Industrial Revolution

New Ways of ThinkingChapter 5, Section 4

Thomas Malthus British economist Explored effects of population explosion Wrote Essay on the Principle of Population Concluded that population increasing faster

than food supply

Laissez-Faire Economics Economic philosophers believed the

government should not interfere with the free operation of the economy

This is called Laissez-Faire “Government – stay out of the economy” Let the market correct itself without passing

laws or regulations

Adam Smith

Wrote The Wealth of Nations Free, unregulated market would

help everyone, not only the poor Free market would produce more

goods at lower prices because of competition among sellers

Competition brings prices down Prices would be more affordable

to many Growing economy would

encourage capitalists to re-invest profits into new businesses

Capitalism Economic system Factors of production (land, labor, and capital)

are privately owned Money is invested to make a profit The sole goal of capitalism is to make more

MONEY without due regard for the social effects on people and society

(contrast this later with communism)

Thomas Malthus (economist) Malthus predicted that population would

outpace the food supply Without wars, hunger and diseases to kill off

the extra people, most were destined to be poor and miserable

An increase in population would cause greater suffering on the existing poor

Malthus urged families to have fewer children

Thomas Malthus Malthus discouraged vaccinations (to promote

disease and death) If fewer people were vaccinated, more people

would catch deadly diseases leading to a natural decrease in the world’s population

However, Malthus was proven wrong – population grew but the food supply grew faster

Living conditions did improve – people eventually had fewer children in western countries

Ricardo Principles of Political Economy and Taxation (1817) Believed a permanent underclass would always be

poor In a market system, if there are many workers and

abundant resources, then labor and resources are cheap (too many workers drives DOWN the wages)

If there are few workers and scarce resources, then goods they are expensive (insufficient workers and scarce resources drives UP the price of goods)

Ricardo believed that wages would be forced down as population increased

Ricardo Ricardo argued the Iron Law of Wages Under the Iron Law of Wages, Ricardo argued

that increases in a worker’s wages are futile (useless)

Why? Because an increase in wages covered the

necessities only When wages were high, families had more

children instead of raising the family’s current standard of living

Ricardo’s other beliefs Opposed government help for the poor Best cure for poverty is not government help

but the free market economy (no restrictions)

Iron Law of Wages

Wages Raised

More Children

Increased Workers

Wages Fall

Working People Produce Fewer Children

Utilitarianism Jeremy Bentham (English philosopher) People should judge ideas, institutions, and

actions on the basis of their utility, or usefulness Government should try to promote the greatest

good for the greatest number of people Government policies was only useful if it

promoted this goal People should be free to pursue his or her own

advantages w/o government interference

Jeremy Bentham (stuffed in a museum)

John Stuart Mill Led utilitarian movement (1800s) Mill questioned unregulated capitalism He believed it was wrong that workers should

lead deprived lives that bordered on starvation Mill wanted to help ordinary working people

with policies that would lead to a more equal division of profits

He favored a cooperative system of agriculture Mill favored increasing women’s rights (right to

vote)

John Stuart Mill Called on government to eliminate great

differences in wealth He pushed for reforms in legal and prison

systems Mill supported reforms in education

Socialists Socialists condemned the economic evils of

industrial capitalism Capitalism created a gap between rich and

poor The rich became richer while the poor

industrial working class became even poorer Socialists focused on promoting collective

equality for all social groups Radical solution = socialism

Socialism Under socialism, the people collectively, not

private individuals, own and operate the means of production

Socialism believes in the basic goodness of human nature and a concern for social justice for all

Means of Production (land, labor, and capital)

Farms Factories Railways Other large businesses that produced and

distributed goods

Utopia

Utopia is a name for an ideal community, taken from the title of a book written in 1516 by Sir Thomas More describing a fictional island in the Atlantic Ocean, possessing a seemingly perfect socio-politico-legal system. The term has been used to describe both intentional communities that attempted to create an ideal society, and fictional societies portrayed in literature.

A perfect utopian society does not exist anywhere.

Utopians Early socialists were called Utopians Utopians attempted to create an ideal, equal

society Work was shared All property owned in common No difference between rich and poor Fighting between people would disappear

Robert Owen (“Owenism”) Owen established a model utopian community

in New Lanark, Scotland Refused to use child labor Promoted laws to restrict child labor Encouraged organization of labor unions

Karl Marx German philosopher He rejected utopianism as unrealistic goal Teamed with Friedrich Engel to author The

Communist Manifesto (1848) – bible of communism

Communism Communism is an extreme form of socialism Social classes would struggle and fight to

control the means of production The end of the fighting would leads to the

creation of a classless society (no upper, middle or lower class)

All means of production (land, labor, capital) would be owned by the community, by the people – equally.

Marxism History has always been about economic class

struggle (between the “haves” and “have-nots”)

The “haves” always owned means of production and controlled societal wealth

“Haves” in society were the bourgeoisie (middle class)

“Have-nots” were the proletariats (working class)

Marxism

Class struggle would occur between the bourgeoisie (wealthy) against the proletariat (workers)

The proletariats (workers) would rise up and seize power and the means of production from the bourgeoisie

Proletariats would then set up a classless, communist society (all people would be equal and not belong to any economic class)

Class distinctions (upper, middle, lower) would disappear forever

Wealth and power to be equally shared Marx hated capitalism believing it created

wealth and power for a few people

The Communist Manifesto “Workers of all countries, unite!” (rallying cry/slogan and last words of The

Communist Manifesto)

Social Democracy Germany adopted Marxist beliefs to create a

social democracy Social democracy = a gradual transition from

capitalism to socialism instead of a sudden (communism) violent overthrow of capitalism

Russian Revolution of 1917 ushered in communism, the more radical form of socialism

Marxism has been adopted in various countries on different continents

Predictions of Marx Failed Marx predicted worldwide worker revolutions to

end class struggles But nationalism won out over working-class

loyalty People felt stronger ties to their own country

than to an international communist movement Few communist governments by end of 20th

century Nearly every economy included elements of

free-market capitalism (even former communist countries)

Powerpoint Questions (22 points)

1. What is the economic theory that believes the government should NOT interfere in the economy?

2. According to Malthus, what were the natural methods to control population growth?

3. What did Malthus predict about food and population?

4. Why were wage increases useless according to Ricardo?

5. All laws or actions should be judged by their utility or usefulness to society. This is called _________ and was promoted by ___________. (2 points)

Powerpoint Questions 6. Who built a model utopian community in

New Lanark, Scotland? 7. What is socialism? 8. Identify the means of production (3 points) 9. Who teamed together to author the

Communist Manifesto (1848)? (2 points) 10. What is communism? 11. The have-nots in communism were the

____, or working class.

Powerpoint Questions 12. In a communist revolution, workers seize

control of the ____________ and they set up a ________ society. (2 points)

13. How is a social democracy different from communism?

14. What was the slogan of Marx and Engels?

15. According to Adam Smith, how does the free market lower prices for everyone?

The End