Capitalism, Communism, and Reform

Laissez –Faire Ecomics Enlightenment Thinker Adam Smith Wrote the Wealth of Nations Stated that economic liberty guaranteed economic progress – government should not interfere with the economy ‘The invisible hand’ – describes the self-regulating behavior of the marketplace through competition

Adam Smith and The Wealth of Nations

Capitalism - An economic system in which money is invested in business ventures with the goal of making a profit helped bring about the industrial revolution The idea of Capitalism is created by Malthus and Ricardo

Capitalism

Socialism In contrast to laissez-faire philosophy, other theorists believed that governments should intervene Believed that people or the government must take action to improve people’s lives

Philosophers divided Laissez Faire – refers to the economic policy of letting owners of industry and business set working conditions without interference – ‘Hands off’ approach Socialism – the factors of production are owned by the public and operate for the welfare of all

Karl Marx- Communist Manifesto

Karl Marx- Communist Manifesto Karl Marx and Freidrich Engels Argue that human societies have always been divided into warring(fighting) classes The ‘haves’ (bourgeoisie – or employers) and the ‘have-nots’ (or workers called the proletariat) While the wealthy controlled the means of producing goods, the poor performed the backbreaking labor under terrible conditions

Communism Communism – as a form of complete socialism in which the means of production – all land, mines, factories, railroads, and businesses would be owned by the people. private property would cease to exist All goods and services would be shared equally

Capitalism during the Industrial Revolution in England

Historical Circumstances Capitalism grew because of the Industrial Revolution in England. Factory owners, upper middle class, started businesses in the hopes of making a profit. Workers Farmers who had lost jobs, women and children. Capitalism or Laissez Faire, allowed factory owners to gain profit from the work of their people and have very little or no interference from the government.

Two features Government has little or no interference with business. (Laissez Faire). Competition sets the price of goods. “invisible hand” regulates the market. Profits for owners depend on the amount of consumption(products sold) The desire for more profit would lead to the hiring of more workers.(job opportunities) With both owners and workers making money, both can become consumers(people who buy goods) in the market.

Impact on Society Positive Negative More job opportunities Big businesses benefit because they are able to make a large profit Negative Workers are treated poorly by Factory owners This led to the creation of unions (groups that fought for rights of workers) Businesses that fail would go bankrupt(totally out of money) and lose everything. Government regulations were passed to help protect businesses from going bankrupt. (government aid, bailouts)

Workers Strikes

Communism in Soviet Union between 1917 and 1990

Historical Circumstances Before 1917, Russia was ruled by Czar(King) Nicholas II. The March and November Revolutions overthrew Czar Nicholas and allowed Vladimir Lenin to take power under a communist government. Lenin and the Bolsheviks(his party), created a radical socialist economy. This failed under Lenin, however, under Stalin with his five year plan (industry over agriculture) communism was stabilized. Communism in Russia ended in 1990 with Gorbachev’s resignation.

Two features Totalitarian rule. Militarization Complete government control over all aspects of life. Including occupation and income People are assigned jobs and salaries by the government Militarization Extremely large amounts of government money are spent on military. To keep up with the US in the military arms race (Cold War). To support proxy wars (Vietnam and Afghanistan)

Impact on Society Positive Negative Everyone was employed and this improved the quality of peoples lives from what they were like before 1917. There was a large need for soldiers(cold war) and scientists(Nuclear Arms Race) Negative Productivity became stagnant(not active) because workers had no motivation to produce more. No salary raises or work incentives Military expenses drained the economy and lowered the quality of life for Russian people.