Industrial Age Economic Ideas

1. Industrial Age Economic Ideas

2. Understand laissez-faire economics and the beliefs of those who supported it. Describe the doctrine of utilitarianism. Summarize the theories of socialism. Explain Marx’s views of the working class and responses to Marxism. Objectives

3. Laissez-faire–Policy of allowing business to operate with little or not government interference. proletariat – society’s “have nots,” the working class means of production – farms, factories, railways, mines, and other large businesses that produce and distribute goods social democracy– a political ideology favoring gradual transition from capitalism to socialism Terms

4. Capitalism–an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state. utilitarianism–the idea that the goal of society should be “the greatest happiness for the greatest number of citizens,” and that this should be the basis for judging all laws Ideas for economic systems)

5. socialism– the belief that the means of production should be owned and operated by and for the people in general rather than by and for private individuals communism–a political theory derived from Karl Marx, advocating class war and leading to a society in which all property is publicly owned and each person works and is paid according to their abilities and needs means of production – farms, factories, railways, mines, and other large businesses that produce and distribute goods Ideas for economic systems

6. What new ideas about economics and society were fostered as a result of the Industrial Revolution? Economic thinkers developed new ideas and ideologies to explain the staggering changes of the Industrial Age. While some focused on the benefits of the free operation of capitalism, others looked at the harsh conditions faced by workers.

7. Laissez-faire–allowing business to operate without government interference Means of production– facilities and resources for production of Goods proletariat – society’s “have nots,” the working class social democracy– a political ideology favoring gradual transition from capitalism to socialism Vocabulary

8. ______________–an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state. Ideas for economic systems Capitalism

9. This attitude of keeping “hands off” was called “laissez faire.” They believed these laws should be allowed to operate without any government interference. Enlightenment economic thinkers believed that natural laws govern the world of business and economics.

10. Believed in a “hands-off” or ______________ policy—that a ____ ______________ governed by the law of supply and demand, would help everyone, not just the Rich Adam Smith Most famous of these thinkers was ____________ , who published The Wealth of Nations in 1776. laissez faire Free Market

11. Thomas Malthus ___________________ an English economist who carefully studied the impact of the population explosion in eighteenth-century Britain. He concluded that poverty was unavoidable because the population was growing faster than the nation’s ability to grow food.

12. Many agreed with Malthus, but he proved to be wrong. Food production rose quickly over the next century. He felt that “natural events” such as famine or war were the only mechanisms to maintain a sustainable population. Malthus said that unless the working class had fewer children, they were doomed to remain in poverty.

13. Another British laissez-faire economist was David Ricardo. Ricardo opposed help for the poor, contending that this would only lead them to have more children. Like Malthus, Ricardo saw no hope for the working class to escape poverty. Malthus and Ricardo saw the “laws of the free market” as the best cure for poverty and advised the poor to be thrifty, work hard, and have fewer children.

14. David Ricardo ___________________ Another laissez-faire economist called his theory the “Iron Law of Wages”. Wage increases were futile because when wages are high then people had more children instead of raising the families standard of living.

16. utilitarianism–the idea that the goal of society should be “the greatest happiness for the greatest number of citizens,” and that this should be the basis for judging all laws Ideas for economic systems

17. Bentham believed that the goal of society should be “the greatest happiness for the greatest number of citizens.” This idea was called utilitarianism. Laws should be judged by their utility to benefit people. Other thinkers, such as _________________,believed there should be some government intervention in the economy. Jeremy Bentham

19. John Stuart Mill One follower of Bentham was ____________. “The only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others.” • Like Bentham and Smith, Mill believed in individual freedom. • Mill saw capitalists harming workers. He called for limiting their power to do so by giving workers and women the right to vote.

20. socialism– the belief that the means of production should be owned and operated by and for the people in general rather than by and for private individuals Ideas for economic systems

21. Socialism: The people as a whole should own and operate the means of production for the general good. The champions of laissez-faire economics praised individual rights, whereas socialists focused on the good of society in general. Capitalism:Individuals should own and operate the means of production for profit.

22. ______________set up a Utopian community at his cotton mill in New Lanark, Scotland. Utopians Socialists set up communities where work was shared and property was commonly owned. These early socialists were called __________. The name implied impractical dreamers. Robert Owen

23. Believed : • The Government should set up “social workshops” that would provide more jobs • The government should aid the sick and elderly Louis Blanc:

24. communism–a political theory derived from Karl Marx, advocating class war and leading to a society in which all property is publicly owned and each person works and is paid according to their abilities and needs means of production – farms, factories, railways, mines, and other large businesses that produce and distribute goods Ideas for economic systems

25. He formulated a new theory that he called “scientific socialism.” German philosopher Karl Marx condemned the ideas of the Utopians as unrealistic idealism.

26. Along with Englishman Frederick Engels, Marx published The Communist Manifestoin 1848. • He predicted a struggle between the social classes that would lead to a classless society. • The workers would take over all of the means of production, such as the farms, factories, and railways, and run them for the public good.

27. Marx theorized that all of history was a struggle between the “haves” and the “have-nots.” • The “haves” were the business owners or bourgeoisie. • The “have-nots” were the workers, or proletariat. • In the end, Marx predicted that the proletariat would unite along class lines, take control of the means of production, and end the struggle. • In practice, Marx’s ideas evolved into communism, a system in which governments led by a small elite controlled all economic and political life.

28. In Germany, socialists adapted Marx’s beliefs to form social democracy, a political ideology calling for a gradual transition from capitalism to socialism. • Russian socialists embraced Marx’s ideas and set up a communist-inspired government in 1917. Marx called for workers everywhere to unite and overthrow the capitalists.

29. But workers worldwide never united as a class. The later failures of communist nations illustrated flaws in Marx’s theories. Revolutionaries around the world adapted Marx to their local goals and needs.