How did the hardships of Industrial life lead to the

formation of new economic systems ?

I. Laissez-faire• A. “Hands off” economy• B. Adam Smith: Wrote “Wealth of

Nations” – 1. Believed that a free market would

benefit everyone.

What are the positives?What are the negatives?

II. Social DarwinismA. Darwin’s theory of “survival of the

fittest” applied to business. 1. If a person is intelligent and capable then

they will be successful. 2. People who are successful deserve it

because they are the superior ones3. People who are not successful don’t

deserve to be because they are inferior.

III. Population• A. Thomas Malthus: “Wealth of nations”

– 1. Believed that the population would eventually outweigh the food supply.

– 2. As population increased so would poverty, so have less children

B. David Ricardo1. When wages are high families had more children2. More children increased the supply of labor which led to lower wages and higher unemployment

Vicious cycle

Economy is good People are

making more money

People have more kids

Less kids lead to decrease in labor force

which leads to an increase in wages

Increase in children increases

the labor force

Increase in labor force leads to lower wages

Lower wages lead to having less kids

IV. Anti-Laissez faire

A. Utilitarianism Jeremy Bentham1. The greatest happiness for the

greatest number2. Strongly supported individual

freedom but saw the need for the gov’t to intervene in certain circumstances.

V. What is capitalism?

Capitalism is a economic system based on the recognition of Individual Rights , including property rights, in which most property is privately owned.

Under capitalism the state is separated from economics (production and trade), just like the state is separated from religion.

Government regulates some aspects of business (minimum wage, working hours, working conditions)

VI. Socialism VI. Socialism A. People as a whole instead of A. People as a whole instead of

the individual would own and the individual would own and operate means of business.operate means of business.

B.B. The “Evils of capitalism and The “Evils of capitalism and industrialism” created an industrialism” created an even greater rift between the even greater rift between the rich and the poorrich and the poor

C.C. Creates economic equality Creates economic equality (on paper)(on paper)

D.D. UtopiaUtopia1.1. Created by Thomas Moore Created by Thomas Moore

a. All people are equal in a. All people are equal in terms of work load and terms of work load and possessionspossessions

VII. Karl MarxVII. Karl Marx

A.A. German German 1.1. Forced out because of his radical views.Forced out because of his radical views.2.2. Moved to France and England Moved to France and England 3.3. Published the Communist Manifesto: stated Published the Communist Manifesto: stated

that class struggle between employers and that class struggle between employers and employees is inevitable. employees is inevitable.

4.4. Story of history: Struggle between the Story of history: Struggle between the “Haves and the Have-nots”“Haves and the Have-nots”

Wrote: “The Communist Manifesto”

VIII. ProletariatsA. “Haves” = bourgeoisie

B. “Have-nots” = proletariats (working class)

IX. Marxist Socialism1. Complete elimination of class structure2. Revolution to overthrow the Bourgeoisie and

Aristocracy and unify all the Proletariat across Europe

3. Land and property are collected and redistributed equally.

4. Elimination of religion, nationality, social classes, and eventually government.

5. People would share equally in the workload

Marx’s theory is to have a Marx’s theory is to have a classless society.classless society.

Marx believes the working class Marx believes the working class should take over and establish should take over and establish

their own state power. their own state power.

A classless society would allow A classless society would allow the fullest potential for all the fullest potential for all individuals through social individuals through social

cooperation.cooperation.Marxist Socialism: government Marxist Socialism: government

would become obsolete would become obsolete (unnecessary). (unnecessary).

““Workers of the world unite”Workers of the world unite”

Was the diagram created by a supporter of Capitalism or Socialism?

Was the diagram created by a supporter of Capitalism or Socialism?

X. Working class reformA. All men are granted the right to vote

1. Increase in the influence of the middle class B. Right to organize unions is grantedC. Because of unions, and working class

voters, governments passed laws regulating conditions in factories and mines

D. Child labor is outlawedE. Laws are formed limiting working

hours