Ch. 7; Sec. 3 New Ideas in a New Society

1. Ch. 7; Sec. 3New Ideas in a New Society MainIdea: The Industrial Revolution led to economic, social, and political reforms New Ideas about Economics Competing Economic Views Effects on Society

2. I. New Ideas about Economics Laissez- faire =the economic policy of letting owners of industry set working conditions without government interference Supporters of laissez-faire: Adam Smith – The Wealth of Nations (1776) • Economy works best with no outside interference • Automatically adjusts itself (“Invisible Hand of the Market”)

3. Supporters of Capitalism (cont.) Thomas Malthus – An Essay on the Principle of Population (1798) • Population increases exponentially while the food supply grows arithmetically • Even if govt. did try to help the poor, it would not solve the problem of the “surplus population ” (the amount of people who exceeded the food supply) • Dickens’ character of Scrooge (A Christmas Carol) based on Malthus

4. Supporters of Capitalism (cont.) David Ricardo – Principles of Political Economy and Taxation (1817) • A permanent lower class would always be poor • The “Iron Law of Wages”: The Economy is a constant cycle of good times/bad times • Good times high wages  more population Next generation • Bad times  low wages  less population

5. II. Competing Economic Views Jeremy Bentham = theory of utilitarianism • All actions, ideas, or institutions should be judged according to their “usefulness” • Job of govt. is to “promote the greatest good for the greatest number” • Govt. needed to intervene only to create better conditions for the majority of people • Distribute wealth more equally • Reform the legal & prison systems • Fund public education for all citizens

6. Critics (cont.) Utopian Socialism • Communities established to encourage communal cooperation (socialism), rather than individual competition (capitalism) • Robert Owen founded 2 such communities in his native Scotland & later at New Harmony, Indiana in the U.S.

7. Critics (cont.) Socialism = type of economic system in which the factors of production are owned by the public and operated for the welfare of all • Governments needed to actively plan the economy rather than allowing free-market capitalism do it by supply/demand • Public ownership would • help abolish poverty • promote social/economic equality

8. Critics (cont.) Karl Marx and Communism -The Communist Manifesto , 1848 • History of world has always been a class struggle (haves vs. “have nots”) • In industrial times it was the owners & bourgeoisie(upper middle class) vs. the workers (proletariats) • Workers sweated while the owners enjoyed the profits of the workers’ labor • Workers would eventually unite and overthrow the owners • Workers would then produce the goods society needed • Wealth would be evenly distributed so no more class struggle; at this point, government would fade away

9. III. Effects on Society 20th Century witnessed several Communist revolutions inspired by Marx’s theories: • Russian Revolution (1917) – V.I. Lenin • Chinese Revolution (1930s) – Mao Zedong • Vietnam (1950s) – Ho Chi Minh • Cuba (1950s) – Fidel Castro

10. Other Reform Movements Abolition of slavery • Wm. Wilberforce led fight in Parliament to end slavery in Britain (1833) • The U.S. abolishes it with the 13th amendment to the Constitution (1865) Women’s Rights • Women workers formed their own unions • Intl. Council for Women established in 1888 Other Areas of Reform in mid-1800s • Public education (Horace Mann in U.S.) • Prison reform to “rehabilitate”, not just punish

11. Section 3 summary OVERVIEW: As industrialization grew, a small percentage of the population became extremely wealthy as a result. While the standard of living was growing for almost everyone, still there was a tremendous inequality of wealth. This led to growing concerns about the nature of capitalism and its glaring weakness ---equal distribution of wealth for its citizens. Thinkers divided over the question of was unchecked industrial growth the best type of economy, or could there be better ways to distribute wealth more evenly throughout society.

12. Anti laissez-faire capitalism Captains of Industry or Robber Barons? Pro laissez-faire capitalism Adam Smith – The Wealth of Nations; economy works best with no govt. interference (“Invisible Hand of the Market”) Thomas Malthus – “surplus population”, population grows much faster than food supply; will always have poor. No reason to help working class David Ricardo – Iron Law of Wages; natural business cycle is boom/bust pattern; “good times” will always lead to “bad times” & vice -versa Jeremy Bentham – utilitarianism; the govt. should intervene IF it would produce “the greatest good for the greatest number”; encouraged govt. laws to reform business Robert Owen-social Utopianism; est. model community in New Harmony, IN where workers shared equally Karl Marx – father of communism

13. The Three Economic Systems • Capitalism – the means of production (businesses) in hands of private citizens; demand/market economy • Laissez-faire: no govt. intervention • Reform capitalism: govt. intervenes to insure fair business practices • Socialism - the means of production (businesses) shared by private & govt. ownership; mixed economy • Communism - the means of production (businesses) in public (govt.) hands; command/planned economy