Over the years, great reliance has been placed on the market system to support and maintain economies. There have been emergent issues that have varied with time and include the Great Depression, inflation, unemployment, and financial crises among other economic issues. The ancient philosophers and thinkers came up with theories that are used to explain the situation in the world, stabilize the market system and provide solutions to emerging modern-day problems. The book “The Worldly Philosophers” by Robert Heilbroner discusses the theories of great world economists and philosophers that form solutions to current economic situations. The book includes theories of economists such as Adam Smith, Karl Marx, John Stuart Mill, and John Maynard Keynes among others. The book forms the basis of this paper. This paper analyzes the theories presented by Heilbroner that are most relevant to the present issues facing the world today.
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Relevance of Theories in “The World Philosophers” to the World Today
The world today has grown and developed into a global village fostered by great innovations and developments in technology and other economic sectors. This however has brought several issues that affect the market system. These include globalization, trade imbalance, and financial crises such as the recent global economic meltdown. In his book “The World Philosophers,” Heilbroner summarizes the economic theories of prominent scholars which are useful even in modern-day situations. The major situations facing the world today are issues related to globalization and technological innovations. The current financial crisis has also sought to challenge some of the theories by some of these philosophers, which have been in continuous use in the international market system yet have not been able to predict nor solve the financial crisis. Further, in addressing the relevance of the theories, it is important to note the ability of each theory to address economic differences, global imbalances, the pitfalls of the global financial system, decoupling matters, and prospects. It is worth noting that the theories have to consider global balance in the international system regardless of the type of theory individual nations implement to avoid system divisions.
The most relevant theories from Heilbroner’s book are the theories by Karl Marx and Adam Smith who had their points of view and thoughts which were based on their interpretation of the market economic system or which were a reaction to a prior theory by another philosopher. Ideally, the thoughts and opinions of these scholars were influenced by their background and application to the relevant situations during their lifetime. However, most of these theories have been relied upon for decades and even form great relevance in interpretation and solving of economic situations in the present-day market system and have a positive application especially in the age of technological advancements and globalization.
The Theory by Karl Marx
Karl Marx was born in 1818 and lived until 1883. He was a devout communist who lived at a time that was characterized by threats of revolution of 1848. Marx is the founder of Marxism and has made outstanding contributions of exemplary depth and breadth in the disciplines of philosophy, economics, sociology, and history. He contributed scholarly work mainly in collaboration with Engels Friedrich such as “The Communist Manifesto” and “Das Kapital.” Marx developed the theory of the reality of materialism. The book “The Communist Manifesto” showed the aims of communism and the fact that capitalism has to destroy itself. The “Das Kapital” analyzes the destruction means of capitalism. Marx asserts that the definition of value lies with labor which is the issue that analysts have embarked on in the world today (Mitchinson, p. 3).
The theory of Marx is very applicable to the modern-day economy to a great deal mainly because the current global crisis is viewed by analysts as the collapse of capitalism. As logic would have it, the solution can then only be the opposite of which is communism. Marxism believes in providing an opportunity for people to engage in productive activities that earn them a living through protecting human dignity. However, the current global recession has been characterized by high levels of unemployment, job losses, and job cuts. The Marxism theory is the best solution since the current capitalist system has been characterized by high levels of corruption which does not allow people to get value for what they deserve in terms of employment. Additionally, the issue of unemployment affects people of all ages thus lowering the respect for human dignity that Marxism advocated for which therefore makes it the appropriate solution for the problem. The capitalist system is mainly characterized by large companies that increase their influence through mergers, acquisitions, and buying of small companies. This condition has increased the impact of the current crisis since the large companies are the movers of the economy and have encouraged unemployment through the vast job cuts and replacing workers with machinery to minimize costs, increase productivity, and ultimately profits. Contrary to this, Marxism would be relevant today since analysts have realized that the drivers of the economy are small firms and the efficient use of labor to maximize returns.
The theory of communism by Karl Marx has over the past decades been applied by some nations mostly the Middle Eastern and Asian countries such as China and Japan among others. These nations have been motivated by the dominant Islam religion. The United States has been a major advocate for capitalism since the collapse of communism. This contributed to its global influence through, for instance, heading international institutions such as the International Monetary Fund and its role in enhancing global stability. However, it has been hard hit by the financial crisis with its consumer debt soaring, and its share market in crisis even as spending decreased. This situation has hit the developing nations badly and the disadvantage is that the US is not in a position to help them. The communist nations such as China have had controlled economies that have not been significantly affected by the crisis. This provides an opportunity for Marx’s theory to be applied by having the communist nations take a key role in ending the crisis. This can be enhanced by establishing their influence on the developing world by helping them come out of the crisis while actively helping the US. Further, this can be influenced by taking over global institutions such as the IMF through funding and enhancing its export and financial stability (Mitchinson, p. 18).
The Marxist theory is also relevant to the world due to the divergence of issues such as monopolization, inequality, corruption, technological progress, the end of high culture, and globalization in the world today which are the core foundation of the Marxist theory. The insights of Marxism lie in giving explanations to what is wrong with society and how to change it for the better. Additionally, Marx had given predictions of the fall of capitalism which led to the embracement of communism. The current global crisis points to a situation similar to the days of Marx since it is characterized by the fall of capitalism. This situation thus provides the answer as to why communism would be the solution for the current society.
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The Theory by Adam Smith
Adam Smith was born in 1723 and taught at Oxford University and later at the University of Glasgow. He contributed to scholarly work through his books “The Theory of Moral Sentiments” and “An Inquiry into the Nature and Causes of the Wealth of Nations”. He was termed as a moral philosopher who advocated for capitalism. Smith came up with two main market economic laws: self-interest and competition which operated in an unregulated economy. He further argued that the economic laws determine the production levels of goods as well as the levels of income for the producers. According to him, the market system was not only progressive but dynamic while specialization and division of labor were bound to cause a great increase in productivity. Smith further proposed other laws that were fundamental to the propelling of the market system. These included the accumulation law of profit to channel it back to production and control the population growth rate.
Sen argues that Smith identified reasons why markets needed restraint, supplementation, and correction through other institutions to provide stability, equality, and eradicate poverty which is the focus of the present-day system. Smith in his theory identified destructive influences that he called “projectors and prodigals.” The removal of market regulations by some nations ignored these mechanisms as suggested by Smith and hence experienced shocks on the market economy. Smith provided a distinction between innovation and projection which is relevant in understanding both the nature and causes of the world financial crisis. This understanding would be better placed to provide better ways of dealing with the global financial crisis through addressing the actual causes. This is particularly very important since the current financial crisis has not found clear definitions of the causes that propelled it although it is argued that it could be a combination of causes.
Sen argues that the current economic crisis calls for a departure from self-seeking motives towards decent society, a proposition that has been made by Smith’s theory. Further, Sen shows that this proposition was used by John McCain during his campaigns which he referred to as “the greed of Wall Street.” Smith addresses the issue of economic exchange with trust and confidence as the motivation behind it. Smith argued that this confidence need not always be there as there are other motivations. This provides the understanding of the economic crisis which provides the opportunity of finding ways to solve it.
Smith also came up with the concept of interdependence of interests which was used to solve the 1770 famine crisis during the British rule in India and is still relevant today. Landsburg argues that the interdependence of nations globally served as the motivation factor during the G-20 meeting. This is due to the realization that how one nation handles its economy affects the entire world with a good example being the global crisis. Further, this is a good foundation for the handling of issues such as floods, HIV/AIDS and other epidemics, global oil spills, wars, and the challenges of setting environmental policies to tackle global warming.
This paper has focused on the theories stipulated in the book “The Worldly Philosophers” by Robert Heilbroner. It has explained the theories with emphasis placed on those that are relevant to the world today. The world today has been described with more emphasis placed on the issue of globalization and the global financial crisis. This paper has given suggestions of the Marxist theory of Karl Marx and Classical theory of Adam Smith as the most appropriate in tackling the issues facing the world today. The theory by Marx is supported by the association of the crisis with the fall of capitalism, the influence of globalization and other sociological issues on the economy, the rise of communist nations such as China irrespective of the crisis, and the fact that they form the core of the theory. Adam Smith’s theory, on the other hand, influences the issues of regulations, the interdependence of interests, and the rethinking of the self-interest motive which all form the basis of understanding the issues in the world today especially the global financial crisis. Smith’s theory is supported in its ability to establish the root causes of the global and other social issues and provide the opportunity for solving them adequately.
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