1. Industrial Revolution
New Ways of Thinking
Chapter 5, Section 4

2. Thomas Malthus British economist
Explored effects of population explosion
Wrote Essay on the Principle of Population
Concluded that population increasing faster than food supply

3. Laissez-Faire Economics
Economic philosophers believed the government should not interfere with the free operation of the economy
This is called Laissez-Faire
“Government – stay out of the economy”
Let the market correct itself without passing laws or regulations

4. Adam Smith Wrote The Wealth of Nations
Free, unregulated market would help everyone, not only the poor
Free market would produce more goods at lower prices because of competition among sellers
Competition brings prices down
Prices would be more affordable to many
Growing economy would encourage capitalists to re-invest profits into new businesses

5. Capitalism Economic system
Factors of production (land, labor, and capital) are privately owned
Money is invested to make a profit
The sole goal of capitalism is to make more MONEY without due regard for the social effects on people and society
(contrast this later with communism)

6. Thomas Malthus (economist)
Malthus predicted that population would outpace the food supply
Without wars, hunger and diseases to kill off the extra people, most were destined to be poor and miserable
An increase in population would cause greater suffering on the existing poor
Malthus urged families to have fewer children

7. Thomas Malthus
Malthus discouraged vaccinations (to promote disease and death)
If fewer people were vaccinated, more people would catch deadly diseases leading to a natural decrease in the world’s population
However, Malthus was proven wrong – population grew but the food supply grew faster
Living conditions did improve – people eventually had fewer children in western countries

8. Ricardo Principles of Political Economy and Taxation (1817)
Believed a permanent underclass would always be poor
In a market system, if there are many workers and abundant resources, then labor and resources are cheap (too many workers drives DOWN the wages)
If there are few workers and scarce resources, then goods they are expensive (insufficient workers and scarce resources drives UP the price of goods)
Ricardo believed that wages would be forced down as population increased

9. Ricardo Ricardo argued the Iron Law of Wages
Under the Iron Law of Wages, Ricardo argued that increases in a worker’s wages are futile (useless)
Why?
Because an increase in wages covered the necessities only
When wages were high, families had more children instead of raising the family’s current standard of living

10. Ricardo’s other beliefs
Opposed government help for the poor
Best cure for poverty is not government help but the free market economy (no restrictions)

11. Working People Produce Fewer Children
Iron Law of Wages
Wages Raised
More Children
Increased Workers
Wages Fall
Working People Produce Fewer Children

12. Utilitarianism Jeremy Bentham (English philosopher)
People should judge ideas, institutions, and actions on the basis of their utility, or usefulness
Government should try to promote the greatest good for the greatest number of people
Government policies was only useful if it promoted this goal
People should be free to pursue his or her own advantages w/o government interference

13. Jeremy Bentham (stuffed in a museum)

14. John Stuart Mill Led utilitarian movement (1800s)
Mill questioned unregulated capitalism
He believed it was wrong that workers should lead deprived lives that bordered on starvation
Mill wanted to help ordinary working people with policies that would lead to a more equal division of profits
He favored a cooperative system of agriculture
Mill favored increasing women’s rights (right to vote)

15. John Stuart Mill
Called on government to eliminate great differences in wealth
He pushed for reforms in legal and prison systems
Mill supported reforms in education

16. Socialists
Socialists condemned the economic evils of industrial capitalism
Capitalism created a gap between rich and poor
The rich became richer while the poor industrial working class became even poorer
Socialists focused on promoting collective equality for all social groups
Radical solution = socialism

17. Socialism
Under socialism, the people collectively, not private individuals, own and operate the means of production
Socialism believes in the basic goodness of human nature and a concern for social justice for all

18. Means of Production (land, labor, and capital)
Farms
Factories
Railways
Other large businesses that produced and distributed goods

19. Utopia
Utopia is a name for an ideal community, taken from the title of a book written in 1516 by Sir Thomas More describing a fictional island in the Atlantic Ocean, possessing a seemingly perfect socio-politico-legal system. The term has been used to describe both intentional communities that attempted to create an ideal society, and fictional societies portrayed in literature.
A perfect utopian society does not exist anywhere.

20. Utopians Early socialists were called Utopians
Utopians attempted to create an ideal, equal society
Work was shared
All property owned in common
No difference between rich and poor
Fighting between people would disappear

21. Robert Owen (“Owenism”)
Owen established a model utopian community in New Lanark, Scotland
Refused to use child labor
Promoted laws to restrict child labor
Encouraged organization of labor unions

22. Karl Marx German philosopher
He rejected utopianism as unrealistic goal
Teamed with Friedrich Engel to author The Communist Manifesto (1848) – bible of communism

23. Communism Communism is an extreme form of socialism
Social classes would struggle and fight to control the means of production
The end of the fighting would leads to the creation of a classless society (no upper, middle or lower class)
All means of production (land, labor, capital) would be owned by the community, by the people – equally.

24. Marxism
History has always been about economic class struggle (between the “haves” and “have-nots”)
The “haves” always owned means of production and controlled societal wealth
“Haves” in society were the bourgeoisie (middle class)
“Have-nots” were the proletariats (working class)

25. Marxism
Class struggle would occur between the bourgeoisie (wealthy) against the proletariat (workers)
The proletariats (workers) would rise up and seize power and the means of production from the bourgeoisie
Proletariats would then set up a classless, communist society (all people would be equal and not belong to any economic class)
Class distinctions (upper, middle, lower) would disappear forever
Wealth and power to be equally shared
Marx hated capitalism believing it created wealth and power for a few people

26. The Communist Manifesto
“Workers of all countries, unite!”
(rallying cry/slogan and last words of The Communist Manifesto)

27. Social Democracy
Germany adopted Marxist beliefs to create a social democracy
Social democracy = a gradual transition from capitalism to socialism instead of a sudden (communism) violent overthrow of capitalism
Russian Revolution of 1917 ushered in communism, the more radical form of socialism
Marxism has been adopted in various countries on different continents

28. Predictions of Marx Failed
Marx predicted worldwide worker revolutions to end class struggles
But nationalism won out over working-class loyalty
People felt stronger ties to their own country than to an international communist movement
Few communist governments by end of 20th century
Nearly every economy included elements of free-market capitalism (even former communist countries)

29. Powerpoint Questions (22 points)
1. What is the economic theory that believes the government should NOT interfere in the economy?
2. According to Malthus, what were the natural methods to control population growth?
3. What did Malthus predict about food and population?
4. Why were wage increases useless according to Ricardo?
5. All laws or actions should be judged by their utility or usefulness to society. This is called _________ and was promoted by ___________. (2 points)

30. Powerpoint Questions
6. Who built a model utopian community in New Lanark, Scotland?
7. What is socialism?
8. Identify the means of production (3 points)
9. Who teamed together to author the Communist Manifesto (1848)? (2 points)
10. What is communism?
11. The have-nots in communism were the ____, or working class.

31. Powerpoint Questions
12. In a communist revolution, workers seize control of the ____________ and they set up a ________ society. (2 points)
13. How is a social democracy different from communism?
14. What was the slogan of Marx and Engels?
15. According to Adam Smith, how does the free market lower prices for everyone?

32. The End