Smith and Marx agree upon the importance of capitalism as unleashing productive powers. Capitalism is born out of the division of labour. that is, it is made possible by dividing jobs up into simple tasks as a way of increasing efficiency. By increasing efficiency, then everyone can produce more than they personally need. The extra produced can go towards the accumulation of capital, (machines, more land, more tools, etc) which will allow for even more increased efficiency and production. Both thought that this increased production was great. But Marx said that capitalism was only one stage. that every country must go through capitalism, to get that increased production, but that capitalism is unstable. It requires expanding markets and will end up creating a large gap between the wealthy and the poor, with more and more people becoming poor. Because of this instability, he thought that it would eventually collapse. .
However, here is where they split. Smith thinks that as everyone produces more, they have more to sell (exchange) and everyone will be happier. Not only that, he says that as people have only small tasks to do over and over they'll find even more efficient ways of doing those tasks, and will produce even more, thus becoming even more happy. .
Marx points out that the means of production are owned by only a small group of the population and most other people do not. These people who don't own the means of production (land, machinery, factories, tools, etc.) are called the proletariat and cannot sell their produce, only their labour-power. that is, they can sell hours of their time to other people. So the profits of their labour always go to those who hire them, and they are left with only a bare minimum wage. .
Smith says that the money that goes to paying wages comes from profits. There must always be an expanding market, so that there can be more and more profits or else there will not be more and more jobs.