1. Smith v. Marx or Capitalism v. Socialism

2. Modern Capitalism Emergence –Capital is needed to build factories, purchase machines & raw materials & pay labor –____________ System because individuals invest in hopes of a profit (future return) –Based on concepts of ___________& competition –Needs & desires of __________ (purchasers) met by quality goods at lowest price

3. Adam Smith 1776: Wrote Wealth of Nations ______________ –People work for self interest –Society naturally benefits ______________ –Government does not interfere with business “hands off”

4. Basic Principles ______________: individual not gov’t ______________: anyone can participate in business ______________: do it for $$$$ ______________: lower prices, better quality, bigger choice, stimulates creativity ______________: supply & demand

5. Labor Discontent _________________Barely above starvation level ___________________Hrs./day Women & children (from age 5 ) Unsanitary & UNSAFE working conditions Technological Unemployment displaced workers

6. Socialism- a movement to displace Capitalism CAPITALISM __________________ own & operate __________________ provide people with goods & services __________________ make decisions SOCIALISM __________________ State planning Gov’t plans economy

7. Utopian Socialists They believed that capitalists, once convinced of the merits would voluntarily discard private ownership & profit motive To many people the possibility that this would happen seemed unlikely, therefore these people were considered dreamers or UTOPIANS Experimental Utopian communities are established and quickly fail.

8. Karl Marx & Scientific Socialism __________________: 1818-1883 “father of communism” –lived in poverty & witnessed the suffering of English industrial workers Wrote: –_______________ : pamphlet written w/ Fredrich Engels –Used “communist” to distinguish himself from Utopians –Das Kapital: criticism of capitalism

9. Marxist ideas & criticisms MARXIST IDEAS Economic interpretation of history _________________ Surplus value: –capitalists exploit the poor Capitalism will destroy itself beginning in industrial countries Ultimate society –Classless w/ no Gov’t CRITICISMS Neglects non-economic factors –Religion & nationalism Interests often coincide Capitalists entitled to profit b/c of risking $$ & managing business Capitalism works w/ in democracies –Responds to voters –Revolution comes to agricultural countries 1st. State becomes all powerful

10. Socialism v. Communism SOCIALISM Achieved by evolution peaceful & legal gaining of control __________________ __________________ __________________ Nationalism of only MAJOR industries COMMUNISM Achieved only by revolution violent overthrow of capitalist Gov’t & economy “_________________ __________________ __________________ Requires Gov’t ownership of ALL means of production

11. Flaws of Socialism Individuals lose incentive to work Gov’t becomes a dictatorship ___________________________________ Gov’t central planning of economy Gov’t must be in constant state of emergency to instigate production Gov’t must adopt capitalist concepts

12. Flaws of Market led capitalism _____________________ These are a few of the reasons why governments became involved with regulating the economy