Economic Theories Economic Theories Thinking Skill: Demonstrate an understanding concepts

Before Industrialization we had… Cottage Industry Cottage Industry How did we see this in yesterday’s activity? How did we see this in yesterday’s activity?

How did nations conduct business prior to industrialization? Mercantilism Mercantilism

Economic Systems Review Mercantilism- a nation’s strength depended on its wealth, restricted trade to acquire wealth Mercantilism- a nation’s strength depended on its wealth, restricted trade to acquire wealth Capitalism-individual ownership of means of production Capitalism-individual ownership of means of production Adam Smith (father of capitalism)Adam Smith (father of capitalism) Arises in opposition to MercantilismArises in opposition to Mercantilism Emerges as main economic pattern in Western WorldEmerges as main economic pattern in Western World

Where did we see capitalism in yesterday’s activity? What was unfair? What was unfair? Why would alliances be allowed? Were they beneficial? Why would alliances be allowed? Were they beneficial? What would the blowpops represent? What would the blowpops represent?

Adam Smith “The Wealth of Nations” (1776) “The Wealth of Nations” (1776) Laissez-faire (“free to do”) Laissez-faire (“free to do”) Free trade and minimal government interference in the economy Free trade and minimal government interference in the economy Markets free from government interference benefit all Markets free from government interference benefit all 1. Law of Self-interest1. Law of Self-interest 2. Law of Competition2. Law of Competition 3. Law of Supply and Demand3. Law of Supply and Demand 4. Invisible Hand u4wE4. Invisible Hand u4wE u4wE u4wE

Thomas Malthus Population will continue to grow and eventually outstrip the food supply Population will continue to grow and eventually outstrip the food supply Poverty and misery would never go away Poverty and misery would never go away Slowed by “checks” (war, disease, famine) Slowed by “checks” (war, disease, famine) Justify low wages and laws that limited charity to the poor Justify low wages and laws that limited charity to the poor

David Ricardo Theory of the Iron Law of Wages -Natural economic forces would keep wages low-so low that workers barely had enough to survive Theory of the Iron Law of Wages -Natural economic forces would keep wages low-so low that workers barely had enough to survive Popular with factory owners-justified their paying low wages Popular with factory owners-justified their paying low wages

Look to the Socialism Questions Horrible Conditions Horrible Conditions Unions, Strikes, and Luddites Unions, Strikes, and Luddites

Three Types of Socialism Utopian Socialism Utopian Socialism Early 19th centuryEarly 19th century Robert OwenRobert Owen Ideal communities where poverty and other evils of society did not existIdeal communities where poverty and other evils of society did not exist Marxist Socialism (Revolutionary) Marxist Socialism (Revolutionary) “Communist Manifesto” (1848)“Communist Manifesto” (1848) Revisionist Socialism (Democratic) Revisionist Socialism (Democratic) Late 19th centuryLate 19th century

DefinitionDefinition State ownership of the means of production State ownership of the means of production State should control and plan the economy State should control and plan the economy Distribute wealth more equally Distribute wealth more equally

Where did we see socialism yesterday? Community controlled the wealth/means Community controlled the wealth/means Still some choice and freedom Still some choice and freedom Not everyone the same, but more of a sharing Not everyone the same, but more of a sharing

Compared to Capitalism Competition Competition Individual Individual Production Production Cooperation Cooperation Community Community Fair distribution of goods Fair distribution of goods

Background Info on Karl Marx  German philosopher and writer (From Middle Class Family)  Kicked out of Germany and Forced to Move to London  Belonged to secret group known as the “Communist League”  In London, 1848 writes “The Communist Manifesto” with Frederich Engels

1. Robert Downey Jr. $80 Million 2. Jackie Chan $50 Million 3. Vin Diesel $47 Million 4. Bradley Cooper $41.5 Million 5. Adam Sandler $41 Million

Class Theory Look at Document 1- Answer Questions Look at Document 1- Answer Questions History unfolds through this inevitable process History unfolds through this inevitable process The conflict is between classes over control of the means of production The conflict is between classes over control of the means of production

Where did we see Communism yesterday? No revolutions, but government control of means of production No revolutions, but government control of means of production Distribution according to need Distribution according to need No vote in place No vote in place

Revolutionary Socialism Workers (Proletariat) should rebel against the Bourgeoisie and seize control of the means of production Workers (Proletariat) should rebel against the Bourgeoisie and seize control of the means of production Capitalism would collapse Capitalism would collapse Workers would establish a society based on cooperation and equal distribution of wealth Workers would establish a society based on cooperation and equal distribution of wealth Das Kapital Das Kapital

Transition Socialism could help solve all injustices Socialism could help solve all injustices Happens slowly Happens slowly Workers would have to control the government=command economy Workers would have to control the government=command economy System in which government owns almost of the means of production and controls for economic planning…. System in which government owns almost of the means of production and controls for economic planning….

The New Communist Order The New Communist Order  Division of Wealth: Economic equality  From each according to his abilities, to each according to his needs  No private Property  Classless society  Education: Free for All  Healthcare: free for all  Worldwide revolution - no countries  No religion - tool of the upper classes  State eventually withers away

Marx’s Advice to Workers A state of war existed with the bourgeoisie A state of war existed with the bourgeoisie Govt., law, morality, religion are weapons of the bourgeoisie - don’t trust them! Govt., law, morality, religion are weapons of the bourgeoisie - don’t trust them! To rise above the proletariat is betrayal To rise above the proletariat is betrayal Never negotiate for concessions! Never negotiate for concessions! Class consciousness must develop Class consciousness must develop

Problems and Reactions People did not want war necessarily People did not want war necessarily Loyalty to religion & country still strong Loyalty to religion & country still strong Difficult to commit to an unseen future Difficult to commit to an unseen future Owners increased wages Owners increased wages Workingmen are given the right to vote Workingmen are given the right to vote Proletariat worked within government and became reluctant to change it Proletariat worked within government and became reluctant to change it

Argument If we could create a true “Socialist” state, life would be better for the majority of people. If we could create a true “Socialist” state, life would be better for the majority of people.