How Did Adam Smith Influence Capitalism

Adam Smith, Karl Marx and Karl Polanyi, have influenced capitalism in different ways. Adam Smith known as the father of the political economy, developed the concept of the invisible hand; which explains how self-interest and competition in a free market economy, would allow economic prosperity. Likewise, Smith developed the concept of the division of labour which articulates that different jobs in a business should be specialised, instead of one person having to carry out all the processes. Karl Marx, on the other hand, demonstrated the adverse consequence of the capitalist system upon workers and society. Since, Marx believed that workers gained nothing, instead get exploited by the capitalist who employ them; he established this through his
Therefore, embeddedness is a necessary and basic condition of the economy. Polanyi further, argues that before the free market economy the economic system was part of the broader system, which was governed by social customs and norms as much it was by market principle of profit and exchange. The rise of capitalism saw a political effort to de-embed the economy from it social environment, this, also impacted society as basic aspect of social life would be treated as pure market commodities such as fictitious commodities and humans would be redefined as economic rational profit maximising actors. Polanyi said that these efforts of de-embed society from the market, would fail and would bring in dangerous societal reactions, which is seen in the double
Therefore, Polanyi argued that if land, labour and money are sold on the market, then human being would become subordinate to the system itself. Treating land, labour and money as trading commodities, when there not made for that purpose, makes them fictitious commodities. As land is simply nature, labour is human life and money is purchasing power. Consequently, when these elements are viewed as commodities, it would result in destruction of the free market system. As the market system itself is artificial because of the buying and selling and the fact that you can build an economic system based on fabricated commodities shows the flaws in the market