Today… Students will … describe how the Industrial Revolution inspired new ideas about economics and affected society in many ways. Compare and contrast communism, socialism, and capitalism

Warm Up Read the excerpts from Karl Marx’s Communist Manifesto and Adam Smith’s Wealth of Nations Answer the questions on the back. Sit quietly until everyone is done.

The Economic Philosophers New Ideas in a New Society

What is economics?

New Ideas about Economics The Industrial Revolution didn’t just change products and work , but also how people thought about economics Mercantilism? Mercantilism gave way to capitalism and competition Laissez faire economics (“free to do”)

The Philosophy of Industrialization Laissez-faire Economics Laissez faire—economic policy of not interfering with businesses (Hands OFF government) Originates with Enlightenment economic philosophers Capitalism—system of privately owned businesses seeking profits

Adam Smith Leading advocate of laissez faire economics Published The Wealth of Nations in 1776 – analyzed the definition and creation of wealth Markets free from gov’t intervention benefits EVERYONE Market economy Businesses can compete freely against each other British gov’t agreed with Smith and ended most regulations by 1840s

Thomas Malthus Influenced by Smith, Thomas Malthus studied population growth caused by the development of industry. Population will always grow faster than food production Food shortages Poverty and misery would never go away Population growth could only be slowed by war, disease, famine, and decreased production Malthus’s ideas were used to justify low wages and law that limited charity to poor

David ricardo David Ricardo envisioned a permanent, poor underclass that provides cheap labor “…high wages give to the increase of population, the number of laborers is increased, wages again fall to their natural price, and indeed from a reaction sometimes fall below it.” (1817)

Capitalism in industry Before the IR, people who owned land controlled the wealth and power By mid-1800s, leaders of industry began taking away landowners’ influence Industrialists became extremely wealthy = political power ENTREPRENUERS – someone who starts a business Rise of corporations Some industrialists made fortunes simply by buying and selling companies for profit

American industrialists Andrew Carnegie – Scottish immigrant; started working in a mill at age 12 Led the expansion of the American steel industry Cornelius Vanderbilt – shipping and railroads Vanderbilt University; Biltmore Estate John D. Rockefeller – oil These men built giant corporations that drove out their competition Admired for their contributions to human progress, but criticized for treatment of their employees “Robber Barons”

Competing economic views Not everyone agreed that laissez faire capitalism was a good thing. Some blamed capitalism for bad working conditions and big gaps between the rich and the poor.

Robert Owen Robert Owen thought that for the good of all, society or the gov’t, not individuals, should own property and control industry – SOCIALISM To demonstrate his ideas, Own built a mill town in New Lanark, Scotland Gained widespread praise as a model industrial town. Workers had good working conditions; shopped at nonprofit stores, lived in decent houses, and earn sick pay Provided free schooling for workers’ children (believed education improved character) He also imposed strict rules on workers’ personal lives, including curfews and bathing requirements.

Lanark, scotland

New Harmony, Indiana Owen brought his ideas to America in 1825, founded a community called New Harmony in Indiana Utopia- ideal community where poverty and other societal evils don’t exist Utopianism – belief that these communities could solve society’s problems.

Rise of Communism The unity of the bourgeoisie can only be shaken by the unity of the proletariat. Karl Marx and Friedrich Engels (German) advocated for a more radical form of socialism. Wrote “Communist Manifesto” Society is divided into warring classes, caused by capitalism ‘ Haves and the have-nots As capitalism grew, more and more workers would sink into poverty  they’re gonna rebel  seize control of the “means of production”  govern themselves  capitalism will collapse  workers would establish society based on cooperation and equal distribution of wealth. Inevitable Class struggle between proletariat (workers) and the bourgeoisie (upper class, wealthy, factory owners) Engels was the son of a textile mill owner Karl Marx was a German journalist

Das Kapital Marx’s first published part 1 of his 3 part work in 1867 – arguing against capitalism Argued that capitalism disrupted the connection between labor and profit  thought there should be a direct connection between work and pay Thought that socialism could help rid the world of inequality and injustice BUT the transition to socialism would not happen quickly because so many people (esp. wealthy) would not see ay benefit for themselves He thought the workers would have to control the government and economy  command economy (gov’t owns almost all the means of production) COMMUNISM

COMMUNISM COMMUNISM –gov’t owns means of production Marx’s ideas later take root in Russia, China, and Cuba. Some countries adopted communism and used it to violate basic human rights and freedom of choice

T-Chart Communism vs Socialism vs Capitalism

Debate Communism – Brooke, Jehanne, Jonah, Lexi, Will, Demeka Capitalism – Naji, Kaylee, Aniya, Chloe, Braden, Chandler Socialism – Tatum, Lauren, Amber, Kiauna, Karrah, Brantoris