AP European History
Hancock
In Search of an Economic View of the World: Smith to Marx
Background: With the advent of the Commercial Revolution in the sixteenth century, national monarchs adopted
mercantilism as their economic policy. The chief objective of mercantilism was to gain a favorable balance of trade by
restricting imports and promoting exports.
In the eighteenth century a group in France called the physiocrats, who were influenced by the natural law thinking of
the Enlightenment, sought to remove all man-made barriers to trade. In particular, they opposed the restrictions
imposed by guilds and mercantile laws. The physiocrats desired the elimination of all restrictive economic policies to
permit the natural laws of the marketplace to regulate the flow of goods. This concept developed into the doctrine of
laissez faire, which greatly influenced and aided the development of classical economics.
The industrial capitalist’s adoption of the philosophy of laissez faire resulted in the exploitation of industrial workers.
Many important thinkers, reacting to the economic and social abuses existing in the early Industrial Revolution, found in
the doctrine of socialism the only solution to the problem. A common conviction developed among them that private
property and the competitive spirit were thoroughly evil.
The struggle for survival among capitalists and between capitalists and workers brought out the worst in human nature.
A variety of socialistic schemes was presented and tried by Saint-Simon, Fourier, Owen, Blanc, and Marx. Socialism and
capitalism struggled and competed throughout the nineteenth and early twentieth centuries until an accommodation
was achieved in most modern states.
Directions: Study the following chart on the back then on a separate sheet answer the questions below. Be prepared to
share your responses.
Questions:
1. How would each of the people view the role of government? Classify them on the political spectrum.
2. Why must economic philosophy be allied with political power to effect change?
3. Why does the implementation of an economic theory lag in adoption?
4. Why does an economic philosophy tend to be less radical in practice than in theory?
PEOPLE
Adam Smith
RESPONSE to existing
conditions or theories
Inspired by the ideals of the
French physiocrats who argued
that mercantilism was no longer
an acceptable economic policy.
IDEAS for change
In Wealth of Nation, questioned govern-mental
policy that imposed restrictions on trade.
Suggested that every individual should operate
freely in the marketplace without government
regulation. Then, the nation would profit. The
wealth of a nation depended not as much on a
centralized economy as on the sum of the
individual wealth of all the people.
INFLUENCE of ideas
Liberal laissez-faire ideas in
the mid-nineteenth century
were influenced by his
work.
David
Ricardo
Took a more pessimistic view of
the idea of laissez faire and, in
so doing, turned economics into
the “dismal science.”
Agreed with Adam Smith that the wealth of a
nation was based on the total of individual
efforts. However, he suggested that Smith’s view
was naive because reality showed that only
some people would be successful. The masses
would never be able to compete and would be
exploited; but this was the law of nature and
there was nothing to be done about it.
Ricardo’s realistic
impression dominated
much of the nineteenthcentury industrial world
and served as support for
the ideology of Social
Darwinism.
Robert
Owen
An English factory owner, he
was one of the first socialists.
Unlike many nineteenth-century capitalists, he
organized his business empire on a fraternal
basis and spent a lifetime crusading for social
reform. Owen believed that the only solution to
the exploitation of the workers rested in the
hands of the wealthy who should voluntarily
organize schemes to improve the lives of the
workers.
His ideas, while not
popular, reappeared
throughout the nineteenth
century in other idealistic
policies.
Louis Blanc
Found himself at the head of
the French government at the
end of the Revolution of 1848.
He had been one of the most eloquent
spokesmen for socialist reforms, arguing that the
government should involve itself in “social
workshops” to solve the problems of the
famished unemployed. A confirmed republican,
he demanded elections to support his new
government, but his policies alienated the
conservative countryside, and he was tossed
from power before he could implement his early
socialistic schemes.
Blanc’s ideas found
embodiment in many
twentieth-century social
welfare programs.
Karl Marx
Represented an extreme
understanding of social-ism that
developed into communism.
Marx and his colleague,
Friedrich Engels, highlighted the
necessity of government
intervention in the economic
woes of the masses.
The government would be created by a mass
uprising of proletarians who would create a
universal community of shared wealth based on
shared labor.
The ideas of Marx,
significantly altered, found
full expression in the
Russian Revolution of 1917
and the consequent
development of a
worldwide communist
ideology.