The Growth of Capitalism

1. The Growth of Capitalism • Laissez-faire: Economic policy of letting owners of industry and business operate without interference from government. (“let do”) • Based in the ideas of French Economic philosophers of the Enlightenment. • Argued against tariffs (taxes) on foreign goods. • Government regulations interfered with wealth production.

2. Adam Smith: wrote The Wealth of Nations about a free economy (free markets) and the 3 laws of economics. • Law of Self-Interest- People work for their own good. • Law of Competition- forces people to make a better product or someone else will. • Law of Supply and Demand- enough goods would be produced at the lowest possible price to meet demand.

3. Capitalism: An economic theory based on the beliefs laissez-faire economics, Adam Smith and other economists. • Capitalism: An economic system in which the factors of production are privately owned and money is invested to make a profit. • Thomas Malthus- population grows faster than food supply. Without wars/epidemics to kill of extra people, most were destined to be poor. • Laissez-faire thinkers opposed government efforts to help workers such as the minimum wage/improved (regulated) working conditions. They felt such regulations would lower profits and interfere with the production of wealth.

4. Socialism: An economic system developed by individuals who thought the government should intervene to improve people’s lives. • Jeremy Benthem: introduced the idea of Utilitarianism in the late 1700s. • Utilitarianism: People should judge ideas, institutions and actions based on their utility/usefulness. • Government should promote the greatest good for the greatest number of people. • Government should only pursue policies that promoted this goal. • In general, an individual should be free to pursue his/her own advantage without interference from the state.

5. John Stuart Mill: felt that it was wrong that workers should lead such awful lives. • Wanted government policies that would lead to a more equal division in profits. • Wanted a cooperative system of agriculture. • Give women the right to vote. • Governments should adopt policies to do away with great differences in wealth.

6. Socialism: an economic system where the factors of production are owned by the public (the government) and operate for the good of all. • The government should plan the economy. • Government control of factories, mines, railroads and other key industries would end poverty and promote equality. • Public (government) ownership would help workers who were at the mercy of their employers. • On way to change society was by expanding the right to vote (to the lower classes).

7. Communism- a radical form of Socialism developed by Karl Marx and Friedrich Engles. Often Called Marxism. • The Communist Manifesto: 23 page pamphlet explaining Marxism. 1848 • Human society has always been divided into Haves and Have Nots who are at war. • “Haves”= employers and owners called the bourgeoisie. • “Have Nots”=the workers or the proletariat. • The wealthy controlled all the means of production while the poor labored under terrible conditions.

8. Marx believed that Capitalism would soon destroy itself. • Factories would drive small artisans out of business leaving just a few in control of all the wealth. • The proletariat would revolt and seize control of the factories and mills and produce what society needed. • Workers would share the profits and bring economic equality for all people. • Workers would control the government in a “dictatorship of the proletariat.” • Eventually, the state would disappear and a classless society would emerge.

9. Pure Communism: complete socialism in which the means of production – all land, mines, factories, railroads and businesses would be owned by the people. • No personal property would be needed or allowed- all goods and services would be shared equally. • Produced some revolts in 1848-1849 but they fizzled out. • 1900s- Revolutions in Russia (Lenin), China (Mao Zedong) and Cuba (Castro). • Pure communism never emerged in these revolutions only dictatorship.

10. Why didn’t workers revolt worldwide as Marx had expected? • Marx and Engles believed that ONLY economic forces dominated a society. • Failed to account for the influences of religion, nationalism, ethnic loyalties and the desire for freedom. • The gap between the rich and poor widened but not in the way Marx expected because conditions for the poor improved because of the development of unions and government reforms.

11. Labor Unions and Reform: Working people grew tired of long hours, dangerous working conditions and low wages. By the 1800s, they became more interested in politics and reform. • Unions: Formed to press for reform. Workers joined together in voluntary labor associations (groups). • Unions spoke for all workers in a particular trade. • Collective bargaining: negotiations between workers (represented by the unions) and employers. • Unions bargained for better working conditions and higher pay. • Strike: a collective refusal to work if owners refused union demands. • Skilled workers led the way because they could not easily be replaced. • Governments in both the US and Britain passed laws outlawing unions. • Workers joined unions anyway and they eventually became legal.

12. Other Reforms. • Governments began to investigate child labor and working conditions. • Factory Act (England) 1833- made it illegal to hire children under 9 years old. Kids 9-12 couldn’t work more than 8 hours. Kids 13-17 couldn’t work more than 12 hours. • 1842- Mines Act- prevented women and children from working underground. • Unions eventually joined the fights to ban child labor completely since it lowered wages for all workers.