Economic Systems of the Industrial Revolution Capitalism

Capitalism: Definition An economic system in which the means of production are owned mostly privately. Capital is invested in the production of goods for profit in a competitive free market.

Adam Smith Wrote The Wealth of Nations in 1776 Founded modern economics and laid the foundation for capitalist theory Believed laws of nature should be left to govern the economy Was an Enlightenment philosopher

Two Laws of Economics Supply & Demand Competition Prices & profits depend on both the amount of available goods and the demand for those goods Low supply with high demand  can charge more! High supply with low demand  price cuts… Competition As manufacturers compete with each other to sell their products, they must reduce prices But can’t cut them too much or you’ll lose profit!

Other Concepts Free Market Laissez-Faire Invisible Hand People should be free to engage in whatever business they choose and trade with whoever they want without restriction Laissez-Faire “Let alone” or “hands off” The government should not interfere with the economy Invisible Hand Driving force of the economy Dips / fluctuations are natural – this will correct it!

Other Important Capitalists Thomas Malthus The population grows faster than the food supply Therefore, there will always be a class in poverty Wars, epidemics etc are natural ways to regulate the excess population David Ricardo “Iron Law of Wages” Workers’ wages are connected to supply & demand Lots of workers  lower wages Fewer workers  higher wages

Rise of Corporations During the IR, small businesses grew into corporations Groups of business owners who allow people to buy stock in the company Run by board of directors Corporation = a single “person” under the law Stockholders only financially responsible for the % they hold of the company Profits are split between stockholders, generally invested back into the company

Monopolies Not all corporations were successful When a business failed, could be bought out by another corporation Sometimes a single corporation gained almost complete control of the production / sale of a single good This is called a monopoly Are monopolies good or bad for a capitalist system?

Socialism & Communism

Critiques of Capitalism Some people did not like laissez-faire capitalism Laws cannot do enough to fix the social inequalities of the IR! Socialists wanted the means of production to be owned by the government Get rid of profit motive and competition Everyone has a right to share the profits of industry

Utopian Socialism People can live peacefully with each other in small cooperative settlements Everyone works for the common good and shares everything Model “utopian” towns (“perfect societies”) Robert Owen – factory owner and utopian Wanted workers to be happy Built good homes, schools, fed workers Encouraged workers to form unions

Karl Marx The capitalist system should be destroyed! History = class struggles Owners of property/business (bourgeoisie) AGAINST Those without property / the working class (proletariat) The proletariat must unite and seize power!

Marx’s Ideas Dictatorship of the Proletariat Pure Communism Revolutionaries would have to control the government by force because people will be reluctant to support socialism Pure Communism The state would “wither away” (disappear) when people learned to cooperate and work together **Society can run on its own without government in the end

Two Directions of Socialism Communism Violent revolution was required to get rid of capitalism The only way to establish governments that owned the means of production and controlled the economy Democratic Socialism Socialism can develop gradually through education and democracy Government owns at least some of the means of production People can still have some private ownership and control of the economy

Debate Teams Capitalism Communism Anna Patrick Emily Jonnah Reagan Catie Sam Dyovanna Alex Kierce Cole Mary Kate Kaitlyn Aras Ally Karina Sonny Jennie Adrienne

Charles Darwin & Social Darwinism Other Theories Charles Darwin & Social Darwinism

Charles Darwin Published Origin of the Species in 1859 Two observations: No two living things are exactly the same There are more creatures born than actually survive The survivors have characteristics best suited to the environment “Survival of the Fittest” or “Natural Selection” Strong offspring pass these good traits to the next generation

Controversy 1) Humans developed from animals  offensive! 2) Many thought Darwin’s theory contradicted the Bible (story of creation) Herbert Spencer developed new theory: social Darwinism Applied Darwin’s ideas to social situations The wealthy are on top because they have the right characteristics People were in poverty because they were “unfit”