New Economic Ideas for the Industrial World

Mercantalism Old system Three beliefs: Money = wealth National power more important than the individual More money = more power

Adam Smith (1723 – 1790) Rejected mercantilism New idea: capitalism Labor was source of wealth Goal = individual welfare Competition would act as an invisible hand and guide resources to their best use

Adam Smith –cont- Promoted idea of laissez faire - no government interference Govt. would threaten economic growth

Karl Marx (1818 – 1883) Economics was the basis for change in society

Marx’s social divisions Karl Marx –cont- Marx’s social divisions Society has always been divided into “haves” (the bourgeoisie or middle class) and “have nots” (proletariat or working class) This would happen:

State/govt. will wither away Factories drive workers out of business Proletariat rise up and take over factories Will produce only what society needs Workers will share profits w/society State/govt. will wither away Communism = people own all land, factories and roads

History did not happen as Marx thought Workers used the vote and unions to correct problems