1. Economics of the Industrial Revolution

2. Economics
The study of
Production (making goods)
Consumption (buying goods)
Distribution (selling goods)
An economy is where all of these actions occur together

3. Rise of Industry Changes in Communication and Transportation
Electricity, telegraph and telephone lines, automobile, railroads, and airplanes increase travel efficiency

4. Explosion of Industrial Growth
The growth of technology and creation of communication power helped fuel industry
Companies who had once been local expanded in a growing globally connected economy
Systems of mass production came about and factories were used to produce goods in large quantities

5. Factories
Work was done by specialized machinery that could produce identical parts
Unskilled workers were used to run the machines
Engineers divided up the production process so that each worker did a single task
The sped up production and increased profits
Increased production led to cheaper goods

6. Factors (or means) of Production
As businesses grew, they needed three factors of production
Land – includes soil, forests, and minerals
Labor – people to work
Capital – money, buildings

7. Adam Smith
commercial virtues are self-interested and should be applied to reap success in the business world: prudence, justice, industry,
Wealth of Nations
Left to its own devices, the market will allow only the most competitive consumers and producers stay afloat. The free market fixes errors on its own. If there are shortages or surpluses the market, left to its own devices, will ensure that that the economy eventually returns to equilibrium.
Invisible hand
innate function of the free market was determined by the simple laws of supply and demand.

8. Capitalism
Based on private ownership of the means of production and on individual economic freedom
Factories and businesses are owned by private individuals and not the government
Prices will be kept as low as possible because consumers will seek the best product for the least amount of money

9. Capitalism
Free competition – people should compete freely without interference from the government or any outside force
Laissez-faire
Means “hands off” or “allow to do” in French
Lawmakers are not intervening in business
The market will regulate itself and the government will not interfere
Businesses can do what they want – change prices and alter competition

10. Capitalism Supply and Demand
Prices are determined by how many products there are and how many people want them
When supplies increase, prices tend to drop
When prices drop, demand usually increases until supplies run out. The prices will rise once more, but only as long as demand is high.
These laws of supply and demand work in a cycle to control prices.

11. New ways of thinking Thomas Malthus David Ricardo
As long as the population increases, the poor suffer. Poor people should have fewer children.
David Ricardo
When wages are high, families have more children, but more children lead to lower wages

12. Pros of Capitalism?

13. Pros of Capitalism Economic freedom is political freedom
Individual choice: you can choose your job
Incentives to be efficient
Always making improvements
Market forces make decisions
Not bound by decisions of one or few in charge
Encourages innovation and development
Economic growth – higher standard of living

14. Cons of Capitalism?

15. Cons of Capitalism? Exploitation of workers
Gap between the rich and poor
Competition implies winners and losers
Monopolies can take advantage of the system [control of state by wealthy]
social benefit ignored: pollution, health, public transport
Lack of centralized planning – overproduction/ underproduction
Boom and Bust cycles

16. Karl Marx Outraged by the growing gap between rich and poor
Saw capitalism as an exploitative system
As a person labors, he or she becomes alienated from society, the human race, and the object they produced.
Workers would eventually rise against the rich because they were treated so unfairly
Believed that private ownership encouraged greed and motivated people to knock out the competition, no matter the cost

17. Communism
Communism is based on principles meant to correct the problems caused by capitalism
No private ownership of property allowed
State government should exercise control in the name of the people
Goal to eliminate the gap between rich and poor and create economic equality

18. Communism
Under this system the government has total control of everything produced and control what is made, and who will receive the goods and services produced.
Based on need – no need for money
The State decides what you can use, how much, and where you will work.
In order to produce, a worker must be fit to do so; this means that he or she must be clothed, sheltered, fed, rested, etcetera, before he or she will be able to properly complete the job.

19. Pros of Communism?

20. Pros of Communism Economic equality Little to no unemployment
No social gap
Never need to worry about money
Little to no unemployment
Government protection
Equal access to education, employment, and health provision
Focus on the community

21. Cons of Communism?

22. Cons of Communism? High poverty rates Little economic growth
Censorship
Limited personal freedoms
No individuality
High government intervention/ ownership
Strict laws
No innovation or creative liberty
One party system

23. Socialism
Calls for putting the means of production in the hands of the people – either directly or through the government
Based on need: profit distributed equally
Wealth and income should be shared more equally among the people
Planning or market determine capital allocation to socially-owned enterprises
Whole community collectively owns and controls property, goods, and production
Local government control

24. Socialism Different from Communism:
Do not believe that the workers will overthrow capitalists suddenly and violently
Do not believe all private property should be eliminated
Main goal is to narrow, not eliminate, the gap between the rich and the poor
Government is responsible to redistribute wealth to make society fair and just

25. Pros of Socialism?

26. Pros of socialism Social equality Economic equality Political equality
Education, healthcare, public housing
Economic equality
Lessens the gap between classes
Political equality
Increases workers’ rights, more likely to allow more than one political party

27. Cons of Socialism?

28. Cons of socialism Higher cost = more taxes Fewer entrepreneurships
Big Government
Potentially become communist (communism is an extreme form of socialism)
Does not reduce inequalities