1. Ch. 7; Sec. 3 New Ideas in a New Society
Main Idea:
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. Captains of Industry or Robber Barons?
Anti laissez-faire capitalism
Pro laissez-faire capitalism
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
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

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