Immanuel Kant introduces the phenomenal/noumenal division into Smith’s philosophy, thus erasing moral standards from the human experience.Only an empty self-absorption remains:Be true to yourself.Follow your heart.While his principles of limited government and individual freedom do preserve biblical principle, Smith espouses no ethical code higher than the economic actions themselves.As contemporary author Gary DeMar states in God and Government, “Christians…must be aware of those who want to create a “free” market without the unchanging economic laws of God that really govern our freedom.Any economic system that omits God, not only as a factor in production and economic prosperity, but also as the key to economics…is a false system.”3Smith confines man to a gilded cage.Blindly towed by the caprice of self-interest, material acquisition ultimately defines the purpose of existence.

Marx, on the other hand, does espouse a moral critique on the subject of value.Value, according to him, is objectively determined by the investment of human labor.The sheer amount of exertion, regardless of its quality, type, intensity, or productivity, establishes a commodity’s value.The product of this abstract, identical human labor is solely the property of the laborer himself.Any attempt to wrest this value from him is tantamount to crime.According to Marx, societal ills are a direct result of capitalist interference, a concept which contradicts the biblical principle of man’s depravity.The Bible states that “All have sinned and fallen short of the glory of God” (Rom. 3:23)“As it is written: ‘There is no one righteous, not even one; there is no one who understands, no one who seeks God.”(Rom. 3:10-12)This corruption is plainly manifested in every individual.Marx spends so much of his time whining about the fate of the working class and wallowing in shallow self-pity that he fails to recognize this cardinal truth: before the throne of God, employer and employee are equally condemned.The attempt to pin the gross sum of global evils upon a single class of people is to deny the inherent sin nature of all men, employer and employee alike. 

Given the conflicting worldviews of these philosophers, what economic position should the Christian advocate?The Bible reveals a God who is concerned about every aspect of our existence, including the economic ordering of society.Biblical principles of money management are expressed many times throughout the Old and New quizaments.Detailed instructions for tithing and sacrifice are included in the Pentateuch.Private ownership is both endorsed and assumed as generosity is frequently commended (Psalms 37:21) and irresponsibility condemned (Proverbs 6:1-5) in Scripture.

Perhaps the most powerful and applicable Biblical principle of economics, however, is the concept of ownership versus stewardship.In chapter 19 of the gospel of Luke, Jesus tells the parable of a certain king’s ten servants, who are each given a sum of money to care for in the king’s absence.When the king returned, he praises the servant who had wisely invested his money.“Well done, good servant; because you were faithful in a very little, have authority over ten cities.”(Luke 19:17, NKJV)The servant who had poorly invested the king’s money, however, by hiding it away, is sharply rebuked.The good steward is applauded, the bad steward censured and disciplined.Obviously, we should recognize the significance of the money God has entrusted to us and make wise choices about how to employ it.On the other hand, however, the Bible warns over and over again of the dangers of valuing material wealth above God.“No servant can serve two masters.Either he will hate the one and love the other, or he will be devoted to the one and despise the other.You cannot serve both God and Money.”(Luke 16:31)“’Watch out!Be on your guard against all kinds of greed; a man’s life does not consist in the abundance of his possessions.”(Luke 12:15b)“For the love of money is a root of all kinds of evil.” (1 Tim 6:10a)

In contrast, the Christian should recognize that God ultimately owns all of our possessions, our stocks, and our cash: not people as individuals, and not the state.As Psalm 24:1b says, “The earth is the Lord’s and everything in it…”It is the fact that He has blessed us with material wealth that determines how we should utilize our economic blessings in daily choices.Therefore, the decision to buy a house or appliance or used car becomes more than an evaluation of market price or an assessment of the human labor involved in its production.The life-purpose of each born-again Christian should influence each choice he makes, from the most vital decision to the most insignificant daily purchase.As Galatians 2:20 says, “I have been crucified with Christ, and I no longer live, but Christ lives in me.The life I live in the body, I live by faith in the Son of God, who loved me and gave himself for me.”And again, in 1 Corinthians 10:31, “So whether you eat or drink or whatever you do, do it all for the glory of God.”The true standard for economics is not the value of labor or autonomous personal freedom.As Gary DeMar states, “The Bible is the Christian’s standard, not the independent voice of the individual or the collective voice of the majority.”Neither Marx’s sovereign state, which determines a “fair” labor value for the worker, nor Smith’s sovereign individual, operating in a free market, can lead to the source of true freedom, found only in a relationship with Sovereign God.

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1 ‘The Communist Manifesto,’ by Frederich Engels and Karl Marx

2 ‘Ideas Have Consequences: An Overview of the Bible with R.C. Sproul,’ Copyright 1998 by Ligonier Ministries.

3‘God and Government: Issues in Biblical Perspective,’ by Gary DeMar

Copyright 1989 by Primer Resources; Volume 2