Ch. 7; Sec. 3Ch. 7; Sec. 3New Ideas in a New SocietyNew Ideas in a New Society

MainMain IdeaIdea: :

The Industrial Revolution led to The Industrial Revolution led to economic, social, and political economic, social, and political reformsreforms► New Ideas about EconomicsNew Ideas about Economics►Competing Economic ViewsCompeting Economic Views►Effects on SocietyEffects on Society

I. New Ideas about I. New Ideas about EconomicsEconomics

Laissez- faire Laissez- faire == the economic policy of the economic policy of letting owners of industry set working letting owners of industry set working conditions without government conditions without government interferenceinterference

Supporters of laissez-faire:Supporters of laissez-faire:

Adam Smith – Adam Smith – The Wealth of Nations The Wealth of Nations (1776)(1776)►Economy works best with no outside Economy works best with no outside

interferenceinterference►Automatically adjusts itself (“Invisible Automatically adjusts itself (“Invisible

Hand of the Market”)Hand of the Market”)

Supporters of Capitalism Supporters of Capitalism (cont.)(cont.)

Thomas Malthus – Thomas Malthus – An Essay on the Principle of An Essay on the Principle of Population Population (1798)(1798)

► Population increases Population increases exponentiallyexponentially while while the food supply grows the food supply grows arithmeticallyarithmetically

►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

Supporters of Capitalism Supporters of Capitalism (cont.)(cont.)

David Ricardo – David Ricardo – Principles of Political Principles of Political Economy and Taxation Economy and Taxation (1817)(1817)

► A permanent lower class would always A permanent lower class would always be poorbe poor

►The The “Iron Law of Wages”: “Iron Law of Wages”: The Economy is The Economy is a constant cycle of good times/bad timesa constant cycle of good times/bad times Good times Good times high wages high wages more population more population

Next generationNext generation Bad times Bad times low wages low wages less population less population

II. Competing Economic II. Competing Economic ViewsViews

Jeremy Bentham = theory of Jeremy Bentham = theory of utilitarianismutilitarianism

► All actions, ideas, or institutions should be All actions, ideas, or institutions should be judged according to their “usefulness”judged according to their “usefulness”

► Job of govt. is to “Job of govt. is to “promote the greatest promote the greatest good for the greatest number”good for the greatest number”

Govt. needed to intervene only to create better Govt. needed to intervene only to create better conditions for the majority of peopleconditions for the majority of people

1.1. Distribute wealth more equallyDistribute wealth more equally2.2. Reform the legal & prison systemsReform the legal & prison systems3.3. Fund public education for all citizensFund public education for all citizens

Critics (cont.)Critics (cont.)Utopian SocialismUtopian Socialism►Communities established to encourage Communities established to encourage

communal cooperation (socialism)communal cooperation (socialism), , rather than rather than individual competition individual competition (capitalism)(capitalism)

►Robert Owen Robert Owen founded 2 such founded 2 such communities in his native Scotland & communities in his native Scotland & later at later at New Harmony, IndianaNew Harmony, Indiana in the in the U.S.U.S.

Critics (cont.)Critics (cont.)Socialism = type of economic system in Socialism = type of economic system in

which the factors of production are which the factors of production are owned by the public and operated for owned by the public and operated for the welfare of allthe welfare of all

►Governments needed to actively Governments needed to actively planplan the economy rather than allowing free-the economy rather than allowing free-market capitalism do it by market capitalism do it by supply/demandsupply/demand

►PublicPublic ownership would ownership would help abolish povertyhelp abolish poverty promote social/economic equalitypromote social/economic equality

Critics (cont.)Critics (cont.)

Karl Marx and Communism -Karl Marx and Communism -The Communist The Communist Manifesto , 1848Manifesto , 1848

► History of world has always been a class struggle History of world has always been a class struggle ((haveshaves vs. “ vs. “have nots”have nots”))

► In industrial times it was the owners & In industrial times it was the owners & bourgeoisiebourgeoisie (upper middle class) vs. the workers (upper middle class) vs. the workers ((proletariats)proletariats) Workers sweated while the owners enjoyed the Workers sweated while the owners enjoyed the

profits of the workers’ laborprofits of the workers’ labor► Workers would eventually unite and overthrow the Workers would eventually unite and overthrow the

ownersowners Workers would then produce the goods society Workers would then produce the goods society

neededneeded Wealth would be evenly distributed so no more class Wealth would be evenly distributed so no more class

struggle; at this point, government would fade awaystruggle; at this point, government would fade away

III. Effects on SocietyIII. Effects on Society2020thth Century witnessed several Century witnessed several

Communist revolutions inspired by Communist revolutions inspired by Marx’s theories:Marx’s theories: Russian Revolution (1917) – V.I. LeninRussian Revolution (1917) – V.I. Lenin

Chinese Revolution (1930s) – Mao ZedongChinese Revolution (1930s) – Mao Zedong

Vietnam (1950s) – Ho Chi MinhVietnam (1950s) – Ho Chi Minh

Cuba (1950s) – Fidel CastroCuba (1950s) – Fidel Castro

Other Reform MovementsOther Reform MovementsAbolition of slaveryAbolition of slavery► Wm. Wilberforce led fight in Parliament to end Wm. Wilberforce led fight in Parliament to end

slavery in Britain (1833)slavery in Britain (1833)► The U.S. abolishes it with the 13The U.S. abolishes it with the 13thth amendment amendment

to the Constitution (1865)to the Constitution (1865)

Women’s RightsWomen’s Rights► Women workers formed their own unionsWomen workers formed their own unions► Intl. Council for Women established in 1888Intl. Council for Women established in 1888

Other Areas of Reform in mid-1800sOther Areas of Reform in mid-1800s► Public education (Horace Mann in U.S.)Public education (Horace Mann in U.S.)► Prison reform to “rehabilitate”, not just punishPrison reform to “rehabilitate”, not just punish

Section 3 summarySection 3 summary

OVERVIEW:OVERVIEW:As industrialization grew, a small percentage of As industrialization grew, a small percentage of

the population became extremely wealthy as the population became extremely wealthy as a result. While the standard of living was a result. While the standard of living was growing for almost everyone, still there was a growing for almost everyone, still there was a tremendous inequality of wealth. This led to tremendous inequality of wealth. This led to growing concerns about the nature of growing concerns about the nature of capitalism and its glaring weakness ---equal capitalism and its glaring weakness ---equal distribution of wealth for its citizens. Thinkers distribution of wealth for its citizens. Thinkers divided over the question of was unchecked divided over the question of was unchecked industrial growth the best type of economy, or industrial growth the best type of economy, or could there be better ways to distribute could there be better ways to distribute wealth more evenly throughout society.wealth more evenly throughout society.

Captains of Industry Captains of Industry or or Robber Robber BaronsBarons??

Pro laissez-faire capitalismPro laissez-faire capitalism Anti laissez-faire capitalismAnti laissez-faire capitalism

► Adam Smith Adam Smith – – The Wealth of The Wealth of NationsNations; ; economy works best economy works best with no govt. interference with no govt. interference (“(“Invisible Hand of the Invisible Hand of the MarketMarket””))

► Thomas MalthusThomas Malthus – “ – “surplus surplus populationpopulation”, population ”, population grows much faster than food grows much faster than food supply; will always have poor. supply; will always have poor. No reason to help working No reason to help working classclass

► David RicardoDavid Ricardo – – Iron Law of Iron Law of WagesWages; ; natural business cycle natural business cycle is boom/bust pattern; “good is boom/bust pattern; “good times” will always lead to “bad times” will always lead to “bad times” & vice -versatimes” & vice -versa

► Jeremy Bentham – Jeremy Bentham – utilitarianismutilitarianism; ; the govt. should the govt. should intervene IF it would produce intervene IF it would produce “the greatest good for the “the greatest good for the greatest number”; encouraged greatest number”; encouraged govt. laws to reform businessgovt. laws to reform business

► Robert Owen-Robert Owen- social social UtopianismUtopianism; ; est. model est. model community in New Harmony, IN community in New Harmony, IN where workers shared equallywhere workers shared equally

► Karl Marx – Karl Marx – father of father of communismcommunism

The Three Economic The Three Economic SystemsSystems

1.1. CapitalismCapitalism – the – the means of production means of production (businesses) in hands of private (businesses) in hands of private citizens; demand/market economycitizens; demand/market economy

Laissez-faire: Laissez-faire: nono govt. intervention govt. intervention ReformReform capitalism: govt. intervenes to capitalism: govt. intervenes to

insure fair business practicesinsure fair business practices2.2. Socialism - Socialism - the the means of production means of production

(businesses) shared by private & govt. (businesses) shared by private & govt. ownership; mixed economyownership; mixed economy

3.3. Communism - Communism - the the means of means of production production (businesses) in public (businesses) in public (govt.) hands; command/planned (govt.) hands; command/planned economyeconomy