1. New Ideas in a New Society The Transition from Mercantilism to Capitalism and Competition

2. Laissez-faire Economics Mercantilism ◦Old system ◦Governments restrict trade to protect industries from competition Laissez-faire: “free to do” Advocates (supporters): ◦Adam Smith ◦Thomas Malthus

3. Adam Smith The Wealth of Nations: markets free from government interference benefit all ◦Market economy: economy free from regulation, with competition among businesses Influenced British economic system

4. Thomas Malthus Population will always grow faster than food production Population growth slowed only by war, disease, famine, & decreased reproduction Ideas used to justify low wages/restrictions on charity

5. New Roles for Business Leaders Decreasing influence of landowners Increased influence of industry owners ◦Entrepreneur: founder of a business ◦Banking, finance, & investment Andrew Carnegie: “Man of Steel” Cornelius Vanderbilt: railroads John D. Rockefeller: oil Sometimes called robber barons

6. Competing Economic Views Some blamed capitalism for bad working conditions and large gaps between rich/poor Robert Owen Karl Marx

7. Robert Owen Society or the government should own property (socialism) To test his ideas: mill complex at New Lanark, Scotland->successful New Harmony in Indiana->utopia Social democracy->move from capitalism to socialism by democratic means

8. Friedrich Engels & Karl Marx Radical Germans Predictions: ◦With industrialization, increased poverty ◦Would rebel, seize control of means of production, and govern themselves ◦Establish a society based on cooperation and equal distribution of wealth Communist Manifesto ◦Command economy: run by government ◦Communism: system in which government owns almost all means of production and controls economic planning

9. Effects on Society Workers work in outside industries ◦Women stay home ◦Men & women occupying separate spheres

10. Questions to Answer -What is the connection between Adam Smith and laissez-faire economics? -Why do you think that some economists believed that unrestricted capitalism would help all of society? -What was the role of Karl Marx and Freidrich Engels in the development of socialism? -How did the Industrial Revolution affect the role of men/women in industrialized countries?