Professor’s Summary
Jeff, your paper on “What Adam Smith Got Wrong About Late Stage Capitalism” demonstrates a solid understanding of both classical economic theory and contemporary economic issues. Your analysis of the discrepancies between Smith’s predictions and the realities of late stage capitalism is thoughtful and well-structured. You’ve effectively highlighted key areas where Smith’s theories fall short in explaining modern economic phenomena, particularly in your sections on financialization and globalization. Your use of current examples strengthens your arguments. However, the paper would benefit from a more nuanced discussion of the ongoing relevance of Smith’s work, despite its limitations. Additionally, while your critique of late stage capitalism is compelling, it sometimes lacks the objective tone expected in academic writing. I would encourage you to incorporate more quantitative data to support your claims, particularly in the sections on wealth inequality and labor markets. Your references are relevant and current, but expanding your source base would add depth to your analysis. Overall, this is a strong paper that shows critical thinking and a good grasp of complex economic concepts.
Grade: A- (92%)
What Adam Smith Got Wrong About Late Stage Capitalism
by
Jeff Williams
Economics Major
Massachusetts Institute of Technology
1. Introduction
Adam Smith, often regarded as the father of modern economics, laid the groundwork for our understanding of capitalist systems. However, his theories, developed in the 18th century, could not have anticipated the complexities of late stage capitalism we observe today. This paper examines the discrepancies between Smith’s predictions and the realities of late stage capitalism in the 21st century.
2. Understanding Late Stage Capitalism
2.1 Definition and Characteristics
Late stage capitalism refers to the hypothetical end-state of capitalist development characterized by:
- Extreme wealth inequality
- Monopolistic corporate power
- Financialization of the economy
- Environmental degradation
2.2 Historical Context
The concept of late stage capitalism emerged in the late 20th century as critics observed the evolving nature of capitalist economies. It represents a significant departure from the nascent capitalism Smith observed and theorized about.
3. Smith’s Assumptions vs. Late Stage Capitalism Realities
3.1 The Invisible Hand
Smith’s concept of the invisible hand suggested that individual self-interest would lead to societal benefits. However, in late stage capitalism, we observe:
- Market manipulation by powerful corporations
- Externalities not accounted for in market transactions
- Short-term profit maximization at the expense of long-term societal well-being
3.2 Perfect Competition
Smith’s model assumed perfect competition, but late stage capitalism is characterized by:
- Oligopolies and monopolies
- Barriers to entry for new competitors
- Information asymmetry favoring large corporations
3.3 Labor and Wages
While Smith believed wages would naturally rise with economic growth, capitalism shows:
- Stagnant wages despite productivity increases
- Erosion of worker bargaining power
- Increasing precocity of employment
4. Unforeseen Aspects of Late Stage Capitalism
4.1 Financialization
Smith could not have predicted the extent of financialization in capitalism, including:
- The dominance of the financial sector over the real economy
- Complex financial instruments divorced from productive activities
- Increased economic instability due to speculative activities
4.2 Globalization
The global nature of late stage capitalism introduces complexities not considered in Smith’s localized model:
- Transnational corporations with power rivaling nation-states
- Global supply chains and their social and environmental impacts
- International tax avoidance strategies
4.3 Environmental Consequences
Smith’s theory did not account for the environmental externalities prevalent in late stage capitalism:
- Climate change driven by industrial activities
- Depletion of natural resources
- Pollution and its health impacts
5. The Role of Government in Late Stage Capitalism
Contrary to Smith’s limited government model, late stage capitalism has seen:
- Increased need for regulation to curb corporate excesses
- Government interventions to stabilize economic crises
- Complex relationships between government and corporate interests
6. Conclusion
While Adam Smith’s theories laid the foundation for understanding capitalist economies, they fall short in explaining the complexities of late stage capitalism. The concentration of wealth and power, environmental degradation, and global interconnectedness of modern economies present challenges that were unforeseen in Smith’s time. As we grapple with these issues, it becomes clear that new economic models and theories are needed to address the realities of capitalism and chart a course towards a more sustainable and equitable economic future.
References
Fuchs, C. (2018). Industry 4.0: The digital German ideology. tripleC: Communication, Capitalism & Critique, 16(1), 280-289. https://doi.org/10.31269/triplec.v16i1.1010
Kotz, D. M. (2015). The rise and fall of neoliberal capitalism. Harvard University Press.
Srnicek, N. (2017). Platform capitalism. John Wiley & Sons.