The Industrial Revolution Begins (1750-1850) New Ways of Thinking WEX II Chapter 19, Section 4

New Ways of Thinking At the end of this section, I will be able to answer the following questions: What economic ideas helped shape the industrial age? What reforms did individual thinkers urge? How was socialism linked to the Industrial Revolution? Vocabulary: utilitarianism, socialism, communist, proletariat

New Ways of Thinking What economic ideas helped shape the industrial age? Laissez-Faire Economics was the belief that natural laws should be allowed to operate without interference Business leaders believed in the “hand-off” approach

New Ways of Thinking Who was Adam Smith & what did he have to say? He believed in the Free Market He wrote “The Wealth of Nations” He believed that a “free market” would eventually help everyone Not just the rich

New Ways of Thinking How would the free market help everyone? The free market would produce more goods at lower prices This would cause the economy to grow People would reinvest in new capital This cycle would continue to grow The proof of this idea was the success of the industrial age which had NO government intervention

New Ways of Thinking Who was Thomas Malthus? Thomas Malthus wrote an “Essay on the Principle of Population” He wrote, “The power of population is [far] greater than the power of Earth to produce subsistence for man.”

New Ways of Thinking What did Malthus predict? Population would outpace the food supply The only checks on population growth were War Disease Famine The poor would suffer

New Ways of Thinking Was Malthus right? No, not really! The food supply grew faster than the population Living conditions improved for people in the western countries In the 1900s, population growth wasn’t a problem for western countries People began having fewer children

New Ways of Thinking Who was David Ricardo? He was a British economist who agreed with Malthus and was concerned about the population growth He wrote the ‘Iron Law of Wages” What are wages? Wages are the amount of money that people get paid for doing a job

New Ways of Thinking What did David Ricardo say in his work Iron Law of Wages? When wages are high Families have more children When families have more children, this increases the supply of labor The increase in the supply of labor leads to lower wages & unemployment

New Ways of Thinking Malthus & Ricardo don’t appear to be very optimistic about the future This is why economics became known as the “dismal science” Did they believe that government should intervene and help out the poor? No!

New Ways of Thinking Were Malthus & Ricardo cruel? No! They believed that the best cure for poverty was unrestricted laws of the free market Individuals should be left alone to improve their conditions through Thrift hard work limiting the size of the family

New Ways of Thinking Did everyone agree with the Laissez-Faire approach? No! Many other people believed in the need for government intervention For example, Jeremy Bentham was preaching utilitarianism.

New Ways of Thinking What is utilitarianism? Utilitarianism is the idea that the goal of society should be the “greatest happiness for the greatest number of people” Bentham believed that laws and actions should be judged by their “utility” Did they provide more pleasure than pain?

New Ways of Thinking Who is John Stuart Mill? He supported Bentham's belief that actions are right if they promote happiness and wrong if they cause pain. He argued that unrestricted competition favors the strong over the weak Government should help the poor He wanted to give everyone the right to vote He encouraged governmental reform

New Ways of Thinking Did most people agree with his position? No! Most middle-class people rejected Mill’s ideas (Remember, the middle class felt that people were poor because they were lazy) Hi ideas started to be accepted in the 1800s They are a significant part of government today

New Ways of Thinking Some people believed the opposite of the Laissez-Faire approach These people believed in socialism Under socialism People as a whole own and operate the “means of production” Private individuals would not longer their factories, farms, railways, or businesses

New Ways of Thinking The Utopians piloted these socialistic ideas Robert Owen set up a Utopian or ideal community in New Lanark Scotland He built homes for his the workers He built schools for the children He treated his workers well His business was a model that many people came to observe

New Ways of Thinking Many people felt that the Utopians were too idealistic and not based in reality Karl Marx presented a new approach he called this approach “scientific socialism” He claimed it was based on scientific study of history He presented his ideas in the “Manifesto”

New Ways of Thinking Karl Marx & Friedrich Engels get together and write a pamphlet The Communist Manifesto Communism is a form of socialism that sees class struggle between employers and employees as inevitable

New Ways of Thinking What did Karl Marx believe? He believed History is a struggle of classes The “haves” or bourgeoisie own the means of production The “have-nots” or proletariat were the working class History shows the constant struggle between the bourgeoisie & the proletariat

New Ways of Thinking Karl Marx presents his solution! He believed that capitalism contains the seeds of it’s downfall that eventually the workers will rise up and take control of the “means of production” that this would lead to equality He urged working men in all countries to unite

New Ways of Thinking What was the impact of communism? Russian socialists embraced Marxism Eventually Russia and China establish Communistic Governments

New Ways of Thinking What are the weakness of Marx’s teachings? Although he said that his works were based on scientific laws, there were many errors He predicted that the misery of the proletariat would set off a world revolution However, the standard of living improved and a revolution didn’t take place

New Ways of Thinking Okay, let’s see if you get it… What economic ideas helped shape the industrial age? Laissez-Faire Economics Adam Smith – Free Market System Thomas Malthus – Population Growth David Ricardo – Iron Law of Wages

New Ways of Thinking What reforms did individual thinkers urge? Utilitarianism Jeremy Bentham John Stewart Mill Utopians Robert Owen Communism Karl Marx

New Ways of Thinking How was socialism linked to the Industrial Revolution? First time there were so many employees Owners vs Workers Workers were being abused and wanted to have rights!

New Ways of Thinking What is the meaning of utilitarianism? Goal of society should be the greatest happiness for the most number of people What is the meaning of socialism? People as a whole would own and operate the “means of production”

New Ways of Thinking What is the meaning of communist? Form of socialism that sees the struggle between employers and employees as inevitable What is the meaning of proletariat? Working class person

New Ways of Thinking The End

New Ways of Thinking

New Ways of Thinking The Invisible Hand - 60 Second Adventures in Economics (1/6) https://www.youtube.com/watch?v=ulyVXa-u4wE The Paradox of Thrift - 60 Second Adventures in Economics (2/6) https://www.youtube.com/watch?v=qrHyDztQlBY&feature=endscreen&NR=1 The Phillips Curve - 60 Second Adventures in Economics (3/6) https://www.youtube.com/watch?v=H_LHFs_Htak&feature=rellist&playnext=1&list=PLB6DJIG4ASMXKZWHJDLIQF4JXO86U5PZL The Principle of Comparative Advantage - 60 Second Adventures in Economics (4/6) https://www.youtube.com/watch?NR=1&feature=endscreen&v=U12yZXBmQmY The Twin Paradox - 60-Second Adventures in Thought (5/6) https://www.youtube.com/watch?v=oOL2d-5-pJ8&feature=related Rational Choice Theory - 60 Second Adventures in Economics (6/6) https://www.youtube.com/watch?v=JaKMimJPxyA&feature=relmfu The Invisible Hand - 60 Second Adventures in Economics (1/6)

New Ways of Thinking Quick bio of Karl Marx http://www.youtube.com/watch?v=HsSLvbwFZh4