Economics of the Industrial Revolution The Industrial Revolution

Economics of the Industrial Revolution

The Industrial Revolution opened a wide gap between the rich and the poor. While business leaders believed the market would eventually fix society’s problems, reformers believed that the government should play a more active role in improving conditions for the poor.

Adam Smith In his book The Wealth of Nations, British economist Adam Smith promoted “laissez faire” capitalism, which became the leading economic system during the Industrial Revolution. Capitalism – economic system in which the means of production are privately owned and operated for profit. Laissez Faire (hands off) – policy allowing businesses to operate with little or no government interference. Smith

Competition forces people to make a better product The Law of Competition 1. The Law of Self. Interest People work for their own good The Law of Supply and Demand Capitalism Enough goods would be produced at the lowest possible price to meet demand in a market economy

Adam Smith argued that the free market forces of supply and demand would produce more goods at lower prices, and encourage capitalists to invest their money in new ideas. Smith claimed that the “invisible hand” of capitalism led individuals who worked for their own good to actually promote the good of the entire community. Adam Smith is known as the father of economics. Smith

The hammer symbolizes industrial workers The sickle symbolizes peasants

Socialism – system in which the people as a whole (society) rather than private individuals own all property and operate all businesses. Socialists claimed that industrial capitalism had created a large gap between the rich and poor. Socialists cared less about individual ownership rights, and more about the interests of society. They believed government control factories, mines, railroads and other industries would end poverty and promote equality.

Karl Marx German philosopher Karl Marx promoted his form of “radical socialism, ” called communism In 1848, Marx teamed up with fellow German economist Friedrich Engels and published The Communist Manifesto. Engels Marx

Communism In The Communist Manifesto Marx argued the following points: • History was a class struggle between the bourgeoisie (wealthy capitalists), and the proletariat (working class). • In order to make profits, the bourgeoisie exploited the proletariat. • Capitalism created prosperity for a few and poverty for many.

Communism In The Communist Manifesto Marx argued the following points: • The proletariat would eventually revolt and overthrow the capitalist system, creating their own society. • The proletariat society would take control of the means of production and establish a classless communist society where wealth and power would be shared. • With communism, all the evils and inequalities of the industrial revolution would end.

Communism Marx called for an international struggle to bring down capitalism, which he hated. His slogan was “workers of the world unite!” Radical Socialist and Communist political parties formed in Western Europe, but by 1900 the standard of living for the working class improved, and communism lost popularity.

Communism – a form of socialism in which the means of production – all land, factories, railroads, and businesses – would be owned by the people. Private property would not exist and all goods were to be shared equally. Marx

Critical Thinking Questions 1. Developing Historical Perspective Consider the following people from 19 th century Britain: factory worker, factory owner. Which of them would most likely prefer capitalism and which would prefer a form of socialism? Why? 1. Forming and Supporting Opinions Which system of economic ideas seems most widespread today? Support your opinion. 2. Real Life Application What style of play would be better for an athletic team, capitalism or a form of socialism? Think about the perspectives’ of the coach, the players, the fans, etc https: //www. youtube. com/watch? v=ub. IWy. T 7 n. Gd. U http: //www. npr. org/2006/05/16/5408616/steve-nash-basketballs-selflesssocialist