Economic Theories of the
Industrial Revolution
Old Ideals: Mercantilism & Rising Demand
• An economic theory followed by Europe in
the 1600s that stated a nation should
maintain and increase its wealth by
exporting goods more than importing
• Encouraged a policy of being self-sufficient,
therefore putting guild restrictions on
amount of material produced by workers to
keep prices stable
• Limited expansion of economy, thus bringing
decline making way for another way of
managing the economy
Capitalism
• Capitalism – an economic system
based on private ownership and on
the investment of money in
business ventures in order to make
a profit.
Other Thoughts…
• Herbert Spencer (1820-1903):
– Applied Darwinism to human society: as in nature,
survival properly belongs to the fittest, those most able
to survive.
– Social Darwinism was used by many Victorians to
justify social inequalities based on race, social or
economic class, or gender
• Adam Smith– 18th century economist,
– held that the best government economic policy was to
leave the market alone—
– to follow a laissez faire or “let it be” policy of little or
no gov’t intervention
New Ideas about Economics
Capitalism and
Competition
• Old mercantile system
restricted trade
• Laissez-faire economics
• Adam Smith, market
economy
• Thomas Malthus, poverty
unavoidable
• Industrialization succeeded
and spread
New Roles for Business
Leaders
• Shift in wealth and power
• Entrepreneur
• Banking and finance
• Andrew Carnegie, rags to
riches
• Robber barons
Capitalism
• System of production, distribution, and exchange in
which private owners invest accumulated wealth for
the sake of gain
• Defined by:
– free open market,
– private ownership, and
– private businesses competing for profit
Capitalism
•
•
•
•
Private Property
Free Trade
Low Taxes
Light Regulation
Economists on Capitalism
• Adam Smith
• Thomas Malthus
• David Ricardo
Thomas Malthus
David Ricardo
Adam Smith
Adam Smith
• Scottish economist who wrote The Wealth of
Nations (1776)
• Stated that an economy works best when the
natural forces of supply and demand operate
without government interference
• Believed that self-interest was a natural order
in the universe that added up to the common
good
Adam Smith cont
• Businesses competed to produce goods
at the lowest price possible, and
consumers would buy the best products
at the lowest prices.
• By 1850’s Great Britain had been the
leading industrial power and adopted
free trade and laissez-faire policies.
He predicted that workers were at the mercy of the law
of supply and demand. Competition and Free Trade
would rule the future.
Laissez-Faire Capitalism
• It is a French phrase that literally means
hands-off.
• It states that the government should not be
involved in the economy.
• It should let the natural laws of capitalism
work. This is the way the economy works
best.
• Dominant form of capitalism through the end
of the Industrial Revolution.
Capitalists were
seen as greedy. The
truth was, many
were bewildered
themselves by the
forces of an
unregulated
cuthroat
marketplace…
Role of Government
• Government should enforce contracts and grant
patents and copyrights to encourage inventions and
new ideas.
• Government should provide public works like roads
and bridges that would not be worthwhile for
individuals to provide.
• But the users should pay to use the public works
like road tolls.
• Did support retaliatory tariffs.
Smith’s Definition of Wealth
• Consists of the goods which all people of society
consume
• Rejected the traditional views of wealth as gold,
treasures, kingly hoards
• Rejected the restrictions of merchants, farmers, and
guilds
• “We are in the modern world where the flow of
goods and services consumed by everyone
constitute the ultimate aim and end of economic
life.”
Law of Self-Interest and Charity
• Charity cannot alone provide the essentials for living.
• Self-Interest is the remedy for Charity’s shortcomings.
• “It is not from the benevolence of the butcher, the brewer, or the
baker, that we can expect our dinner, but from their regard to their
own interest.”
• Someone earning money by his own labor benefits himself.
• He also benefits society, because to earn income on his labor in a
competitive market, he must produce something others value.
• “By directing that industry in such a manner as its produce may be
of greatest value, he intends only his own gain, and he is in this, as
in many other cases, led by an invisible hand to promote an end
which has no part of his intention.”
Law of Supply and Demand
• When there is a limited supply of a
product, and there is a growing demand,
the price of the product will increase.
• When there is a large supply of a product,
and there is a decreasing or little
demand, the price of the product will go
down.
• This results in a fair pricing system.
Law of Competition
• This applies the idea of survival of the fittest
to the business world.
• A number of businesses will compete in the
same field to offer the best product for the
best price.
• It is known that not all will succeed.
• Those that succeed should.
• The consumer benefits because the consumer
gets a quality product for a fair price.
Division of Labor
• Main cause of prosperity was increasing the division of
labor
• Smith gave the example of pins.
• 10 workers could produce 48,000 pins per day if each of 18
specialized tasks were assigned to particular workers.
• Average productivity is 4, 800 pins per worker per day
• If no division of labor, a worker would be lucky to produce
even ONE pin per day.
• Individuals should invest in land or labor to earn the
highest possible return
Wage Rates
• Wage rates would be higher for trades that
were more difficult to learn, because people
would not be willing to learn them if they were
not compensated by a higher wage.
• Gave rise to the modern concept of Human
Capital.
• Wage rates would also be higher for those
engaged in dirty or unsafe occupations like coal
mining, butchering, and hangmen,
• Work is compensated by differences in pay.
Private vs Public ownership
• Privately owned things tend to used
more efficiently and cared for better.
• Publically owned things tend to be
abused for short term gain and have
neglected care.
Taxes
• A tax is a forced transfer of wealth and will
lessen the incentive to do what is taxed.
• If we tax work, we get less work
• If we tax smoking, we get less smoking
• We should change to a consumption tax
• Laissez-Faire Capitalists prefer a national sales
tax over income, SS, Medicare, Estate, Capital
Gains, & Dividend taxes
Invisible Hand
• Term used by Adam Smith to describe the natural force that
guides free market capitalism through competition for
scarce resources.
• According to Adam Smith, in a free market each participant
will try to maximize self-interest, and the interaction of
market participants, leading to exchange of goods and
services, enables each participant to be better of than
when simply producing for himself/herself.
• He further said that in a free market, no regulation of any
type would be needed to ensure that the mutually
beneficial exchange of goods and services took place, since
this "invisible hand" would guide market participants to
trade in the most mutually beneficial manner.
Adam Smith and the Invisible Hand
• Adam Smith (1723-1790) saw prices as the
force that directed resources into activities
where they were most valuable
• Prices told both consumers and firms the
“worth” of the good.
• Smith’s somewhat incomplete explanation for
prices was that they were determined by the
costs to produce the goods.
29
Adam Smith and the Invisible Hand
• Since labor was the primary resource used,
this led Smith to embrace a labor-based
theory of prices.
– If catching deer took twice as long as catching a
beaver, one deer should trade for two beaver (the
relative price of a deer is two beaver’s).
30
Explain Adam Smith’s “Invisible Hand” theory. What are the
forces that drive the hand? What are the benefits?
All of the misery was observed by two
important men: Malthus and Ricardo.
Malthus and Ricardo
• Thomas Malthus and David Ricardo take
laissez-faire capitalism to extremes.
• Malthus thinks populations grow faster than
food supply; wars, epidemics, etc. kill off extra
people or misery and poverty result.
• Ricardo envisions a permanent, poor
underclass providing cheap labor.
Thomas Malthus and David Ricardo
• Thomas Malthus wrote in An Essay on the Principle
of Population (1798) that poverty, famine, and
misery were unavoidable because population was
increasing faster than the food supply.
• David Ricardo stated that rapid population growth
would only lead to fierce competition for jobs,
lower wages, and higher unemployment.
• Both opposed government aid to the poor; the poor
could help themselves by working hard, saving their
earnings, and having fewer children.
Thomas Malthus
• wrote “An Essay on the Principle of
Population”
• predicted population would outpace the
food supply leading to widespread poverty
• saw effects of the population explosion
• thought only checks on population were
natural methods: war, disease, & famine
• Malthus was a political economist who was concerned about,
what he saw as, the decline of living conditions in nineteenth
century England.
• He blamed this decline on three elements:
– The overproduction of young;
– the inability of resources to keep up with the rising human
population;
– and the irresponsibility of the lower classes
• To combat this, Malthus suggested the family size of the lower
class ought to be regulated such that poor families do not
produce more children than they can support.
• Does this sound familiar? China has implemented a policy of
one child per family (though this applies to all families, not just
those of the lower class).
Malthus said that mankind was condemned to
overpopulation and “checks” on the population by
war, famine, disease and mother nature (earthquakes,
floods, drought)
Though not a
cruel man, his
underlying idea
was that one
should not
improve the lot
of man, because
if things get
better, they will
just “breed”
more.
As the population grows, this will result in
another cycle of “checks” by famine, disease,
wars and mother nature.
So, said Malthus:
don’t make things
better. If its too
good people will
have more kids—
and the cycle will
repeat itself.
Malthus could not
foresee that in the
Industrial World,
people would begin to
limit the size of their
families as health and
education improved.
Also, as the economy expanded, even large
families would be successful—and many of
your grandparents came from families of 7 or
more children.
Ricardo was a “sidekick” of Malthus. He spoke
of an “Iron Law” of wages: when there are too
many workers, wages go down. But when there
are fewer workers, wages go up.
David Ricardo and Diminishing
Returns
• David Ricardo (1772-1823) believed that labor
and other costs would rise with the level of
production
– for example, as new less fertile land was
cultivated, it would require more labor
• This increasing cost argument is now referred
to as the law of diminishing returns
45
Capital system political cartoon.
Political Cartoons
• 'Punch' cartoon, 1894:
Important meeting of
smoke makers
Political Cartoon
• 'Punch' cartoon, 1847:
A boy falls through the
gap between 'voluntary'
and 'state' education
Capitalism
• Positive Effects:
–Competition led to progress
• Negative Effects:
–Unequal distribution of wealth led
to social unrest
Industrial Capitalism –
Positive Effects
• Unprecedented exploration and technological advancements---major
economic growth
• Less responsibilities for govt…more freedom
• War less likely.
• Urbanization opens people’s minds to new ideas.
• New ideas makes society more complex and advanced in terms of
technology, science, etc…
• Economic production centralized
• Encourages a strong work ethic---motivated by greed---forces people
to work harder and improve
• Allows for the best prices for quality products
• Growth and importance of the middle class
Industrial Capitalism –
Negative Effects
• Destroys important human values, replacing even
religious belief with naked exploitation---child labor,
etc…
• Undermines an individual’s sense of personal value in
one’s work---unfair wages, hours, conditions
• Undermines human relationships; all relationships are
based on cash.
• Destroys human freedom. The only freedom it protects
is free trade.
• Allows for monopolies
• Allows for problems to develop unchecked…bigger issue
later
• One mistake can blow up the economy
Negative of
LaissezFaire
Capitalism:
Monopolies
Social Darwinism
• Social Darwinism is a belief, popular in the late
Victorian era in England, America, and elsewhere,
which states that the strongest or fittest should
survive and flourish in society, while the weak and
unfit should be allowed to die.
• The theory was chiefly expounded by Herbert
Spencer, whose ethical philosophies always held
an elitist view and received a boost from the
application of Darwinian ideas such as adaptation
and natural selection.
Herbert Spencer
• Herbert Spencer, the father of Social Darwinism as an ethical theory, was thinking
in terms of elitist, "might makes right" sorts of views long before Darwin
published his theory.
• However, Spencer quickly adapted Darwinian ideas to his own ethical theories.
• The concept of adaptation allowed him to claim that the rich and powerful were
better adapted to the social and economic climate of the time, and the concept of
natural selection allowed him to argue that it was natural, normal, and proper for
the strong to thrive at the expense of the weak.
• After all, he claimed, that is exactly what goes on in nature every day.
• However, Spencer did not just present his theories as placing humans on a
parallel with nature.
• Not only was survival of the fittest natural, but it was also morally correct.
• Indeed, some extreme Social Darwinists argued that it was morally incorrect to
assist those weaker than oneself, since that would be promoting the survival and
possible reproduction of someone who was fundamentally unfit.
Applications of Social Darwinism
• At the time that Spencer began to promote Social Darwinism, the
technology, economy, and government of the "White European"
was advanced in comparison to that of other cultures.
• Looking at this apparent advantage, as well as the economic and
military structures, some argued that natural selection was playing
out, and that the race more suited to survival was winning.
• Some even extended this philosophy into a micro-economic issue,
claiming that social welfare programs that helped the poor and
disadvantaged were contrary to nature itself.
• Those who reject any and all forms of charity or governmental
welfare often use arguments rooted in Social Darwinism.
Applications of Social Darwinism
• Social Darwinism was used to justify numerous exploits which we
classify as of dubious moral value today.
• Colonialism was seen as natural and inevitable, and given
justification through Social Darwinian ethics - people saw natives as
being weaker and more unfit to survive, and therefore felt justified
in seizing land and resources.
• Social Darwinism applied to military action as well; the argument
went that the strongest military would win, and would therefore be
the most fit.
• Casualties on the losing side, of course, were written off as the
natural result of their unfit status.
• Finally, it gave the ethical nod to brutal colonial governments who
used oppressive tactics against their subjects.
Applications of Social Darwinism
• Social Darwinism applied to a social context too, of
course.
• It provided a justification for the more exploitative
forms of capitalism in which workers were paid
sometimes pennies a day for long hours of
backbreaking labor.
• Social Darwinism also justified big business' refusal
to acknowledge labor unions and similar
organizations, and implied that the rich need not
donate money to the poor or less fortunate, since
such people were less fit anyway.
Applications of Social Darwinism
• In its most extreme forms, Social Darwinism has been
used to justify eugenics programs aimed at weeding
"undesirable" genes from the population; such programs
were sometimes accompanied by sterilization laws
directed against "unfit" individuals.
• The American eugenics movement was relatively popular
between about 1910-1930, during which 24 states passed
sterilization laws and Congress passed a law restricting
immigration from certain areas deemed to be unfit.
• Social Darwinist ideas, though in different forms, were
also applied by the Nazi party in Germany to justify their
eugenics programs.
Applications of Social Darwinism
• At its worst, the implications of Social Darwinism were
used as scientific justification for the Holocaust.
• The Nazis claimed that the murder of Jews in World War II
was an example of cleaning out the inferior genetics.
• Many philosophers noted evolutionary echoes in Hitler's
march to exterminate an entire race of people.
• Various other dictators and criminals have claimed the
cause of Social Darwinism in carrying out their acts.
• Even without such actions, Social Darwinism has proven to
be a false and dangerous philosophy.
Positives to Social Darwinism
• Not all Social Darwinists were quite so extreme,
and Social Darwinism was not the only justification
of colonialism, imperialism, and other intrusive
exploits (the "white man's burden" was another,
almost completely opposite, justification).
• In fact, the early Social Darwinists, who regarded
the theory as a logical extension of laissez-faire
capitalism, would have been appalled at the use of
the concept to promote state-run eugenics
programs.
Positives to Social Darwinism
• Though its moral basis is now generally opposed, Social Darwinism
did have some favorable effects.
• Belief in Social Darwinism tended to discourage wanton handouts
to the poor, favoring instead providing resources for the fittest of all
walks of life to use, or choosing specific, genuinely deserving people
as recipients of help and support.
• Some major capitalists, such as Andrew Carnegie, combined
philanthropy with Social Darwinism; he used his vast fortune to set
up hundreds of libraries and other public institutions, including a
university, for the benefit of those who would choose to avail
themselves of such resources.
• He opposed direct and indiscriminate handouts to the poor because
he felt that this favored the undeserving and the deserving person
equally.
Negatives to Social Darwinism
• Social Darwinism's philosophical problems are rather daunting, and fatal to it as a
basic theory (though some have applied similar ideas).
• First, it makes the faulty assumption that what is natural is equivalent to what is
morally correct.
• In other words, it falls prey to the belief that just because something takes place
in nature, it must be a moral paradigm for humans to follow.
• This problem in Social Darwinist thinking stems from the fact that the theory falls
into the "naturalistic fallacy", which consists of trying to derive an ought
statement from an is statement.
• For example, the fact that you stubbed your toe this morning does not logically
imply that you ought to have stubbed your toe!
• The same argument applies to the Social Darwinists' attempt to extend natural
processes into human social structures.
• This is a common problem in philosophy, and it is commonly stated that it is
absolutely impossible to derive ought from is (though this is still sometimes
disputed); at the very least, it is impossible to do it so simply and directly as the
Social Darwinists did.
Capitalism vs Socialism
• Private ownership vs Public ownership
• Creation of wealth vs Distribution of wealth
• Forced transfer of wealth always destroys
wealth
• Countries that follow Capitalism get richer
• Countries that follow Socialism get poorer (or
not as rich as they would have been)
“From each according to his/her
ability, to each according to his/her
work."
Socialism
Socialism
• a reaction to the Industrial
Revolution, characterized by:
– rejection of the idea that the wealthy “deserve their
wealth” because they created it - but instead an
argument that wealthy exploit working classes
– vision of society based on economic equality
– belief in cooperation, production for benefit of all
– idea of public ownership of means of production
Socialism: Reaction against capitalism
• Belief that the means of production—capital, land,
raw materials, and factories—should be owned and
controlled by society. A lot less private ownership
of businesses
• European workers began associating themselves
with political parties who believed in increasing the
rights for the laboring class.
• They were called socialists.
• Production is given over to public control, and the
profits from manufacturing are used for public
welfare, not private gain.
Socialism defined
• Text: “An ideology arguing that
citizens are best served by policies
focused on meeting the basic needs
of the entire society rather than on
serving the needs of individuals as
individuals.”
Socialism
• Ancient roots – Judeo-Christian belief in the
common good, which takes precedence over
individual desires
• Term “socialism” coined in 1827 by British socialist
Robert Owen to describe his view of a cooperative
new society.
Socialism’s emergence
• Liberal political parties in 19th century Europe failed
to address the desperate needs of working people.
– Classical liberalism views poverty as an individual choice
or failure, not the result of social structures. Also
suspicious of big government.
– Socialism provides a different conception of individual
responsibility & of government.
Socialism’s principles
• Egalitarianism or equality.
• Humankind will be unified and cooperative, once wealth
is owned and used for the common good.
• Capitalism exploits the very people who create society’s
wealth.
• Moralism.
• Division of rich & poor is evil;
• capitalism is fundamentally unjust.
• Instead, the ideal future emphasizes peace, social justice
and true liberty for all.
Social Democracy
• A variation on socialism that argues that socialism
and democracy can work together.
• Example: British Labour Party.
• Change comes through peaceful democratic
processes like elections.
• Democratic governments should promote economic
- as well as political - freedom & equality.
Socialism
•
•
•
•
Public Ownership
Restricted Trade
High Taxes
Heavy Regulation
Early Socialism
• Robert Owen
– Believed that competition caused society’s problems,
and if cooperation replaced competition, life would
improve
– Reconstructed and improved working and living
conditions of textile mill workers of New Lanark,
Scotland.
– In 1825, he bought New Harmony, Indiana, where he
tried to set up a cooperative community.
– He did not have the same success with New Lanark,
thus feuding with the residents of the town and he
moving back to Great Britain.
Robert Owen cont.
• David Dale had originally built a large number of
houses close to his factories in New Lanark.
• By the time Owen arrived, over 2,000 people lived
in New Lanark village.
• One of the first decisions he took when he became
owner of New Lanark was to order the building of a
school.
• He was convinced that education was crucially
important in developing the type of person he
wanted.
Robert Owen cont.
• With the financial support of several businessmen
from Manchester, Owen purchased Dale’s four
textile factories in New Lanark for £60,000.
• Under Owen’s control, the Chorton Twist Company
expanded rapidly.
• However, he was not only concerned with making
money, he was also interested in creating a new
type of community at New Lanark.
• Owen believed that a person’s character is formed
by the effects of their environment.
Robert Owen cont.
• Owen was convinced that if he created the right
environment, he could produce rational, good and
humane people.
• He argued that people were naturally good but
they were corrupted by the harsh way they were
treated.
• For example, Owen was a strong opponent of
physical punishment in schools and factories and
immediately banned its use in New Lanark.
Owen cont.
• When Owen arrived at New Lanark children from as
young as five were working for thirteen hours a day
in the textile mills.
• He stopped employing children under ten and
reduced their labor to ten hours a day.
• The young children went to the nursery and infant
schools that Owen had built.
• Older children worked in the factory but also had to
attend his secondary school for part of the day.
Owen cont.
• Owen’s partners were concerned that these
reforms would reduce profits.
• Unable to convince them of the wisdom of
these reforms, Owen decided to borrow
money from Archibald Campbell, a local
banker, in order to buy their share of the
business.
• Later, he sold shares in the business to men
who agreed with the way he ran his factory.
Owen cont.
• Robert Owen hoped that the way he treated
children at his New Lanark would encourage other
factory owners to follow his example.
• It was therefore important for him to publicize his
activities.
• He wrote several books including The Formation of
Character (1813) and A New View of Society (1814).
• In 1815 he sent detailed proposals to Parliament
about his ideas on factory reform.
• This resulted in Owen appearing before Robert Peel
and his House of Commons committee in April,
1816.
Owen cont.
• Owen toured the country making speeches on his
experiments at New Lanark.
• He also published his speeches as pamphlets and sent
free copies to influential people in Britain.
• In one two month period he spent £4,000 publicizing
his activities.
• In his speeches, Owen argued that he was creating a
“new moral world, a world from which the bitterness of
divisive sectarian religion would be banished.”
• His criticisms of the Church of England upset many
people, including reformers such as William
Wilberforce and William Cobbett.
What are the strengths of
socialism?
• An equitable distribution
of income
• Rapid growth is possible
• No unemployment
104
What are the
weaknesses of socialism?
Inefficiencies occur
Absence of entrepreneurship
stifles growth
105
Utilitarianism
“The greatest happiness for the greatest number”
1. The right thing to do is whatever would have the
best overall consequences.
2. Which consequences matter? What’s important is
human welfare—we want people to be as well-off
as possible.
3. Each person’s welfare is equally important.
•English philosophers John Stuart Mill (1806-1873) and
Jeremy Bentham (1748-1832) were the leading proponents of
what is now called“classic utilitarianism”.
•The Utilitarians were social reformers
•They supported suffrage for women and those without
property,
•The abolition of slavery.
•Utilitarians argued that criminals ought to be reformed and
not merely punished (although Mill did support capital
punishment as a deterrent).
•Bentham spoke out against cruelty to animals.
• Mill was a strong supporter of meritocracy.
•Proponents emphasized that utilitarianism was an
egalitarian doctrine.
• Everyone’s happiness counts equally.
Basic Insights of Utilitarianism
• The purpose of morality is to make the
world a better place.
• Morality is about producing good
consequences, not having good intentions
• We should do whatever will bring the most
benefit (i.e., intrinsic value) to all of
humanity.
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Utilitarianism
Some practical implications:
1. Abolition of slavery; equal rights for
women and minorities; abolition of
child labor
2. Prison reform: deterrence and
rehabilitation, not vengeance
3. We have extensive charitable duties.
Utilitarianism & Reforms
• Utilitarianism was the
idea that society
should work for the
happiness of citizens
• It was promoted by
Jeremy Bentham, who
wanted a better code
of law, education for
all, public health
services, and better
prisons
Jeremy Bentham
• He was British philosopher
• Promoted utilitarianism- the idea that society should work
for the citizens
• To him laws should be judged by their usefulness, whether
they advanced human happiness and reduced human misery
• He called for a better code of law, education for all, a
public health service, and improved prisons
• In Constitutional Code he addressed how government should
be organized.
• He suggested the introduction of rules that would ensure the
regular attendance of members of the House of Commons.
• He pointed out that politicians should be continually
reminded that they are the “servants, not the masters, of the
public.”
Bentham cont.
• His most detailed account of his ideas on political
democracy appeared in his book Constitutional Code
(1830).
• In the book Bentham argued that political reform
should be dictated by the principal that the new system
will promote the happiness of the majority of the
people affected by it.
• Bentham argued in favor of universal suffrage, annual
parliaments and vote by ballot.
• According to him there should be no king, no House of
Lords, no established church.
• The book also included Bentham’s view that women, as
well as men, should be given the vote.
Bentham cont.
• In Constitutional Code Bentham also addressed the
problem of how the government should be organized.
• For example, he suggested the introduction of rules
that would ensure the regular attendance of members
of the House of Commons.
• Government officials should be selected by competitive
examination. The book also suggested the continual
inspection of the work of politicians and government
officials.
• Bentham pointed out they should be continually
reminded that they are the “servants, not the masters,
of the public.”
• Jeremy Bentham died in 1832.
John Stuart Mill
1806-1873
• Bentham’s godson
• Believed that happiness, not
pleasure, should be the
standard of utility
• All people should have the
right to vote---universal
suffrage
• He was one of the first to
call for women to have the
right to vote.
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John Stuart Mill
• He was a Bentham follower
• Challenged strict views of laissez faire
economics, calling on govt. to distribute national
wealth more justly by taxing income.
• Held a firm belief in individual freedom.
• On Liberty (1859) Mill stated that freedom of
thought and discussion promoted social progress
and supported extending the vote to all adults
• Believer in full democracy, Mill advocated equal
rights for women.
John Stuart Mill
• Mills added an amendment to the 1867
Reform Act
• This amendment would give women the same
political rights as men
• It was defeated by 196 votes to 73
• Mill’s attacks on colonialism in the West Indies
had made him unpopular
Socialism/Social Democracy’s similarities
with Communism/ Marxism
• Sees capitalism as exploitive, leading to
social injustice and extreme income
inequality.
• These economic conditions have adverse
effects on ordinary working people – in
terms of physical health, psychological
well-being, housing, education, etc.
Social Democracy’s similarities
with Marxism
• Both ask the question: why should those
who provide the money (capital) receive
all the profits, and those who provide the
labor receive none of the profits?
• It is labor, after all, that turns raw
materials (including cash) into something
with greater value.
Social democracy’s differences
from Marxism
• Private property not abolished, but the public
should control the use of property and make
necessities available to all.
• Individual rights not abolished but should
complement other important values such as
concern for others.
• Change can occur through an evolutionary
process that uses democratic means.
Marx’s view of Social Democracy
• Karl Marx said social democrats
were naive to think that
“enlightened capitalists” would
join with workers to form a new
society.
• Violent revolution was inevitable.
“From each according to his/her ability, to
each according to his/her need."
Communism
“The worker of the world has nothing to
lose, but their chains, workers of the
world unite.” - Marx
What is Communism?
• Communism - a government where people
shared work fairly and were paid equally.
• The word “Communism” comes from the Latin
word “Communis” which means common or
belonging to all.
Communism
• Communism – an economic system
in which all means of production
are owned by the people, private
property does not exist, and all
goods and services are shared
equally.
Origin of Communism
• It originated from the
idea proposed in
Greece.
• The ideas on what they
wanted communism to
be.
• Who first came up with
the idea of communism?
• What they believed was
wrong and right.
Communism
• In many ways, Communism was
a reaction to the Industrial
Revolution and Capitalism
Industrial Revolution
1. Inventions of new
machines
2. Bought by
capitalists
3. Displaced former
workers
4. Difference
between classes
increases
Communism
• The Industrial Revolution
intensified class struggle (rich vs.
poor)
–“Haves”(bourgeosie) take advantage
of “Have-Nots” (proletariat)
The Beliefs of Communism
• The rich get richer.
• The poor get poorer.
• People wanted to
make everything
equal.
• People never
achieved the goal.
Communism
–Workers are exploited by
employers
–The labor of workers profits
employers
The Goal of Communism
• Goal: to get rid of
social classes and
make everything
fair for everyone.
What is Communism?
• This is the symbol of
Communism – The
Hammer and the
Sickle
Hammer for the
Workers
Sickle for the
Peasants – the
farm labourers
Who are these blokes?
What is Communism?
‘Those Blokes’ wrote the ‘Communist Manifesto’
in 1847. It’s a short book – but billions of
people have read it….
This is Karl Marx, the ‘Father of
Communism’. People who believe
in his ideas are called ‘Marxists’
This is his good friend,
Frederick Engels.
Communism
• Marx and Engels called for workers
of the world to unite and overthrow
the rule of the rich.
–Wealth would be redistributed
–Classes and private property would
cease to exist
Communism
The immediate aim of the Communists is the… formation of
the proletariat into a class, overthrow of the bourgeois
supremacy, conquest of political power by the proletariat." Karl Marx, Communist Manifesto, 1848
Communism is characterized by:
• idea that history is guided by class struggle
• desire to establish a classless, stateless society
• belief in the abolition of all private ownership,
• belief that this will come about through revolution
Communism vs. Socialism
• Communism emerged out of Socialism – and
early communists considered themselves
socialist
• For modern communists: Communism is an
advanced stage of Socialism  Socialism is the
stage between Capitalism (which is bad) and
Communism (which is perfect)
• Communism in practice has moved significantly
away from the theory – disconnecting it from
Socialism
Communist Manifesto
1. The history of class
struggle
•
•
•
Proletariat vs.
Bourgeoisie
(oppressor and the
oppressed)
Exploitation of the
working class
Surplus value of
labor
Communist Manifesto
2. The nature of the new working class
the proletariat
• the abolition of property and family
• the necessity of revolution to bring about
the overthrow of the bourgeoisie
• Ultimately resulting in end of capitalism,
other forms of government, and a
workers’ paradise
Communist Manifesto
2. (cont.)
• Dictatorship of the proletariat – all
economic activity will be run by the state,
governed by the working class
• Concluding with a Utopian type of society
in which government becomes
unnecessary
What is Communism?
•
•
•
Marx and Engels studied the history of the world’s economies.
This means the way that power, industry and finance are controlled.
They saw the way countries developed in stages.
Communism
Socialism
Capitalism
Feudalism
Primitive
Communism
Explain these please!
What is Communism?
This is how humans first lived together – in small tribes.
Primitive means ‘not very advanced’ e.g. hunting and
gathering.
Primitive
Communism
Communism means that everything was shared amongst the
tribe – food, jobs, belongings.
No-one owned land. Eventually a group comes to power – this
leads to Feudalism…
Primitive Communism
• People find food for
themselves and trade
for needed goods.
• No companies or
governments involved
• This system is found
among herders or small
farmers
What is Feudalism?
Under feudalism, a
king or emperor or
chief becomes the
ruler over all the
people.
Feudalism
Primitive
Communism
The people
are kept
uneducated
and told that
god chose
the king to
rule. The
church helps
the king this
way.
He gives land
and privileges
to ‘nobles’ who
rule the people
for him.
As trade develops,
some people get
richer. This leads to
Capitalism…..
What is Capitalism?
The business
owners or
capitalists get
richer while the
workers do all
the hard work.
The
capitalists
get more
power to
serve their
own
interests.
Feudalism
Capitalism
Capitalism creates a huge workingclass of people who soon get angry at
the way they are treated. They
organise in unions and demand
changes. This will lead to a revolution
and Socialism…
Capitalism
• Sometimes called
“capitalism” or “market
economy.” Ex. U.S.A.
• People own companies
and decide what to
produce to make
consumers happy.
• Business owners can earn
big profits or can lose
their money if a business
fails.
• Some businesses sell
stock to get more capital
to invest.
New York Stock Exchange
INDUSTRIAL REVOLUTION CONTEXT…
Communist Views on Capitalism.
• Revolutionary Beliefs cont.
– Believed that capitalism was only a temporary phase
• Proletariats, or working class, were truly productive
• In the face of economic hardship, the bourgeoisie’s (middle class)
control would be seized by the proletariats. Then, the proletariats
would build a society in which the people owned everything.
Without private property, classes would wither away and so would
the government.
• The effect of the previous causes would result in communism,
who’s literal principle is “from each according to his ability, to each
according to his need.”
What is Socialism?
The workers
take control of
the country to
produce things
for everyone.
Because nothing is
made for profit, all
people benefit from
education and health.
Socialism
Capitalism
In the Socialist revolution
all the rulers – kings,
churches, capitalists are
removed.
These ideas
spread across
the world to
create
Communism…
.
Socialism
Workers arrive at a factory in the old
Soviet Union in 1929.
• The government makes
economic decisions
about what should be
produced, how much it
should cost.
• Two types of command
economies are socialism
and communism.
Socialism: Command Economies
Venezuela’s President Hugo
Chavez
• In socialism, the
government runs some
industries, such as oil, and
uses profits to pay for health
care, education. Ex.
Venezuela
• In communism, the
government runs all
industries, owns all
property, sets wages, and
prices, and people must do
as they are told. Ex. North
Korea
What is Communism?
The remaining capitalists
put up a bitter fight, but the
will of the people will
always win.
Communism
Socialism
As everyone now works together,
war is a thing of the past – armies
are not needed. Sharing means no
police are needed. Everything is
provided by the people – so money
becomes a thing of the past.
All human activity
goes towards
benefiting each other
– allowing all to live
their lives to the
fulestl.
Marx’s Key Ideas
1. Slave system gave way to feudal
economy
2. Feudal economy broke down with
growth of manufacturing, towns,
navigation & transportation, emergence
of middle class
3. Industrial capitalism emerged, with only
two classes: proletariat and bourgeoisie.
Communist Revolution Inevitable
• Capitalism creates huge factories.
• Workers become concentrated and
begin to organize for legal reforms
(higher wages/better working
conditions).
• Their effort fails.
• Fierce competition between capitalists
leads to new technologies, which leads
to lower costs.
Communist Revolution Inevitable
In the competition, some capitalists go bankrupt
& have to become workers, and many workers
lose their jobs as new technology replaces them.
(Consider reports that U.S. workers’ productivity is going
up. Fewer workers are making more goods, which
means technology is replacing them.)
Communist Revolution
• Revolution will eliminate private property. No
longer will man have the means of exploiting
another man.
• Bourgeoisie will fight, so revolution will be
violent.
• A dictatorship of the proletariat will follow to
weed out remaining capitalist elements.
The Worker’s Utopia
• In the end, a classless society with no
more oppression or internal
contradictions.
• People will be free to choose how
they labor, and can be creatively
productive.
• They will be able to live to their
fullest potential.
•
•
•
•
•
further, this change follows a regular scientific pattern:
FEUDALISM
CAPITALISM
COMMUNISM…
acc. to this pattern communism is inevitable
Explain Marx’s theory of a class struggle. How does this
struggle end? How does this cartoon relate to this theory?
Communism vs. Capitalism
• Capitalists say that people have
no reason to do a good job in
communism because everyone
gets the same pay. Products
are boring and poorly made.
• Communists say that capitalism
is unfair to the poor because
people at the top of the
company get rich while
workers get low wages. They
also say capitalists wipe out
little companies and destroy
the environment to get money.
Communism vs. Capitalism
• The Cold War from 19451991 between U.S. and
Soviet Union was based on
getting nations to line up on
the communist side or
capitalist side.
• Today Russia allows some
capitalism.
• Communist China also
allows some capitalism.
Factory workers in China
A Classification of Economic Systems
U.S., Canada,
China, Russia
W Europe, Japan
Pure
Pure
capitalism
socialism
Cuba, N. France, Mexico, Hong Kong
Latin
Sweden,
Korea
America
Israel
161
Putting Politics & Economics
Together
• Communist countries have been dictatorships in
which leaders have tried to control all aspects of the
country.
• But not all dictators are Communists.
• Some want capitalist companies to come in and
create jobs Ex. Batista in Cuba before Castro.
• Democracies are sometimes capitalist and
sometimes socialist.
• Voters may elect a leader who promises to help the
poor through socialism.
• Or voters may prefer capitalism as a way to create
more jobs.