2. Laissez-Faire Economics
During the 18th Century, industrialized nations began to experience a widening gap between the rich and the poor, despite the development of a middle class
Business leaders, in particular, wanted to be able to make as much money as possible and not have the government interfere with their company practices
Laissez faire—Economic policy of government not interfering with businesses – prominent during the Industrial Revolution (especially the U.S.)
Originates with Enlightenment economic philosophers – leadership style where leader allows members to make decisions while he oversees from a distance
Based on the criticisms that Enlightenment thinkers had towards tariffs the government placed on certain goods – hinders businesses’ ability to make as much money/profit as possible
Originates from the French saying of “let do/let people do as they please”
Adam Smith—A Scottish professor- defended the idea of free markets in his book The Wealth of Nations (1776)
Believed that a nation’s wealth should be judged by the total of its production and commerce – Gross Domestic Product (GDP)
Believed economic liberty = economic progress
Economic natural laws—self-interest, competition, supply and demand

3. Adam Smith

4. The Economists of Capitalism
Smith’s ideas were supported by other British Economists like Thomas Malthus and David Ricardo
They Believed that natural laws governed economic life
Their ideas of natural order in economics became the foundation of laissez faire capitalism
This idea become Basis of Capitalism—system of privately owned businesses that seek to make profits
In An Essay on the Principle of Population (1798), Malthus stated populations grow faster than food supply
Wars and epidemics were natural occurrences that killed off extra people that were likely to be poor and miserable
Seemed to be true during the 1840s
In Principles of Political Economy and Taxation (1817), Ricardo envisions a permanent, poor underclass providing cheap labor in a market system
As long as there is a poor underclass providing labor, the system is profitable
If there is no longer cheap labor available, its sign the system is no longer healthy

5. The Rise of Socialism
In contrast to laissez-faire economics, other theorists believed government should interfere in business practices
English philosopher Jeremy Bentham’s modified Smith’s ideas and introduced utilitarianism—theory where we judge things by their usefulness
Stated government should promote the greater good for the people
Also believed people should be free to pursue his/her own advantage without interference from the government
Philosopher and Economist John Stuart Mill led the utilitarian movement in the 1800s
Questioned unregulated capitalism
Believed it was wrong for workers to lead deprived lives that sometimes bordered on starvation
Wanted policies that divided profits more equally among people
Also called for reforms in suffrage, which he believed should extend to women

6. Rise of Socialism (Cont.)
Other reformers took a more active approach in addressing the inconsistencies of capitalism
Robert Owen – British factory owner– improved working conditions for his workers
Instituted 8 hour work day; children under 10 couldn’t work
Offered free schooling near factory grounds
Built low-rent housing for workers and their families
In 1824, Owen founded a utopian community in New Harmony, Indiana
It lasted only 3 years, but Owen funded the community with a more equitable mindset
Bentham, Mill and Owen’s beliefs become basis of Socialism— system where factors of production owned by and operated for the people
Socialists think government control can end poverty, bring equality
Socialism grew out of optimistic view of human nature
Believed that Government should plan the economy, not leave it up to free market system
Government Controls key industries like mines, railroads, etc.
People won’t be at the mercy of their employers

7. Marxism: Radical Socialism
Some reformers wanted a more radical kind of socialism that benefited the working classes specifically to be put into effect
Karl Marx—German journalist proposes radical socialism - Marxism
He went to school to study philosophy but turned to Journalism and Economics
Later he met his good friend, Friedrich Engels, who was a wealthy because Engels father owned a Manchester textile mill
After observing the conditions of industrial cities, Marx and Engels coauthored the Communist Manifesto
In the Manifesto, Marx and Engels stated society was divided into warring classes
“haves,” the employers - the bourgeoisie
“have-nots,” the workers - the proletariat
Marx, Engels believed that the Industrial Revolution enriched only the wealthy and impoverished the poor people even more
This reality could only cause tensions that would result in a radical revolution

8. The Future According to Marx
Marx believes that capitalism, which was produced during the Industrial Revolution, would eventually destroy itself
Inequality would cause workers to revolt, seize factories and mills
Factories would drive small time artisans/businesses out of work – leave a small amount of manufacturers with all the wealth
After the revolts, the workers would establish a dictatorship of the proletariat
The dictatorship would take away land, profits, etc and divide it amongst the people – nobody owns anything yet everybody has something
Leads to Communism—Society where people share the means of production – absence of social class and money
After years of implementation, classes would phase out of existence and the people would rule themselves
Though there were uprisings in 1840s based on communist ideas in Europe, they were put down by European leaders
Marx’s ideas later take root during the 1900s in Russia, China, Cuba

9. Test Review
Students will have 10 minutes to review (turn in review if complete)
Scantron information:
Name:
Date: 4/10/17
Period: 5th
Subject: WH
Test no: Ch. 24 – 25
Turn in Test copy, scantron when finished with test
Get Map and Articles from the podium and complete them before the bell rings