Modern World HistoryNovember 29, 2010

Economic system based on private ownership and on investment of money in order to make a profit

Each business tries to provide goods and services that are better and less expensive than their competitors

Profit is the motive Individual ahead of society

Father of Capitalism 1723-1790 Scotland Wrote The Wealth of Nations (1776) “invisible hand” – belief that everyone’s

self-interest would result in what is best for society

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

Laissez-faire (pronounced less-say-fair) – French term that means “let go”

Both L-F and F.M. mean that the government should have very little control over business – business owners set the working conditions without government interference

Under pure L-F and F.M. government would not set minimum wage or child labor laws

POSITIVE NEGATIVE

Progress People motivated More goods at lower

prices Freedom

Unequal distribution of wealth – rich vs. poor

Wealth & power in the hands of a few

Appeals to selfishness

Does not take into account social justice

Reaction to the poverty, poor working conditions and inequality that arose during the Industrial Revolution

Society ahead of individual interest Government actively involved in

controlling the economy, including major businesses and resources (the “means of production”)

No private ownership

A form of socialism Economic system in which all means of

production are owned by the people, private property does not exist, and all goods and services are shared equally

No class divisions Equality between “haves” and “have-

nots” “From each according to his ability, to each

according to his needs.”

Father of Communism 1818-1883 Germany then England Partner Friedrich Engels Engels from wealthy family and managed

a factory for family business They wrote The Communist Manifesto

(1848)

Everything is based on economics – politics, law, social structures, family relations, religion

Bad effects of capitalism result in class struggle between bourgeoisie (owners of businesses) and proletariat (workers)

Eventually there will be violent struggle between bourgeoisie & proletariat and proletariat will win

Class divisions will disappear

Capital = money and the people who have it

Labor = the workers – they make things of value but do not receive the profits

Essential Question: Should those who provide the money (capital) receive all the profits and labor receive none?

“The workers of the world have nothing to lose but their chains, workers of the world unite!” – Karl Marx

POSITIVE NEGATIVE

No gap between rich & poor

Everyone equal Society operates for

the benefit of all

Destroys individual motivation

Does not reward individual effort

Assumes people willing to act for benefit of society

Soviet Union practiced it from 1917-1991, as did countries in Eastern Europe that were controlled by Soviet Union

After 1991 Soviet Union broke up and capitalism spread (but countries had lots of problems shifting to capitalism)

Countries that are still Communist: China, Vietnam, Laos, N. Korea, Cuba

On a separate sheet of paper: Why did Communism appeal to some people during the Industrial Revolution?