Development of Capitalism during
the Industrial Revolution
Created by: Erika Arellano
Industrial Revolution
1700-1900
• Industrial Revolution refers to the greatly increased
output of machine made goods
• Began in England in the 1700’s
• Why did it begin in England? It had natural resources
such as:
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Water power and coal to fuel the new machines
Iron ore to construct machines, tools and buildings
Rivers for inland transportation
Harbors from which merchant ships set sail
http://www.historyguide.org/intellect/lecture17a.html
Innovation created during
Industrial Revolution
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Spinning Jenny
Flying Shuttle
Cotton Mills
Steam Engine
Factories
Ideas of Adam Smith
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Believed in free economy, or free markets
Wrote book The Wealth of Nations
Economic liberty guaranteed economic progress
Three Natural Laws of Economics:
– Law of Self Interest: People work for their own good
– Law of Supply and Demand: Enough goods will be
produced at the lowest possible price to meet
demand in a market economy
– Law of Competition: Competition forces people to
make a better product
Thomas Malthus and
David Ricardo
• Smiths ideas influenced Malthus and Ricardo
• Believed that natural laws governed economic
life
• Opposed government efforts to help poor
workers
• Their ideas formed the foundation of laissezfaire capitalism:
– http://www.importanceofphilosophy.com/Politics_Laiss
ezFaire.html
Capitalism
• Economic system in which the factors of
production are privately owned and money is
invested in business ventures to make a profit
• Replaced feudal empires (i.e. Holy Roman
Empire) and monarchies
• Created markets where buyers and sellers of
goods and services agreed on prices
• Created market types:
– Competition
– Monopoly
– Oligopoly
• Long distance trade increased dramatically due
to innovation in transportation
Capitalism continued
• Individuals and businesses own property and
the mean of production.
• Progress results when individuals follow their
own self interest.
• Businesses follow their own self interest by
competing for the consumer’s money. Each
business tried to produce goods or services that
are better and less expensive then those of
competitors.
• Government should not interfere in the economy
because competition create efficiency in
business.
How did capitalism bring about
the Industrial Revolution?
• The connection is that it:
– Led to investing in factories
– Led to increased production and higher
demands for raw materials
– Led to world wide trade
– Led to new inventions and new innovations
– Led to changes in transportation, agriculture,
and communication
Spread of Industrialization
1850-1914
Global Diffusion of the Industrial
Revolution
Summary of Institutional Capitalism
• English Parliament was firmly under the control of the
capitalist classes.
• Increase in agricultural production and turned the
established rules of land ownership on their head.
• Lands previously held in common by tenant farmers
changed into large private farms, worked by a smaller
labour force. This increased the agricultural production
and caused the displaced peasants to head for the cities.
Subsequently, there was an abundant labour supply to
mine coal and iron, and man the factories.
• The revolution moved economic power away from the
aristocratic classes and into the hands of the new middle
class, the bourgeoisie.