New Ways of Thinking Economics and Society 7.4

Laissez-Faire Economics Enlightenment idea that government should not interfere in the free operation of the economy. Adam Smith, The Wealth of the Nations Main Feature: Free Market- produced more goods at lower prices thus more affordable. Supporters justified this capitalism by pointing to the success of the Industrial Age Free Market- the unregulated exchange of goods and services Industrial Age- No Gov. Intervention in economy

Thomas Malthus- Population British Economist Researched the effects of the population explosion and wrote, An Essay on the Principle of Population. Concluded: Poverty was unavoidable b/c population is increasing faster than the food supply. Urged families to have fewer children.

His Bleak View Although population did boom, the food supply grew in faster. Living condition slowly improved. People began to have fewer children. Believer in Laissez-Faire

David Ricardo- Wages British Economists “Iron Law of Wages” -An increase on wages resulted in families having more children instead of raising their standard of living. Opposed government support for the poor. “dismal science” Because of all of the gloomy predictions, economics became known as the dismal science.- depressing, dreary

Utilitarianism The idea that the goal of society should be the greatest happiness for the greatest number of citizens. Limited gov. involvement Jeremy Bentham Individual Freedom=Happiness Laws should be judged by their “utility” (usefulness, effectiveness, value). Saw need for gov. to become involved under certain characteristics.

Question How does a Laissez-Faire viewpoint differ from a Utilitarianism viewpoint?

Emergence of Socialism Socialism – Focus on the good of society in general, not on individual rights. Belief that socialism would end poverty and injustices of industrial capitalism. People as a whole, not private individuals, should own and operate the means of production. Farms, factories, railways, & other large businesses that produce & distribute goods. Idea grew out of the Enlightenment

Utopians Community in which all work shared and all property commonly owned Hope that equality would end conflict. Robert Owen- set up a model community in New Lenmark, Scotland. The name alone implied that they were “impractical dreamers”.

Karl Marx Condemned the ideas of Utopians New Theory: Scientific Socialism- based on scientific study on history The Communist Manifesto Communism – form of socialism, in which struggle between social classes would lead to the creation of a classless society where all means of production were owned by the community. Marxism- Economics was the driving force in history- the struggle between have and have nots. Haves- always owned the factors of production and controlled society and wealth. Have nots- Proletariat Bourgeoise v. Proletariat Marx believed that in the end proletariat would win. Workers would eventually take control of means of production & set up classless, communist society. Wealth and power shared equally. Capitalism created wealth for only a few, but poverty for many. Urged for workers of all countries to unite.

Marxism in the Future Marxism briefly flourishes 1860, German socialists adapt beliefs to form social democracy. Ideology in which gradual transition from capitalism to socialism, as opposed to violent overthrow. Leads to the Russian Revolution in 1917. Russian Revolution set up a communist inspired government. Independence leaders in Asia, Latin American and Africa turn to Marixism.

Marxism Loses Appeal Failures in the government illustrates its flaws Instead, Nationalism wins loyalty of working class People felt stronger ties to their own country than the international communist movement. Few nations remained communist.