Capitalism, Classical Economics, And the Changing Nature of Work

1. Capitalism, Classical Economics, And the Changing Nature of Work

2. Capitalism • The Industrial Revolution coincided with – and mutually affected – the fall of mercantilism and the rise of capitalism • It is important to remember that the central feature of mercantilism was strict governmental control over the economy • By the end of the 1700s, a number of economic thinkers began to argue that economies were more likely to flourish when they were left alone to function freely

3. These classical, or laissez-faire, economists theorized that competition, free trade, and the laws of supply and demand, operating by themselves, created greater wealth for all nations and all people • These became the key principles of capitalism • The first major capitalist thinker was the Scottish philosopher Adam Smith • Smith’s The Wealth of Nations (1776) used the elegant metaphor of the “invisible hand” to describe how the laws of supply and demand naturally increased prosperity

4. Other classical economists accepted Smith’s principles and approved of capitalism, but were not so optimistic that the new economic approach would benefit all people, especially the working masses • One of these was England’s Thomas Malthus, whose Essay on Population (1799) argued that population growth caused poverty • His reasoning was that, while population growth grew at a geometric rate, food supply grew at an arithmetic rate • Malthus saw war, disease, and starvation as natural mechanisms by which population growth was regulated

5. David Ricardo created the theory known as the “iron law of wages” • Ricardo stated that an employer will naturally pay his workers no more than whatever it takes to keep them at a subsistence level • If population growth expands more quickly than the economy, too many workers will compete for too few jobs • Wages will decline and those without jobs will starve • However, according to Ricardo, to interfere with this “iron law” will only lead to economic ruin

6. The pessimism of thinkers like Malthus and Ricardo caused classical economics to be nicknamed the “dismal science” • Nonetheless, classical capitalist thought became the dominant economic approach of the nineteenth and early twentieth century

7. Socialism, Marxism, and Communism • Another economic approach, socialism, remained in the minority – and, in some times and places, it became illegal • Socialism’s basic principle is that economic competition is inherently unfair and leads to injustice and inequality • There were many different forms of socialist thought • The earliest socialists, who appeared between the 1810s and 1840s, were known as the utopian socialists

8. These included the Scottish industrialist Robert Owen, as well as the French thinkers Charles Fourier and Comte de Saint-Simon • Rejecting capitalism and Ricardo’s “iron law,” utopian socialists felt that, by means of good planning and judicious regulation, economies could be made to prosper without exploiting the working class

9. Marxism • A more radical form of socialism appeared later, during the 1840s • This was Marxism (also known as communism) • It was originated by the German philosophers and radicals Karl Marx and Friedrich Engels • The movement’s fundamental principles came from The Communist Manifesto (1848)and Das Kapital (1867-1894) • Based heavily on the philosophy of G.W.F. Hegel, Marxism condemned capitalism and economic competition

10. Marx and Engels argued that, since ancient times, social and historical development have always been driven by the class struggle between the upper classes (who control capital, or the means of economic production) and the lower classes (who are forced to labor for the upper classes) • They felt that their own age – the capitalist era, during which the class struggle pitted the bourgeoisie (capitalists) against the proletariat (industrial working classes) – was the final stage of human history before the achievement of socialism

11. From socialism, human society would pass to communism: an economic state of perfect justice, social equality, and plenty • In order to bring about socialism, however, revolution was necessary • Marx and Engels therefore advocated and fought for, the overthrow of the capitalist order • Much more so than utopian socialism, Marxism captured the imagination of hundreds of thousands of intellectuals and workers, and it would go on to become one of the most influential doctrines of the modern era

12. Yet the rapid expansion of the middle class and the birth of the industrial working class affected politics in many ways • The gradual widening of political representation was due largely to agitation and ambition on the part of both of these classes • Early in the 1800s, the middle class, which favored liberalization, won greater political rights and economic privileges for itself, both by means of reform (in countries like Britain) and more drastic political action like opposition or revolt (as in France)

13. Working-Class Radicalism • What options were open for the working class? • The most desperate tended to turn to radical forms of agitation: socialism, communism, even anarchism (developed as a political movement by the Russian revolutionaries Mikhail Bakunin and Prince Pyotr Kropotkin) • Marxism drew most of its strength from disgruntled workers • But as a movement, it was often led by radicalized intellectuals who promoted communism as the way toward social equality and economic justice

14. Trade Unions • Most workers turned to trade unions rather than radicalism • At first, unions were illegal in Europe, as well as the United States, and joining one could be very risky: union members were often in danger of arrest, even injury, especially if they went on strike • Over time, however, trade unionism became a less extreme way of carrying on the struggle for greater political rights and fairer treatment in the workplace (higher wages, shorter workday, shorter work week, safety regulations, pensions, employee insurance)

15. Workers’ parties also emerged; one of the most famous was the Labour Party, which became (and remains) a major force in British politics • Unions and workers’ parties tended to be left leaning, but not as far to the left as socialist and communist groups

16. Industrialization and Imperialism • Europe was the first major civilization to develop a modern industrialized, capitalist economy and the effects of this new economy spread quickly to the rest of the world • The United States also industrialized and by the late 1800s and early 1900s, was doing so more successfully and more quickly than the nations of Europe • Western industrialization and imperialism were also intimately connected

17. First, industrialization made Western nations, particularly Britain and France, more able to conquer and colonize other parts of the world during the 1800s • Industrialization made European nations richer, it made them more technologically adept, and it boosted the scientific knowledge needed to explore or know better parts of the world that were not yet under Western control • Perhaps most important, industry placed new weaponry in the hands of Westerners: gunboats, artillery, quick-firing and accurate rifles, and machine guns, all of which made Western armies extremely difficult for poorly armed native warriors to resist

18. Second, if industrialization gave Europeans a greater capacity to conquer and colonize, it also gave them a greater variety of motives • Industrialization required ever-greater amounts of raw materials: iron ore, coal, rubber, metals, timber, and chemicals, all of which could be stripped from other parts of the world • The growing importance of steamships made it necessary for Western nations to maintain naval bases and refueling stations around the globe

19. Moreover, as Europe and America produced increasingly large amounts of manufactured goods, they had to have markets overseas to sell them to • All of these needs combined to spur the Western nations’ intense burst of imperial activity during the 1800s, especially the second half

20. Impact on Nonindustrial Nations • Even in non-Western parts of the world that Europe and America did not conquer or colonize, industrialization’s economic clout often had a profound effect • Western businessmen and industrialists struck deals with aristocrats or the political elite to exploit local resources • These bargains typically involved the large-scale growth or extraction of a small set of crops or natural resources

21. This practice, known as monoculture, generally damages the environment and retards the development of a healthy, diverse economy (in the tropics, the derogatory slang term for a country with this type of economy is “banana republic”) • It also exploits these countries’ native workers: Western payments or investments end up in the pockets of a small number of local aristocrats or politicians, rather than adding to the national well-being • Yet in the long term, most non-Western parts of the world would come to imitate industrial methods of economic production

22. Industrialization and the Atlantic Slave Trade • One other worldwide effect of early industrialization concerned the Atlantic slave trade • The 1793 invention of the cotton gin by American engineer Eli Whitney transformed the international textile trade • One of the factors that limited the ability of steam-driven machines such as the spinning jenny, the flying shuttle, and the power loom to speed up the textile industry was the fact that cleaning raw cotton balls by hand took a long time

23. The cotton gin changed this, enabling enough clean cotton to be produced to keep pace with the machines that turned clean cotton into thread and the thread into whole cloth • The effect of this change was to give a phenomenal boost to the English textile trade’s demand for raw cotton • Although one major source for cotton was Egypt, a chief supplier was the American South, where cotton was grown and harvested primarily by slaves • Most economic historians argue that, before the 1790s, slavery was becoming less profitable in the American South, and might have therefore have died away relatively quickly and easily

24. The advent of the cotton gin, however, as well as England’s increased demand for cotton, made slave-based cotton production extremely profitable • Therefore, slavery in America was prolonged for decades – necessitating civil war to end it – largely because of the industrialization of the textile trade

25. Women And Industrialization • Before the Industrial Revolution, European women of the lower (and sometimes middle) class worked alongside men on the farm or in the family business, so motherhood and homemaking were not full-time pursuits • The Industrial Revolution altered that reality • It turned the husband into the wage earner outside the home and the wife the homemaker • Thus, the Industrial Revolution, gradually created a sharply defined domestic sphere for women, separate from the workplace, which, by the mid-to-late 1800s, would be dominated by men

26. However, early in the nineteenth century, for couples of the lower classes, often both husband and wife (and increasingly, their children) were forced to work in factories to make ends meet • Before 1870, women made up 50 percent of the workforce in textile factories • Ironically, this meant that lower-class women had more opportunity to work than those of the middle and upper classes • In this case, however, “opportunity” was not a matter of privilege or right, but economic necessity • Also, women who did work were paid a good deal less than men

27. Throughout the nineteenth century, most working women remained in traditional types of female labor, that is, as domestic servants or agricultural workers • Most working women were single, not married • Some single women, desperate for jobs, left Europe for Australia or the United States • By the end of the nineteenth century, large numbers of poor women were working outside the home, in factories, mines, markets, and on farms • Increasingly, though, as salaries improved in heavy industry (making these jobs more desirable to men) and laws restricted the number of hours women were allowed to work, more women in working-class families stayed at home

28. Fewer middle-class (and almost no upper class) women worked • In such a way, a new social pattern emerged that separated work from the home • Men were the primary breadwinners, whereas women became the homemakers who dabbled in low-paying, part-time work to supplement income • Families started to have fewer children, partly as a result of the adoption of child-labor laws and a decline in infant mortality rates • Children were beginning to be perceived more as dependents than family wage earners

29. Around the turn of the century, a mass consumer society began to emerge along with a higher standard of living • Such consumer products as sewing machines, clocks, and cast-iron stoves focused families on obtaining higher levels of consumption and freed up time for women of all classes to pursue activities outside the home

30. Britain was the first country to industrialize • Near the end of the 1800s, Germany and the United States began to surpass Britain • In general, northern Europe and the United States industrialized fairly quickly • However, southern and eastern Europe tended to lag behind • Even more backward was Russia, which remained overwhelmingly agricultural – and, until 1861, economically stagnant, thanks to its reliance on the old-fashioned practice of serfdom • Southeastern Europe and the Balkans remained the most economically outdated region on the continent