Lecture 02

The Industrial Revolution. An era in the eighteenth and nineteenth centuries. Characterised by significantly improved production and trade brought about by advances in technology. Accelerating pace of change. Technological progress was the main reason for the advancement of wealth generation. Began in Britain and spread to Europe and the United States.

Steam engine a major enabling breakthrough. Provided increased level of power for machinery. Allowed centralisation of production in factories. Development of steam trains and steamers to enable transport of goods. Internally and internationally.

In turn stimulated the coal mining and steel industry. Millions given employment. Trade flourished.

Farming & Manufacturing. A dramatic increase in both sectors of the economy. Led to a great increase in wealth and prosperity of the countries involved. How? Automation (less hands required). Improved methods of planting and harvesting. New industries formed.

Innovation > Development of new and improved products and new and improved methods to create them. Why was innovation delayed? Wars that stopped the flow of information. Isolation of most people. Lack of co-operation.

Impact of the Revolution. Rise of the Trust. Trust > A combination of companies linked by legal titles and property rights that allow them to function as one company. John D. Rockefeller created a monopoly in the oil business. Set the framework for modern corporations.

Capitalism > The economic or business system in which the private ownership of resources becomes the basis for the production and distribution of goods and services. Capitalists > People who personally own or control the physical capital of industrial production such as machinery, factories, distribution networks, raw materials and technology.

Centralisation of production in factories. Concentration of labour in one location. Use of child labour (cost effectiveness)? Average workers wage fell rapidly. Longer working hours. This working class became known as the proletariat. Gave rise to the class system.

Development of Trade Unions Trade Union > An organisation that lobbies on behalf of its members (workers) to increase their bargaining power in work related situations. Class system > A social ranking of people based upon the amount of their capital and wealth, and because of factors such as heredity, kinship, fame and occupation.

This took place in the west. Impact in the other parts of the world? Colonies as imperial resources. Raw materials. Developing nations are still undergoing the process of industrialisation. Has led to big business moving to these areas for cost effectiveness of manufacturing processes.

Business Organisation. Along with the changes in actual methods of production, there were changes in the setup of business. Clans, tribes & slavery. Traditions disappearing. Joint stock companies. A new way. Unlimited liability a problem. Limited liability companies. Distancing themselves?

Modern standard for business. A legal system that prevents creditors from seizing the personal wealth of a company’s stockholders to pay a company’s debts. Multinational companies. Big business spanning multiple nations.

Partnership > Two or more skilled professionals who agree to pool their talents and capital to establish a company in which they are the stockholders and owners. Sole Proprietorship > A non-incorporated business owned entirely by one person. Examples?

Some background context. The hierarchy of authority is a ranking of people according to their relative rights and responsibilities to control and utilise resources. Property rights are the claims by people to own, use and or sell the rights to valuable resources. In earlier times these rights were determined by brute force. Now they are protected and enforced by laws (mostly).

Feudalism is the system in which one class of people, aristocrats, control the property rights to all valuable resources, including people.

The need to overcome problems associated with the double coincidence of wants led to the development of money. It acts as a standard of value, a store of value and is a source of capital in its own right. Mercantilism is the business system in which products are traded across markets and countries until they are put to their most highly valued use.

Increased trade led to the development of finance and banking institutions. It also led to a general increase in specialization and the division of labor.