Post-Industrial Economic TheoriesCapitalism, Socialism, and Communism

Capitalism

Key Ideas

Economic Inequality

Freedom of Competition

Private Ownership of Industry

Key Thinkers – Adam Smith Famous Works

The Theory of Moral Sentiments (1759)

The Wealth of Nations (1776)

Belief: Invisible Hand Smith argued that there was “an

invisible hand” within the economic market that ensured the market stayed regulated

Belief: Laissez-Faire Economics “Laissez-faire” literally translates to

“allow to do.”

Smith argued that government should not interfere with economics at all.

Key Thinkers – Adam Smith“Every individual... neither intends to promote the public interest, nor knows how much he is promoting it... he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”

- Adam Smith, The Wealth of Nations (1776)

Key Thinkers – Thomas Malthus Famous Works

An Essay on the Principle of Population (1798)

Belief: Malthusian Catastrophe Population increases geometrically

Food supply increases arithmetically

THEREFORE, someday, there will not be enough food to feed the population

Key Thinkers – Thomas Malthus“The power of population is so superior to the power of the earth to produce subsistence for man, that premature death must in some shape or other visit the human race. The vices of mankind are active and able ministers of depopulation. They are the precursors in the great army of destruction, and often finish the dreadful work themselves. But should they fail in this war of extermination, sickly seasons, epidemics, pestilence, and plague advance in terrific array, and sweep off their thousands and tens of thousands. Should success be still incomplete, gigantic inevitable famine stalks in the rear, and with one mighty blow levels the population with the food of the world.”

- Thomas Malthus, Essay on the Principle of Population (1798)

Key Thinkers – David Ricardo Famous Works

On the Principles of Political Economy and Taxation (1817)

Belief: “The Iron Law of Wages” See next slide for details

Ricardo argues that if bosses never pay their workers more, the cyclical changes can be avoided.

Wages increase

Parents have more children

More workers in the labor

market

Wages fall

Parents have fewer children

Fewer workers in the labor market

Ricardo’s Iron Lawof Wages

Key Thinkers – David Ricardo“As population increases, these necessaries will be constantly rising in price, because more labour will be necessary to produce them. If, then, the money wages of labour should fall, while every commodity on which the wages of labour were expended rose, the labourer would be doubly affected, and would be soon totally deprived of subsistence... These, then, are the laws by which wages are regulated, and by which the happiness of far the greatest part of every community is governed. Like all other contracts, wages should be left to the fair and free competition of the market, and should never be controlled by the interference of the legislature.”

- David Ricardo, On the Principles of Political Economy and Taxation (1817)

Socialism

Key Ideas

Goal: Classless Society

Economic Equality

Government Ownership of Industry

Key Thinkers – Claude Henri de Saint-Simon Famous Works

Introduction to Scientific Discoveries of the 19th Century (1803)

Notes on the Study of Man (1813)

Belief: Utopian Socialism Through a socialist economy, Saint-

Simon argued, society could achieve perfection

Key Thinkers – Claude Henri de Saint-Simon

“The whole of society rests upon industry. Industry is the sole guarantee of its existence, the single source of all its wealth and all its prosperity. The state of things most favorable to industry is by that very reason the most favorable to society.”

- Claude Henri de Saint-Simon, 1894

Quoted in Georges Weill’s A precursor of socialism: Saint-Simon and his work

Key Thinkers – Robert Owen Famous Works

A New View of Society (1813)

Revolution in the Mind and Practice of the Human Race (1849)

Belief: Utopian Socialism Owen became manager of the mill

business in New Lanark, Scotland (a town of about 2,500 people), which he turned into a Socialist Utopia.

The business faired very well, but Owen’s partners were unhappy with the extra expenses.

1825: Owen left New Lanark to start New Harmony in the United States

Key Thinkers – Robert Owen“They would receive the same care and attention as those who belong to the establishment. Nor will there be any distinction made between the children of those parents who are deemed the worst, and of those who may be esteemed the best members of society: indeed I would prefer to receive the offspring of the worst, if they shall be sent at an early age; because they really require more of our care and pity and by well-training these, society will be more essentially benefited than if the like attention were paid to those whose parents are educating them in comparatively good habits.”

- Robert Owen, Address to the Inhabitants of New Lanark (1816)

Key Thinkers – Karl Marx Famous Works

The Communist Manifesto (1848)

Das Kapital (1867-1894)

Belief: Socialism was a stepping stone toward Communism See next slide

Key Thinkers – Karl Marx“Centralization of the means of production and socialization of labor at last reach a point where they become incompatible with their capitalist integument [click for definition]. Thus integument is burst asunder. The knell of capitalist private property sounds.The expropriators are expropriated [click for definition].”

- Karl Marx, Das Kapital, Volume I (1867)

Communism

Key Ideas

No Need for Government

Classless Society

Public Ownership of Industry

Key Thinkers – Karl Marx Famous Works

The Communist Manifesto (1848)

Das Kapital (1867-1894)

Belief: Communism is the highest form of Socialism The people want a classless society; the

government does not need to regulate it.

Belief: History is the story of class struggle Class struggle will no longer exist when

there are no classes

Communism can eliminate classes

Key Thinkers – Karl Marx“In place of the old bourgeois society, with its classes and class antagonisms, we shall have an association in which the free development of each is the condition for the free development of all.”

“The Communists disdain to conceal their views and aims. They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions.Let the ruling classes tremble at a communist revolution.The proletarians have nothing to lose but their chains. They have a world to win.Working Men of All Countries, Unite!”

- Karl Marx & Friedrich Engels, The Communist Manifesto, 1848