1. The Benefits of Capitalism
Top ten things you should know

2. 1
Capitalism was a response to the high level of government controls in mercantilist economy
Mercantilist focus was on gaining wealth (gold) for the aristocracy
seen as power (can afford to wage a war)

3. Social and political environment2
Social and political environment
Enlightenment = people are questioning the role of government in the economy
Protestant revolution = God is okay with you making money and thinking for yourself
Early years of Industrial Revolution = people are making amazing inventions that are changing the marketplace

4. The Industrial Revolution
“The most far-reaching, influential transformation of human culture since the advent of agriculture eight or ten thousand years ago…The consequences of this revolution would change irrevocably human labor, consumption, family structure, social structure, and even the very soul and thoughts of the individual.”
Richard Hooker

5. 3 Adam Smith Wrote “The Wealth of Nations” Argued that
strength of nations rested on goods produced, not gold
laws and restrictions hindered, rather than promoted economic growth

6. Smith’s argument for laissez-faire4
Smith’s argument for laissez-faire
government should interfere only to
protect the country against foreign enemies
ensure competition
maintain law and order
protect individual property rights
otherwise let people compete with each other for private property (land, capital)

7. Without government controls, how will the economy stay organized?5
Without government controls, how will the economy stay organized?
Smith’s response
Individuals are selfish and want best for themselves
When people seek out own self-interest, they meet needs of others
= economy will organize itself (invisible hand)

8. Key characteristics of a market economy6
Key characteristics of a market economy
Self-reliance, initiative, hard work
Necessity of private property
Profit motive

9. More key characteristics of a market economy7
More key characteristics of a market economy
Price system (supply and demand)
Competition
Inequalities of wealth

10. 8
Advantages
Market gives producers an incentive to produce goods the public wants
Market provides an incentive to acquire useful skills
A wide variety of goods and services is available
There are incentives to use resources efficiently
Competition encourages good quality at lower prices
Productivity is rewarded by higher profits
Fosters self-reliance
Possible to become very wealthy

11. Examples of why it’s awesome9
Examples of why it’s awesome
Growth of middle class and “nouveau riche” during Industrial Revolution
The rapid industrialization around the world promoted by ability to profit from innovations
The growth of the US and other consumerist countries compared to those nations with high levels of socialism (like North Korea)
The current technological revolution has been spurred by the benefits of competition

12. Extreme views – Social Darwinism10
Extreme views – Social Darwinism
Malthus – do not help the poor (The Theory on Population)
Ricardo – do not have minimum wage (Iron Law of Wages)

14. 2006