1. The Western World Turns Upside Down
The Social Changes of the Industrial Revolution

2. Adam Smith… The Wealth of Nations Free Market is best economy
Buyers and sellers work on their own interest
No government interference
Businesses want to produce goods as cheaply as possible
Consumer wants best good at lowest price
Efficient producers will make the most profit by meeting in the middle and benefiting everyone

3. Capitalism and Adam Smith
Capitalist Ideas-
Rejects mercantilism
Supports “laissez-faire” economy.
Literally means “Let them do”, interpreted as “Hands off”
The “invisible hand” of the marketplace will make things work out correctly

4. Smith’s Opposition Thomas Malthus- David Ricardo-
Increase in population would cause:
Poverty
Famine
Misery
War is necessary to kill off the extra people
David Ricardo-
Established “Iron Law of Wages”-
Rapid population growth means:
Fierce competition
Lower wages
Higher unemployment
Increased poverty

5. Opposition…
Utilitarianism-Jeremy Bentham. Government should promote the greatest happiness for greatest # of citizens.
John Stuart Mill- equal distribution of wealth by government. Done through imposition of income tax.

6. Opposition through Socialism
Socialism- means of production should be owned and controlled by society, either directly or through the government.
Karl Marx-established a scientific base for socialism.
Marx- economy is major force for change
Economic status decides social status
Ruling class controls production
“Class Struggles” happen to decide who controls the production

7. Marx… Separated society into 2 classes-
Proletariat-make goods, productive class
Bourgeoisie- middle class and owners of production.
Solution for equality- Democratic Socialism (John Maynard Keynes)
Public control of some means
Respect for individual rights
Use democratic means to implement socialist policy in a capitalist system (The people rule!)

8. 3 Economic Systems of the IR
LOW
Limited by laws
To prevent abuses
High
Individual
Liberty
Government
Some private,
Some govt.
Private
Ownership of
Business
Wages, hours controlled by government
Laws to limit hours, protect wages
No protection of worker hours, wages
Social
Aspects
In theory, workers;
In practice, govt.
Some market demand,
Some govt. control
Market Demands
Determiner of
Production
Socialism/
Communism
Democratic
Socialism
Capitalism
(Laissez-Faire)