– Business leaders believed that governments should stay
out of business and economic affairs.
– Reformers felt that governments needed to play an
active role to improve conditions for the poor.
– Laissez Faire, Capitalism, Social Darwinism,
– Identify the industry that first became
industrialized.
Competing Philosophies of
the Industrial Revolution
Urbanization
Impact of
Industrial
Revolution
• Factory worked attracted
people looking for jobs
• Rapid growth of cities
Working
Conditions
• Created many new jobs
• Factories were unsafe and
dangerous
• Workers worked long hours
Living
Conditions
• Rich lived in nice
neighborhoods
• Poor were crowed in slums
near factories
Impact of
Industrial
Revolution
Rise of Big
Business
• Business sold stock or shares
of the company
• Led to formation of
corporations
Changing
social roles
• Change in family life and role
of women
Social
Classes
• Growth of the Middle class
• Upper middle
• Lower middle
New Class Structure
Developed with expansion of trade
and growth of cities during high
middle ages
Middle
Ages
Commercial
Revolution
Industrial
Revolution
Nobles
Nobles
Upper Class
Middle Class
Upper
Middle
Peasants
Lower
Middle
Peasants
Working
Class Poor
Impact of Industrialization on Class Structure
Class
Upper
Upper Middle
Lower Middle
Working
Class Poor
Description
Aristocrats;
wealthy industrial
and business
families
Business people;
Factory managers;
professionals
(doctors, lawyers)
office workers;
skilled workers;
teachers; shop
owners
Factory workers;
poor farmers
Standard of living
Very wealthy;
High standard of living
Comfortable standard of living
Harsh living and working conditions
in overcrowded cities
Economic Systems
Europe PreIndustrial
Revolution
Mercantilism
Nations
try to
achieve
favorable
balance of
trade
Heavy gov’t
regulations
and tariffs
Factors of
production
privately
owned
Enlightenment
idea of
Laissez Faire
Business
should
operate
without
gov’t
interference
Money
invested in
business to
make a profit
Capitalism
Free
markets
Lassiez Faire Capitalism
• Supported by Adam Smith
– Wrote The Wealth of
Nations (1776)
• Ideas became the basis
for the economic system
during the Industrial
Revolution
– Economic system of the
U.S today
Lassiez Faire Capitalism
• Smith said there were 3 natural laws of economics
Law of
Self
Interest
People work for their
own good
Law of
Competition
Competition forces
people to make a
better product
Law of
Supply and
Demand
Goods will be produced
at the lowest possible
costs to meet demand
Lassiez Faire Capitalism
• Thomas Malthus
– Believed population
would grow faster
than food supply
– Without war, famine,
and epidemics
population would keep
growing
– Poor would suffer
• Not governments job to
help
Social Darwinism
• Based on Charles
Darwin’s idea of natural
selection
– Survival of the fittest
• Belief that successful
business people and
wealthy were more “fit”
to succeed that others
• Stronger nations should
weed out weak nations
• Led to increase in racism
and imperialism
Capitalism
• Individuals and businesses own
property and the means of
production
• Progress results when individuals
follow their own self interest
• Businesses compete for
consumers money by producing
goods that are better and less
expensive than competitors
• Consumers compete to buy the
best goods at lowest prices.
• Shapes the market by affecting
what businesses sell
• Government should not interfere
in the economy because
competition creates strong
businesses (Free Markets)
Points for Discussion
• Which social class expanded as a result
of the Industrial Revolution?
• Which economic system encouraged the
growth of industrialization?
– Socialists were concerned less on the interests and
rights of the individual and more on the interests of
society as a whole.
– Socialism, Command Economy, Utopia, Marxism
– Which economic system is Adam Smith
associated with?
Socialism
• Economic system where
the factors of
production are owned
by the public and
operate for the good of
all people rather than
individuals
Socialism
• Believed
Capitalism
creates large gap
between rich and
poor
• Felt that business
owners and
wealthy took
advantage of
workers
Socialism
• Supported the idea of
a Command Economy
– Government makes
decisions about the
economy rather than
free markets
• Government should
control factories and
key industries
– This would end poverty
and promote equality
Utopian Socialism
• Robert Owen
setup Utopian
factory
community in
Scotland
• Property and
work would be
shared
Marxist Socialism
• Based on the ideas of
German Philosopher
Karl Marx
• Wrote the Communist
Manifesto (1848)
– Written with Friedrich
Engels
Marxist Socialism
• Communism
– Radical
“Fromform
eachof
socialism to his
according
– ability
All means
to of
each
productiontoare
according
hisowned
by the government
needs”
• Land, mines, railroad,
businesses
– Private property does
not exist
– all goods and services
are shared equally
History was a
struggle between
the wealthy and
working class
The
Communist
Manifesto
Proletariat
would rise up
and overthrow
capitalist
system
Capitalists took
advantage of proletariat
to make profits
Take control
of the
means of
production
Create a
classless
communist
society
Wealth and
power
equally
shared
Communist Countries Today
Capitalism
Socialism
• Individuals and businesses own
property and the means of
production
• The community or state should
own property and the means of
production
• Progress results when individuals
follow their own self interest
• Progress when a community
cooperates for the good of all
• Businesses compete for
consumers money by producing
goods that are better and less
expensive than competitors
• Believe that capitalist employers
take advantage of workers and
the government must protect
workers
• Consumers compete to buy the
best goods at lowest prices.
• Shapes the market by affecting
what businesses sell
• unequal distribution of wealth and
goods in the capitalist system
• System should distribute goods
according to each person’s need
• Government should not interfere
in the economy because
competition creates strong
businesses (Free Markets)
• Government regulation of
economy to ensure equal
distribution of wealth and
material goods (Command Economy)
Points for Discussion
• What is the difference between a free
market economy and a command
economy?
• Identify one difference between
Capitalism and socialism.