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There have been several influential and important economists in the past that shaped the market of today with their foresight and theories. Today’s market economy induced society, which is based on the free market system, and Adam Smith was one of such economists, who favored the free market. He considered that free market helped some nations to develop successful economies. He used the Netherlands as an example to show how they instated free market and their economy flourish after they were freed from the Spanish imperialism (Kotabe, 1998). Apart from advocating and formulating the aspects of free market, Smith’s major contribution towards economics lies in the understanding of the value of money and translating it from the concept of time. This evaluation is the key concept of today’s society.
Smith’s Free trade is the principle of foreign economic policy, connected with the good’s free trade on the world market. The classical international agreements of the free trade assume the elimination of tariff and non-tariff barriers in mutual good’s trade, whereas each of the member countries preserves its own control system of trade with the third countries. The debates about what to prefer free trade or protectionism - lasted for hundred years. The argument in favor of free trade was always that what ensures maximum competition, therefore, maximum production efficiency, reduction in the prices and finally benefit to user. The argument in favor of protectionism was always the fact that free trade was fraught with completely negative consequences for the national economies, both in the short term and in the long-term perspective. It increases unemployment and leads to the crash of local producers in the short term perspective. But it forces the weaker countries to be occupied by the unprofitable economic activity in the long-term perspective.
The influence of free trade advocated by Smith is immense in the modern world. Free trade helps to create open conditions for the investments; it prevents corruption and encourages new ideas, contributing to democracy implanting and development. Free trade reduces the cost of such necessities, as food and clothing, leading to the higher standard of living - especially for the poor. The director of the Trade Policy Study Centre Edward Hadzhins assures that Hong Kong is a great example of that how free trade works. After the end of World War II, this English colony destroyed all barriers in the trade. As a result, this plot of land, deprived of any minerals, reached the high level of the economy and living standards development (Kotabe, 1998). Adjacent China, which has the surplus of minerals, but limit freedom in the trade, remained the poor country until the last decade of the 20th Century.
Another chief contribution of Smith is the formulation of time and money. He made it clear through his theories that time is an essential element of economics, and if the concept of time is amalgamated with wealth in the context of social science, it becomes an extremely important determinant. In the book, The Wealth of Nations, Adam Smith proposes some views of the role that time plays in the creation of wealth. It can be determine that this approach of the method is chiefly based on assertions and is prone to too many variable that are unlikely to be present in the real world of the capitalistic mode of economy. This could be termed as too imaginative in nature, but the key factor of the entire book is to understand the approach so such loose points could well be overlooked. However, tightening these loose strings would certainly do no harm in any sense and under any circumstances.
Adam Smith’s view of time and wealth is best illustrated through the parameters of money in chapter II of book 2. He specifically mentions, “The whole expense of maintaining the fixed capital must evidently be excluded from the net revenue of the society. Neither the materials necessary for supporting their useful machines and instruments of trade, their profitable buildings, etc., nor the produce of the labor necessary for fashioning those materials into the proper form, can ever make any part of it” (Smith, 1976). Here the value of time is added to the economic factor, because the capital investments of a trade influence the ultimate nature of the final margin. This form of evaluation is dependent on the depreciating rate of the capital formation and this is directly related to the aspect of duration related to time. Thus, wealth is specifically evaluated in the parameters of time scale.
In this context, it would be relevant to mention that due to fewer government restrictions and generally a larger asset pool to collect form, private financial groups are much easier to handle getting a loan with and can often hold a higher volume of credit line. Also, most corporations realize the value in venture capitalism and will easily give out a large loan to businesses starting up, even though they are more volatile. They often affix a lower interest rate to the loan and know that people will respect this and it makes it much easier to collect on what is owed, since most businesses can generally turn a profit, when given the right amount of assets. Even personal loaning is easier, because financial groups can enforce stricter methods to gain what is owed to them by a private loaner, and as such as more apt to give out loans to people. This form of loan handling has multiple reasons why it spurs economic growth more than banks. First of all, by allowing people to spend more, they improve profits and revenues for other businesses, where the loan is being spent, and by creating lower interest rates, people are able to make payments. Thus, we find the economy expressing themselves in prices in context of tangible timeframe.
Smith also illustrates the situation through the example of banking sector. He says, “If bankers are restrained from issuing any circulating bank notes ……The late multiplication of banking companies in both parts of the United Kingdom, an event by which many people have been much alarmed, instead of diminishing, increases the security of the public.” (Smith, 1976) Thus, it is perfectly clear how Smith valued time in the context of wealth. To him, time was calculable and this element was directly convertible in terms of wealth. Thus, the relevance of wealth creation into the infusion of society in the parameters of time can be well experienced within the framework of the model, introduced by Smith of a different and variable stratum. It should always be considered that the industrial revolution in Europe, particularly the United Kingdom and later in the US gave birth to different aspects of social and cultural changes. Religion was affected in a way, which is still quite relevant and observable in today’s society in the U.S.A. and the United Kingdom, as well as the rest of Europe.
From purely social science parameters, it can be stated that the modern benefit of time reduction and wealth maximization has caused capital building effects that draw immigration to the wealthy countries. There are various causes for migration, including pull and push factors. Pulls would be things that attract people to other areas. In the case of migration to the United States, it would be considered the freedoms allowed, the diversity managed and even the lack of limitations on procreation as would be the case in China. Jobs and weather differences can also cause migration and cause a great number of people to flee to other countries for wealth benefits and better life, which have benefited from the proper amalgamation of time and wealth.
The influence of Smith on today’s society is exceptionally great. This can be proved by the failure of Marxist economy, which actually was a counter argument of Smith on capitalism. Though Marxist theory on social and economic politics has been widely misinterpreted, it compares strongly with modern economic and political regimes. Marx was an ardent critic of capitalism; his observation of accumulation of capital and incorporation of labor in the commercial market prompts critical understanding of labor as our life activity. He saw such a trend as dangerous in that as we give capitalists more wealth they desire, to make more profits that would cause their need to improve productivity.
Although Carl Marx appeared to be disassociating his political economic approach with support for human rights, his principles were in line with calls for human rights just like the liberals. However, Carl Marx had a far sight of dire implications of capitalism, which he viewed as an economic order overexploiting factors of production for fast more wealth. He differed from liberals in that he could foretell a future, whereby the untamed quest for more production to increase profitability would cause dramatic innovations in machinery that would replace human workforce. He foresaw a society of proletariats endeared to the rich; without freedom as people would be as the capitalistic order would create modern working class that would live only to work and such desires would serve to increase property for capital owners. Marxist approach was solely coined to suit the modern world, where capitalists have devised a defensive tool against the wrath of proletariats, who may defy working for them; through technology and division of labor with highly effective machinery replacing workman. As predicted by Marx, workmen sell themselves as any other merchandise and they are embroiled in the harsh cycles of commerce, which do not operate in natural sense as it is subject to many stochastic conditions (Churchich, 1990).
In his conclusion, Marx viewed capitalism as the source of human destruction, where the rich would seek to make more wealth at the expense of the rights and freedom of the poor. Being the majority, the poor people have the capacity to fight and destroy the rich, but according to Marxism; such possibilities were thwarted by technology, whereby mechanization of production leaves workmen with no option, but to abide by the world order set by capitalists. However, the fact that this theory failed to withstand the test of time against Smith’s view of economy is itself a clear indication that Smith is the most influential and important economist of the modern world.
In conclusion, it can be formulated easily, for example, Smith, sees an intimate connection between the nature of property relations in capitalism and the problem employers face in eliciting high levels of effort from workers. Nevertheless, he does not theorize this issue in terms of a general concept of exploitation nor does he sees the problem of extracting labour effort as a pivotal feature of social relations and a central determinant of interest conflict in relation to time. Instead, he treats the problem of eliciting work performance within capitalism as an instance of technical inefficiencies reflecting a tension between formal rationality and substantive rationality within capitalist economic relations.