Classical economics also known as liberal economics was first developed by the father of economics, Adam Smith. His book "An Inquiry into the Nature and the Causes of the Wealth of Nations" was written in 1776. This period is considered as the beginning of classical economics. Adam Smith contributed to economics with his moral thought. He has given our capitalist economy a different form. But Karl Marx first used the term classical economics . He was the most influential thinker and most controversial in his time. He was a great philosopher, social scientist and revolutionary. He is the main person behind communism and wrote the famous book 'Das Kapital ' in 1867. The work of both these famous philosophers are compared many times. They both have contributed to the development of our society and are also similar in some of their thoughts. In this essay we will discuss about their views on the division of labor.
Adam Smith was mainly concerned with the economic development of the nation. According to the classical economist word 'wealth' meant not only gold and silver but all the precious metals. On the other hand, Smith considered 'wealth' not only to gold and silver, but to the volume of production. He gave importance to industry and trade. In his book he gave importance to 'invisible hand'. Besides, he thought a man is free to choose his own ways, i.e. a man will choose with his own will and it will maximize his self-interest. This increases society's social welfare. Additionally, Smith considered that each and every person has an effect on the market. It means that an individual takes the prices as given and to maximize his own gain, he can choose any measure bought and sold. But all these are determined by the prices. So all the people in a society are governed by prices and prices are governed by the total of all the individual reactions. Moreover, the division of labor leads to the growth of the economy, which also increases the productivity of labor . Specialization also leads to economic growth as competition among workers increases, it reduces the time required to produce commodities by the use of proper machinery. Again, capital accumulation is also necessary for the division of labor. Saving is one of the prime necessary for economic growth.
There was one limitation of division of labor. Division of labor depends on the market, i.e. if the market is expanding then division of labor will lead to profitability. Smith, felt that labor productivity rises with the division of labor, but only when the market is expanding and the demand is high. In order to increase the demand trade must be introduced in the market. There should be that concept of free trade. If labor is internationally specialized then the market will enlarge and will not be restricted to national boundaries. He gave importance to labor supply which is dependent on the wage rate and wages depend on the relative bargaining strength of the workers and the employers. But employers are in a better place in bargaining and hence cut wages to the subsistence level. He gave importance to capital accumulation. So when capital accumulation increases, then the demand for labor rises more than the supply of labor and the wage rate rises above the subsistence level. But if there is a shortage of labor, then it will be a great problem for the employers and then the industry profit will decrease.
Adam Smith wrote, "In regards to the price of commodities, the rise of wages operates as simple interest does, the rise of profit operates like compound interest. Our merchants and master complain much of the bad effects of high wages in raising the price and lessening the sale of goods"(Smith and Raphael, The Wealth of Nations).
Besides, Smith considered that value is divided into value in use and value in exchange and labor is a measure of value. The quality of labor is not the same and changes from one labor to another. He takes units of the inutility of labor as a measurement of labor. But about the relative value of the commodity Adam smith did not give a satisfactory answer.
Karl Marx in the commodity chapter of his book "Das Kapital" mentioned that commodity is something that is produced for exchange but not for self consumption. So the study of commodity is the study of exchange. Labor, being a commodity is often argued that whether it is used for own means of production or for exchange. Marx agreed with the view-point of Smith about the relation between commodity production and division of labor. Both argued that the division of labor is not always connected with the exchange.
In Marx's view every commodity has two character one is use value and exchange value . The use value of a commodity is the utility an person gets from the commodity. On the other hand exchange value is the amount of other commodity which will be obtained in exchange for one unit of this commodity. Hence the exchange value represents the quantitative relation between the commodities exchanged. When one commodity is exchanged for another, then the exchange of labor of one producer for the labor to another producer takes place. So Marxian theory labor is a substance of value but is not regarded as a commodity. Each commodity is produced by labor. To the commodity a use value corresponds to useful labor. It means that the utility of labor is represented by the use of its products. If we abstract value of the use value of a commodity, then it is the exchange value. Likely, if we abstract from the useful character of labor, then it is called abstract labor. Abstract labor according to Marx is the labor in general. For example, tailoring and weaving are qualitatively different forms of productive activities, but they are the productive expenditure of human brain, nerves and muscles. As a matter of fact labor is the expenditure of human labor power. Marx was the first person to consider the concept of labor in general in economics. But Smith considered labor to be homogenous and used labor units embodied to find the exchange value of a commodity in terms of another commodity.
The Marxian theory of value assumes that labor is required to produce each commodity. In fact, when products are exchanged in the market it is the exchange of labor between one person with the other person. So the relationship between two commodities is the relation between the labor of two workers producing the commodities. Marx's considered this perspective on a capitalist world as the Fetishism of Commodities. The fetishism also implies the belief that there is an invisible hand or an automatic mechanism in the capitalist economic system. Moreover, the amount of the product that the worker produces in a particular time is the productivity of labor. This will rise in the capitalist market. Rise in technology causes the rise in the amount spent in businesses and thereby raising the amount spent on the factors of production, i.e. capital( constant capital) and labor(variable capital). He considered that the ratio of these kinds of capital is the composition of capital.
Marx wrote," In reality, the laborer belongs to capital before he has sold himself to capital. His economic bondage is both brought about and concealed by the periodic sale of himself, by his change of masters, and by the oscillation in the market of labor power. "(Marx, Capital).
The main similarity between the economists Adam Smith and Karl Marx was that they felt the importance of production is necessary for growing the economy. Besides, in Smith theory, it is a free market with no government intervention, anyone can start business and consumers can buy commodities from the producers following the rule of supply and demand. He gave importance to the law of demand and supply in transaction of economic activity. The 'invisible hand' shows the way how the economy is connected. However, in commodity fetishism Marx also draws the same theory in different terms.
Again, Smith gives the famous example of amount of industries and labors each plays a part in producing the wool coat. Staring from the shepherd to the spinner to the sailor who transports the finished goods. They do their own job and contribute to the economy by increasing productivity. Thus, Smith's views ever based on moral system. But Marx considered government intervention and put emphasis on labor unions and the laws to protect the labors from exploitation by the employers. He gave importance to the betterment of the working condition of the labors.
Works Cited
Marx, Karl et al. Capital. Moscow: Foreign Languages Pub. House, 1961. Print.
Smith, Adam and D. D Raphael. The Wealth Of Nations. New York: Knopf, 1991. Print.
