Thesis: Capitalist ideology is an economic theory presented by Adam Smith, which separates the state affairs from the economic policies of a state. At the same time it distributes the labor according to their skills in the market. These principle points of Smiths economic theory are also followed in the present order of international political economy i.e. globalization.

Introduction

Globalization has changed the traditional trends of international relations. Now states are struggling to gain more and more economic power. This economic power is related to their social, political as well as technological development. However, the means to develop economically with a faster speed is the capitalist ideology. Capitalism is such an economic system where the state affairs and market trends has nothing to do with each other. According to the capitalist ideology, markets are enough efficient and do not need any interference of the state for its proper function.

Adam Smith and Capitalism

Adam Smith was a Scottish economist and the founder of the classical economics and the first to complete a comprehensive theory of political economy. According to him, labor is the soul source to measure the economic value of a state. He believed that the value of good is determined by their exchange value instead of the value of usage of these goods. Therefore, the market price needs to be adjusted by the cost price, which is only possible with out the intervention of state and adoption of a free trade policy. Though his theory of free trade symbolized the working class against the orthodox feudalists and aristocrats of that time, but later on his theory became famous to verify the wealth of nations.

Therefore, he introduced a new economic model predicting the wealth of nations. He presented the theory to divide the labor and organize them with in the markets that are driven by coherent self-interest. According to him, only those nations can be wealthier who let the market forces to generate economic growth instead of following the traditional mercantile economic model for trade.

Capitalism and The Wealth Of Nations

The capitalist theory presented by Smith long ago was not much famous and recognized during his time though the present economic trends of globalization are an extension of his theory presented in his work, “The Wealth Of Nations” the contemporary economic trends are formulated on the roots of capitalism as every state is heading towards regional economic integration and following the policies of free trade, market liberalization, privatization. All these approaches are an adaptation from Smith’s work of wealth of nation. However, smith has presented a systematic analysis regarding the behavior of individuals. These individuals if taken with in the domestic sphere are the various business merchants and business organizations, while in the international market are the countries. Therefore, every individual and country perusing its self-interest and national interest are facing the various challenges in the competition of economic development. Therefore, now the foreign policy of states and the political dominance of any state have nothing to do with the business policies of any business company. Another instance that makes us realize the authenticity of Smith’s economic policy is the increasing rates of MNCs in various countries. Now to mobilize the resources, keeping in mind the skills of the labors, the developed countries are introducing their multinational companies in the developing countries to mobilize their resources and help them develop side-by-side. Yet it is generation so many negative repercussions at the same time, like increasing the gap b/w have and have not instead of bridging. Therefore, according to the economic theory of capitalism, a nation can be wealthier only when the state does not interfere in the economic polices and the labor is divided in to the market where there skills are mobilized in a systematic order.

Furthermore, Smith evaluated the role of government into three basic areas. According to him the legitimate activities of a states revolves around the defense against external threats or insecurities, making of law and norms that restrict the people for doing a wrongful act or hurting the rights of another person living in the society and lastly the government provides certain condition for public goods that the market will not supply. Though smith has done a great job in making the first comprehensive economic theory, there are many critics who do not favor capitalism as it restricts the role of government. At the same time all the countries of the globe are adopting the capitalist ideology. Even the countries that use to cherish communism they are also influenced with the economic model presented by Adam Smith. For instance, China is still politically a communist while it follows the capitalist ideology and presently China’s market is overwhelming globally as it is the only market dominating the world economy, which is also threatening the global economic power America.