Changing Ideology In industrialized countries in the 19th c. we see an increased gap between rich and poor Business leaders believe that government should stay out of business and economic affairs. Reformers wanted government to play an active role in improving conditions of the poor. Leading to different economic policies

Adam Smith & Capitalism Wrote The Wealth of Nations in 1776 States that all actors are driven by the principle to better themselves The Market is driven by both producers and consumers. In the market these factors are called supply and demand The Invisible Hand – Smith’s phrase for the markets ability to regulate itself based on the needs of both the producers and consumers- This is known as a free market or self-regulating market

Adam Smith & Capitalism Economic liberty guaranteed prosperity Three natural laws of economics Self-interest (People work for their own good) Competition (Forces people to make better products) Supply and Demand (Enough goods would be produced at a low enough cost to meet demand) Laissez-faire (roughly) = “let people do as they please” = a core part of capitalism Capitalism: Factors of production are privately owned and money is invested in those businesses to make money

Socialism Many reformers were shocked by living conditions of working class people Socialism: Factors of production are owned by the public and operated for the welfare and benefit of all Government’s responsibility was to take care of its citizens Government ownership of industry would prevent inequality and end poverty

Radical Socialism Karl Marx and Friedrich Engels write the Communist Manifesto in 1848 Human societies have always been divided into the haves and have-nots Haves = bourgeoisie Have-nots = proletariat (workers) This leads to unavoidable conflict Industrial Revolution made this much worse, and sooner or later workers would rise up and overthrow their masters

Radical Socialism “The proletarians of the world have nothing to lose but their chains. They have a world to win. Workingmen of all countries, unite! Karl Marx and Friedrich Engels

The future according to Marx Capitalism would destroy itself eventually Workers would revolt, take over industry Workers would then “be” the government and bring economic equality to all A true classless society would then emerge This last stage is called communism

Revolution The Communist Manifesto in 1848 inspired short revolutions across Europe that summer France, German states, Italian states, Poland, Hungary None resulted in anything permanent, but it did signify the anger that workers had towards business owners It would take another 60+ years before real economic revolutions would start taking place Russia in 1917, China in 1949, Cuba in 1959 Today, only five countries in the world are communist China, Vietnam, Laos, North Korea and Cuba