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Legacy Of Adam Smith

Legacy of Adam Smith

Philosophy of Smith been prevalent in Capitalist societies since industrial revolution.

Basic principle of the market being good, governments should have no power over market.

Unlike Keynesian and Marxist economics, Smith's philosophy states that the proletariat will be motivated by the potential for enterprise in a free market economy.   Smith says employers should be allowed to treat and pay workers as they please.   Defenders of Smith say that there is a motivation to treat workers well as happy workers will create a better standard of product.   Unhappy workers will lead to mistakes, whereas the "competition's" happy workers would have a better product.   Critics (Marxists especially) claim that there is a shared interest between all capitalists to keep costs low - which means poor pay and conditions for workers.   They argue that as workers are the ones who make the product, they should share the surplus value between them.

Since 1970s, Adam Smith's economic philosophy has been used to bring about the rise of neo-liberal economic policies.   Most notably the governments of the US and UK since Reagen and Thatcher respectively.

Neo-liberal economists argue that the market should have control over as much of society as possible, including areas that were traditionally controlled by government like school and hospitals, because competition will lead to standards being driven up.

However, in practice, the "hands off" approach of neo-liberal governments has led to criticisms that areas that have been privatised have seen their standards fall, because it is not in the interest of capitalists to put the money into improving these areas, and also because the capitalist will seek to keep a large proportion of the profit for themselves, rather than invest it back into services.

It has been argued that a lack of government regulation over business has led to the current "credit crunch"/global recession.   Because Western government have...