Transforming Economies: Capitalism, Socialism, and the Rise of New Business Leaders

1. Chapter 7Section III New Ideas in a New Society

2. New Ideas about Economics • Capitalism and Competition • Old mercantile system- government restricted trade to protect their own industries from foreign competition • Late 1700’s people began practicing Laissez-faire: Government does not interfere in business • French term for “free to do”

3. Adam Smith • Leading advocate for laissez-faire • 1776 published The Wealth of Nations • Analyzed the definition and creation of wealth • Smith believed a free market benefited all • Britain slowly agreed and by late 1840’s most of all trade restrictions were removed

4. Thomas Malthus • Concerned about population growth caused by the development of industries • Theory: population would always grow faster than food production • Poverty and misery would never go away • Only way to control population • War, natural disaster, disease • None of the control methods occurred for Thomas so idea lost its power

5. New roles for business leaders • Prior to industrial revolution, land owners controlled wealth • Feudal system • Entrepreneur: Someone who starts a new business • Financers, bankers, investors

6. Entrepreneurs • Andrew Carnegie • Born in Scotland and moved to United States at age 12 • Dad was a weaver and ran out of business because of textile industry • True “rag to riches” story • Carnegie became largest steel producing company in the United States • Cornelius Vanderbilt: Railroads • John D. Rockefeller: Oil

7. Competing economic views • Robert Owen • Socialism: For the good of ALL society of the government, instead of individuals, should own property and control industries • Big contract to Capitalism: Economic system in which most businesses are privately owned • Owen built a mill in New Lanark Scotland • Provided excellent working conditions • Nonprofit stores for town to shop at • Decent housing and sick pay for workers • Free education • Enforced curfews and bathing requirements

8. Robert Owen • Brough New Lanark ideas to United States in 1825 • Founded New Harmony in Indiana • Was to be a Utopia • A society where there was no evil or corruption • Let to social democracy • Move from capitalism by democratic means

9. Karl Marx • Radical view of socialism • More capitalism grew, more workers would go into poverty • In time workers would rebel and seize means of production • Believed revolution was inevitable and socialism would follow

10. 1867 Mark produced a series called Das Kapital • 3 part series that argued the evils of capitalism • Capitalism disrupts the relationships between laborer and profit • Should be a direct connection between ones work and ones pay • Workers would have to control government because the wealthy would not give up riches peacefully • Government control economy = command economy • Capitalism: Economic and political system in which government owns the means of production and controls economic planning; a socialist economic system without social classes.

11. Effects on Society • Effects on home life • In the cottage industry women worked along side of husband • Industry the women stay at home and took care of home • Created “separate spheres” • Business world was a world without morals • Woman's job to provide moral support at home

12. Effects on countries • Industrialization brought power and wealth • Mass production increased ability to build ships and manufacture weapons

13. Long Term effects on societies • Increase in wealth • Standard of living: A measure of the quality of life • Improved • Middle class was introduced to leisure • More free time and money