INDUSTRIAL REVOLUTION New Ideas about Society and Economics

Adam Smith 1723–1790 Adam Smith laid the intellectual framework for the concept of the free market. Born in Scotland, Adam Smith is often considered the founder of economics as a discipline. In his 1776 book, An Inquiry into the Nature and Causes of the Wealth of Nations, Smith postulated that self-interest guides the most efficient use of resources in a nation's economy, and that public welfare occurs as a by-product of pursuit of economic self-interest. Smith then argued that government efforts to promote the social good are ineffective compared to unbridled market forces; he also opposed government interference in the economy. His most influential work was The Wealth of Nations, published in 1744. Adam Smith and the other economic philosophers shown on the following slides addressed many fundamental economic issues related to the Industrial Revolution. Because many of these men predicted the negative outcomes of continued industrialization, economics became known at the time as the “dismal science.”

I. Laissez-faire economics A. Adam Smith and free enterprise 1. Wrote Wealth of Nations 2. Believed in natural law; business should operate without interference. 3. Free market would produce more goods at lower prices. 4. “Invisible hand” will guide the market. 5. Capitalists would reinvest in growing economy.

Thomas Malthus 1766–1834 In An Essay on the Principle of Population (1798), Malthus predicted that the food supply would not meet the needs of the growing population. Thomas Malthus postulated that food shortages would decrease population, thus bringing the food supply into better balance with the remaining population. This balance, however, could be disrupted by rising birth rates, which would eventually cause food shortages to reappear. Malthus further argued that the population’s demand for food would always keep the price of labor low because more individuals would enter the work force in search of funds to buy increasingly expensive food. Malthus believed that only “moral restraint” (including late marriage and sexual abstinence) could check excessive population growth.

B. Thomas Malthus on population 1. Malthus holds a bleak view. 2. Population will outpace food supply. 3. Only checks on population growth are war, disease, and famine 4. Families should have fewer children to preserve the food supply. 5. No government intervention; improve life through hard work and limiting family size.

David Ricardo 1772–1823 The “Iron Law of Wages” David Ricardo’s “Iron Law of Wages” theorized that wages naturally tend toward a minimum level that corresponds to the subsistence needs of workers. Ricardo’s ideas were even more “dismal” than those of Malthus because he saw the working class as trapped in their subsistence-level conditions. He did not offer any convenient solutions to the cycle of poverty.

C. David Ricardo shares Malthus’ view. 1. Believed in Iron Law of Wages. 2. Wage increases are futile for the poor- increase would cause families to have more children, which will increase labor pool and drive down wages. 3. Opposed government help for the poor.

Karl Marx 1818–1883 Philosopher, social scientist, historian and revolutionary, Karl Marx is regarded by many as the most influential economic and social thinker of the 19th century Karl Marx theorized that the struggle between social classes was fundamental to society. He believed that society faced a constant struggle between the rich and the working classes, and that this class division could be blamed in large part on private ownership of the means of production (e.g., corporations, factories). In order for class conflict to be resolved, Marx believed that the major means of production had to be publicly owned. Marx had a tremendous impact on the world’s political systems. Two of his most influential writings are: The Communist Manifesto, written with Friedrich Engels in 1848, the same year as the revolutionary uproar that swept across Europe. Das Kapital (The Capital), in which he outlined his economic theory in great detail. Marx was eventually forced to move to London to avoid political persecution. He lived in poverty his entire life and died nearly penniless, despite having radically changed the political and economic foundations of Europe.

II. Socialist Thought Emerges Focus should be on the good of society in general, not on individual rights. 1. Belief that socialism would end poverty and injustices of industrial capitalism. 2. People as a whole, not private individuals, should own and operate the means of production.

B. Karl Marx explains class struggle 1. New theory of “scientific socialism” is based on scientific study of history. a. Inevitable struggle between social classes will lead to a classless society. b. A classless society would end struggles for wealth and power.

C. Marxism in the Future 1. Marxism briefly flourishes, but never practiced in the form he predicted, not even in communist countries. a. In 1860, Germany adapts Marx’s beliefs to form social democracy. b. Marxism leads to Russian Revolution in 1917. c. Independence leaders elsewhere turn to Marxism.

2. Marxism loses appeal. a. Failures in Marxist governments illustrate its flaws. b. Nationalism wins out over working-class loyalty.

Industrialization Benefits Challenges   Industrialization Benefits  Challenges Created jobs Wealthy middle class Wages rose Labor unions won right to bargain Reformers improved working conditions Crowded cities Pollution Struggle for survival in slums Harsh working conditions in factories and mines Child labor

Before After Most people make their living as farmers People use simple hand tools Most people live in farming villages Most people have never traveled beyond their villages Farmers work long hours at work that varies by season Children help out with farm work Most people make their own clothes and grow their own food Most power provided by people, animals, water mills, and wind mills Slow transportation by animal-drawn wagons and by foot Many people make their living in factories Industrial cities and towns grow up City dwellers live in multistory tenements Factory workers work long hours, governed by the factory whistle Children work in mines and factories City dwellers buy food and clothing in stores Many factory-made products available New importance of coal and steam as power sources Many new inventions, such as telegraph, anesthetics, and sewing machine Faster transportation by train and steamship

The Second Industrial Revolution Transportation & Communication   New Powers Industry & Business Transportation & Communication Germany, France, and United States have more natural resources than Great Britain. Other nations follow Britain’s lead. Japan makes modernization a priority. Technology sparks industrial growth. Steel production soars. Chemists create new products. Electricity replaces steam as power source. New methods of production develop. Rise of big business and monopolies create move toward regulation. The automobile age begins. Airplanes take flight. Telegraph, telephone, and radio make communication faster.

Was the Industrial Revolution more SUMMARY Was the Industrial Revolution more beneficial or harmful? The Industrial Revolution changed Western society significantly. Consider the following: --Thousands of people moved from rural to urban centers where manufacturing was located. This led to crowding and the creation of slums in the cities. --New social class divisions emerged including a new wealthy “bourgeoisie” (middle class), the owners of the factories and other industrial enterprises, as well as a new lower working class, which often had poor working conditions and lived in poverty. --Industrialization brought significantly high levels of environmental pollution. The burning of coal for energy and home heating often blackened city skies. --Increased food production and manufactured goods meant greater availability and lower prices. This meant economic improvement for many people in the industrialized countries and a higher standard of living. By 1900, many people in the Western world consumed more and lived longer than their predecessors. (The teacher can discuss the question on the slide with the class.)