1. As the industrial revolution was greatly increasing the production of goods, most governments stayed out of the way and let business happen. This seemed to be a good idea because the increased production was helping the countries become richer and richer. This idea of keeping the government out of economic activities in a country was known as laissez faire economics. The idea of laissez faire policy actually came out of the enlightenment belief that when the government got involved in economics, it did nothing to help and in fact actually slowed or even stopped economic growth. They believed that if economies were allowed to grow naturally, with no government interference, the economy would prosper. Some Capitalism and Mostly Socialism

2. Adam Smith was a leader of the laissez faire teaching. In his book Wealth of Nations, he argued that there were three laws that make an economy work naturally. 1) the law of self interest- people will work for their own good. 2) the law of competition- competition forces people to make better products. 3)the law of supply and demand- enough goods will be produced at the lowest possible price to meet the demand of the economy. This economic system, based on laissez faire policy became known as capitalism. There was one laizzez faire philosopher named Thomas Malthus, who had a very interesting idea. He believed that frequent wars were necessary to kill off the extra population. Without wars, there would be too many workers and that would cause salaries and wages to decline.

3. While the capitalist system was certainly working for many, as production and overall wealth increased dramatically, it did not work for everyone. As previously discussed, in a capitalist society there will always be winners and losers. These “losers” were not being successful and were barely getting by. They began to cling to a different economic idea known as socialism. In socialism, the workers themselves own the factories or workplace. There is no one owner or small group of owners. Instead, the government plans out the economy in advance and determines what products should be made and how much of each product should be made. By doing this, the government makes sure that everyone has what they need and therefore nobody is poor or living with less than what they need. In socialism everyone is equal.

4. In its plan, Socialism would create a perfect or utopian society. Every worker would have a job that they were capable of doing at a high level and would be able to have everything they needed or wanted regardless of the job that they had. Scientists, doctors, factory managers, teachers, cafeteria workers, factory workers, lawyers, actors, etc…would all be equal. The philosphy of “from each according to his ability, to each according to his need” was proposed, and to many it made perfect sense.

5. In Germany, Karl Marx and Friedrich Engels were promoting a more radical style of socialism in their pamphlet, The Communist Manifesto. In this writing they argued for a fight by the workers, known as the proletariat, to overthrow that rich and take over all business. They argued that there should be no private property at all. Everything should belong to everyone. At first everything would belong to the government, but eventually, since everyone was equal, there would be no need for government. The government would die off and what would be left would be a peaceful, classless, society of workers who worked in harmony to help one another. This idea became known as communism.

6. One advance of socialists was the rise of labor unions. These unions were created to make better working conditions and higher wages for workers. The belief was that if all of the workers joined together and threatened to strike, they could get ownership or management to give into their demands. They would have no choice since not giving in would mean that they would have no workers to produce goods. Labor unions were successful in many cases, but sometimes were not in regions with an overabundance of potential workers. Also, in many instances their were violent clashes between unions and management. In the end, unions were able to gain many things such as shorter work days, cleaner and safer conditions, limits to child labor, fewer work days in a week, and higher wages.