Ch. 7; Sec. 3
New Ideas in a New Society
Main Idea:
The Industrial Revolution led to
economic, social, and political reforms
► New Ideas about Economics
►Competing Economic Views
►Effects on Society
I. New Ideas about Economics
Laissez- faire = the economic policy of letting
owners of industry set working conditions
without government interference
Supporters of laissez-faire:
Adam Smith – The Wealth of Nations (1776)
► Economy works best with no outside
interference
► Automatically adjusts itself (“Invisible Hand
of the Market”)
Supporters of Capitalism (cont.)
Thomas Malthus – An Essay on the Principle of
Population (1798)
► Population increases exponentially while the food
supply grows arithmetically
► Even if govt. did try to help the poor, it would not
solve the problem of the “surplus population ” (the
amount of people who exceeded the food supply)
► Dickens’ character of Scrooge (A
Christmas Carol) based on Malthus
Supporters of Capitalism (cont.)
David Ricardo – Principles of Political Economy
and Taxation (1817)
► A permanent lower class would always be
poor
► The “Iron Law of Wages”: The Economy is a
constant cycle of good times/bad times
 Good times high wages  more population
Next generation
 Bad times  low wages  less population
II. Competing Economic Views
Jeremy Bentham = theory of utilitarianism
►
All actions, ideas, or institutions should be
judged according to their “usefulness”
►
Job of govt. is to “promote the greatest good for
the greatest number”

Govt. needed to intervene only to create better
conditions for the majority of people
1.
2.
3.
Distribute wealth more equally
Reform the legal & prison systems
Fund public education for all citizens
Critics (cont.)
Utopian Socialism
► Communities established to encourage
communal cooperation (socialism), rather
than individual competition (capitalism)
► Robert Owen founded 2 such communities
in his native Scotland & later at New
Harmony, Indiana in the U.S.
Critics (cont.)
Socialism = type of economic system in which
the factors of production are owned by the
public and operated for the welfare of all
► Governments needed to actively plan the
economy rather than allowing free-market
capitalism do it by supply/demand
► Public ownership would
 help abolish poverty
 promote social/economic equality
Critics (cont.)
Karl Marx and Communism -The Communist
Manifesto , 1848
►
►
►
History of world has always been a class struggle (haves
vs. “have nots”)
In industrial times it was the owners & bourgeoisie
(upper middle class) vs. the workers (proletariats)
 Workers sweated while the owners enjoyed the profits
of the workers’ labor
Workers would eventually unite and overthrow the
owners
 Workers would then produce the goods society
needed
 Wealth would be evenly distributed so no more class
struggle; at this point, government would fade away
III. Effects on Society
20th Century witnessed several Communist
revolutions inspired by Marx’s theories:
 Russian Revolution (1917) – V.I. Lenin
 Chinese Revolution (1930s) – Mao Zedong
 Vietnam (1950s) – Ho Chi Minh
 Cuba (1950s) – Fidel Castro
Other Reform Movements
Abolition of slavery
► Wm. Wilberforce led fight in Parliament to end
slavery in Britain (1833)
► The U.S. abolishes it with the 13th amendment to
the Constitution (1865)
Women’s Rights
► Women workers formed their own unions
► Intl. Council for Women established in 1888
Other Areas of Reform in mid-1800s
► Public education (Horace Mann in U.S.)
► Prison reform to “rehabilitate”, not just punish
Section 3 summary
OVERVIEW:
As industrialization grew, a small percentage of the
population became extremely wealthy as a result.
While the standard of living was growing for almost
everyone, still there was a tremendous inequality of
wealth. This led to growing concerns about the
nature of capitalism and its glaring weakness --equal distribution of wealth for its citizens. Thinkers
divided over the question of was unchecked
industrial growth the best type of economy, or could
there be better ways to distribute wealth more
evenly throughout society.
Captains of Industry or Robber
Barons?
Pro laissez-faire
capitalism
►
►
►
Adam Smith – The Wealth of
Nations; economy works best with
no govt. interference (“Invisible
Hand of the Market”)
Thomas Malthus – “surplus
population”, population grows
much faster than food supply; will
always have poor. No reason to
help working class
David Ricardo – Iron Law of
Wages; natural business cycle is
boom/bust pattern; “good times”
will always lead to “bad times” &
vice -versa
Anti laissez-faire
capitalism
►
►
►
Jeremy Bentham –
utilitarianism; the govt. should
intervene IF it would produce “the
greatest good for the greatest
number”; encouraged govt. laws
to reform business
Robert Owen- social
Utopianism; est. model
community in New Harmony, IN
where workers shared equally
Karl Marx – father of
communism
The Three Economic
Systems
Capitalism – the means of production
(businesses) in hands of private citizens;
demand/market economy
1.


2.
3.
Laissez-faire: no govt. intervention
Reform capitalism: govt. intervenes to insure
fair business practices
Socialism - the means of production
(businesses) shared by private & govt.
ownership; mixed economy
Communism - the means of production
(businesses) in public (govt.) hands;
command/planned economy