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Carl Marx Vs Adam Smith

Essay by   •  March 18, 2013  •  Essay  •  1,142 Words (5 Pages)  •  1,226 Views

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Adam Smith and Karl Marx are two of the most influential individuals whose thoughts created the fundamental bases of economics. As the father of communism, Karl Marx's economic model is based on government ownership of the economic wealth and its equal distribution in the society. However due to major flaws in his thinking, his theories have failed to be adopted. Due to lack of competition and profit motive one is less likely to produce goods in most effective and efficient matter. In contrast, Adam Smith's economic model is focused on self-interest and discourages government intervention. Smith's theory is based on the fact that individuals are not concerned with other's needs, but only with profit that he is able to make though providing his services that satisfy their needs. That is why Adam Smith's economic model with the capitalist approach is widely accepted and their modified version is applied throughout the world. Although Marx's theories are very influential, Canada's mixed market economy is mainly based on Adam Smith's theories, thus making Adam Smith most satisfied with Canada's mixed market economy.

Adam Smith is the founder of capitalism; which is an economic system that encourages private ownership and self-profit. Smith believed that competition helps stabilize the economy and structure it to ensure reasonable price levels. This self-interest forms the basis of his "invisible hand theory". As a strong supporter of Laissez-faire, he believed that self-interest was the invisible factor that drove the economy, since profit from selling goods or service is the main reason that encourages production. Being placed as one of top ten countries in the world that have economic freedom in trade Canadian producers can achieve their self-interest due to the economic freedom Canada grants them. This freedom promotes competition, in which consumers will be attracted to goods with lower prices. Thus, in order to maximize profit, business will tend to lower prices in order to attract customers.

Through analyzing the Canadian economy, it's clear how Adam Smith's economic model has influenced the mixed market economy. A common example would be the encouragement of competition and private ownership, these two facts has allowed for Canada's growing and prosperous economy. According to Statistics Canada's Survey of Employment, Payroll and Hours (SEPH) 48% of total private sector labour force worked for small private enterprises, in addition 16% of worked for medium sized enterprises, in total 64% of private sectors employees covered by SEPH. Other recent studies show that 40% of growing businesses have at lead 20 major competitors in the local market. Also majority of mangers assured that their technological production was as good as their competitors. Since 73% of Canadian GDP is collected from service based sectors, competitions are a major factor that helps growing competitions and strengthen the economy, through maximizing production efficiency. This not only helps the growing economy but also increase consumer's purchasing power.

In Adam Smith's book of Wealth of Nation he put great prominence on the division of labour; which in simple words is division of workers in their specialized area in order to increase production levels. Smith's theories are proven to success in the, Index of Economic Freedom, by the Wall Street journal in which Canada was ranked 6th as one of top countries to promote economic opportunity and prosperity. When Adam Smith

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