Reforming the Industrial World

Was there a Need for Reform?

• During the 19th century, the Industrial Revolution not only revolutionized the way things were made, but also created many problems.

• Make a list of the areas of society in which reforms were necessary.

Tensions Created By the Industrial Revolution

• The gap between the rich and poor widened• Business owners/leaders argued that the

government should stay out of economic affairs.• Reformers argued the government needed to

play an active role to improve the conditions for the poor.

• Workers demanded better wages, more rights, and protection.

• Workers form labor unions increase their influence, often times clashing with business owners

Urbanization

• Significant Population Growth• Move to the cities--shift of orientation

from countryside to city.• Housing, public health, crime,

sanitation• Poor working conditions• Child labor; female labor

Social Impacts: new social classes

• Working class• Child and female

labor • Working

conditions

Class Consciousness

• Middle Class—bourgeoisie• Working Class—proletariat• Peasant• Landed Gentry—old aristocracy

The Philosophers of Industrialization & their Economic Philosophies

Philosopher Economic Philosophy

Adam Smith laissez-faire

Thomas Malthus

laissez-faire capitalism

David Ricardo laissez-faire capitalism

Jeremy Bentham

utilitarianism

John Stuart Mill utilitarianism

Robert Owen utopian socialism

Karl Marx Marxism/communism

Friedrich Engels Marxism/communism

Laissez-faire• Term is French in origin— “let people do as

they please.”• Economic policy stemmed from the French

economic philosophers of the Enlightenment. • The Enlightened Philosophers argued:

– against government intervention in the economy and the use of placing heavy tariffs on foreign goods.

– that government regulations only interfered with production and wealth.

– if government allowed free trade, the economy would prosper

Laissez-faire

• Definition of laissez-faire: The idea that the government should not interfere with or regulate industries and business.– An economic policy of letting owners and

business set working condition without interference.

– This policy favors a free market unregulated by the government.

• What are the advantages/disadvantages of a laissez-faire economy?

Capitalism

• Definition of capitalism: an economic system based on private ownership and on the investment of money in business ventures in order to make a profit

• These ideas helped bring about the Industrial Revolution and supporters of capitalism believed its success was due in part by the fact that the government did not meddle in economics.

ECONOMIC LIBERALISM

• Adam Smith, The Wealth of Nations, 1776– Laissez-faire economics– “Hidden hand”

• Thomas Malthus (1766-1834), Essay on the Principles of Population– Geometric Growth of Population– Arithmetic Growth of Food Supply

• David Ricardo (1772-1823), Principles of Political Economy– “Iron Law of Wages”

Adam Smith• Professor at the

University of Glasgow, Scotland

• Defended the idea of a free economy and free markets in his book, The Wealth of Nations (1776):

• Economic liberty = economic progress

• Believed the government should not interfere with the economy

Adam Smith1723-1790

Adam Smith• His arguments rested on

what he called the Three Natural Laws of Economics:

1. Law of self interest— People work for their own good.

2. Law of competition— Competition forces people to make a better product.

3. Law of supply & demand— Enough goods would be produced at the lowest possible price to meet the demand in a market economy Adam Smith

1723-1790

“Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage, naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society….” Adam Smith

“…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 was no part his intention.” Adam Smith

The Hidden Hand of the laissez-faire economy

The Philosophers of Capitalism

Thomas Malthus (1766-1834)

David Ricardo

(1772-1823)

Thomas Malthus• Supported the

basic ideas of Adam Smith and that natural laws governed economic life

• His ideas, (along with David Ricardo’s,) were the foundations of laissez-faire capitalism.

Thomas Malthus (1766-1834)

Thomas Malthus• In his essay, An

Essay on the Principle of Population (1798), he argued that population tended to increase more rapidly than the food supply.

• Argued that without wars, famine, or epidemics to control the population, most people would be poor would suffer.

Thomas Malthus (1766-1834)

Thomas Malthus• He urged people to

have less children to avoid overpopulation and the chance of large families becoming poor and to avoid suffering.

• Predictions became a reality during the 1840s, though the food supply eventually increased, living conditions improved, and people began to have less children.

Thomas Malthus (1766-1834)

Thomas Malthus1766-1834

“Population, when unchecked, increases in a geometrical ratio. Subsistence only increases in an arithmetical ratio. A slight acquaintance with numbers will show the immensity of the first power in comparison of the second.” Thomas Malthus

Who is mainly responsible for poverty?

David Ricardo• A wealthy stockbroker• Believed the poor had

too many children.• Elaborated on Malthus’s

theory of economics in his book Principles of Political Economy & Taxation (1817):– Believed a permanent

underclass would always be poor

– Believed as the population increased, wages would decrease (workers paid less)

David Ricardo (1772-1823)

David Ricardo• Principles of Political

Economy & Taxation (1817) continued:– “Iron law of wages”– When wages are high,

families have more children

– More children = more workers

– More workers = lower wages.

– Thus, higher wages and other reforms will not lead to real improvements.

David Ricardo (1772-1823)

Laissez faire thinkers, such as Adam Smith, Thomas Malthus, and David

Ricardo all:• Opposed government intervention in the

economy, which included government efforts to help poor workers.

• Believed people should be left to improve their lot through thrift, hard work, and limiting the size of their families.

• Argued creating a minimum wage and better working conditions would:

1. Upset the free market system2. Lower profits3. Undermine the production of wealth in society

Discussion: Laissez-faire Capitalism and the

Philosophers• How were “workers” viewed by people like Smith, Malthus, and Ricardo?

• How did they view the poor? Was their view favorable or unfavorable? Explain your answer.

• According to Malthus and Ricardo, what affect did population growth have upon society?

• What flaws (if any) can you find with laissez-faire capitalism?

• Could a society have a capitalist economy in which a government could impose restrictions? Explain your answer. (Hint: Think about the U.S. economy.)

Socialism• Grew out of the Enlightenment faith in

progress, its belief in the goodness of human nature, and its concern with social justice.

• Supporters of socialism believed:– Governments should intervene in business– Wealthy people or governments had an obligation

to take action to make peoples lives better (i.e. better wages, working/living conditions, distribute wealth/power equitably)

– Condemned the evils of industrial capitalism, which they argued, created the huge gap between the rich and the poor.

– In a society in which would operate for the benefit of all its members, not just for the wealthy.

Socialism• Definition of socialism: an economic

system in which the factors of production are owned by the public and operate for the welfare of all.

• Under socialism, people as a whole would own and operate the means of production—the farms, factories, railways, mines, and other large businesses that produced and distributed goods.

Utilitarianism• A form of socialism• Definition of utilitarianism: the theory,

proposed by Jeremy Bentham in the late 1700s, that government actions are useful only if they promote the greatest good for the greatest number of people.– Idea that the goal of society should be to bring

about the greatest happiness for the greatest number of people.

– This theory provided that the government intervene in business and the economy to bring about economic and social equality, fair working conditions, and improved living conditions.

The Philosophers of Utilitarianism

Jeremy Bentham (1748-1832)

John Stuart Mill(1806-1873)

Jeremy Bentham• Modified the ideas of Adam

Smith• Introduced utilitarianism in the

late 1700s• He strongly supported

individual freedom, which he believed guaranteed the greatest happiness.

• Believed people should:– Judge ideas, institutions, and

actions on the basis of their utility, or usefulness

– Be free to pursue his/her own advantage without interference from the state (government.)

Jeremy Bentham (1748-1832)

Jeremy Bentham Bentham’s thoughts about the government:

– The government should try to promote the greatest good for the greatest amount of people.

– Government policy was only useful if it promoted this goal.

– Laws or actions should be judged by their “utility.”

– Did they [laws] provide more pleasure (happiness) than pain?

– Believed the government needed to be involved in the economy in certain circumstances.

Jeremy Bentham (1748-1832)

John Stuart Mill• Philosopher &

economist, led the utilitarianism in the 1800s

• Questioned unregulated capitalism

• Believed it was wrong that workers led deprived lives and often meant starving to death

• Wished to help ordinary through governmental policies that would create an equal division of profits

John Stuart Mill(1806-1873)

John Stuart Mill• While he believed in

individual freedom, he argued the government needed to improve the harsh life of the working class.

• Like other utilitarian’s, Mill worked for reforms in many areas affecting workers, the poor, child labor, and public health.

• Favored cooperative systems of agriculture

• Supported women’s rights

John Stuart Mill(1806-1873)

John Stuart Mill• Suffrage: argued workers

and women should have the right to vote– These groups could then

use their political power to win reforms.

• Pushed for governmental reforms in the following areas:– the legal system, including

prison systems– education reform– Class system: he wished

the government would abolish the great disparity between the rich and the poor.

John Stuart Mill(1806-1873)

Utopia• Definition of utopia: an

ideal society; an imaginary land described by Sir Thomas More in his book Utopia—hence, an ideal place.– In Greek, utopia means “no

place.”– In More’s book, greed,

corruption, and war had been weeded out. Because there was no greed in Utopia, there was no need for money.

• Influenced the political and economic philosophy of utopian socialism

Sir Thomas More (1478-1535)

Utopian Socialism• Early socialists were called utopians.• Early socialists tried to build self-

sufficient communities. In this community:– all work and all property was owned in

common.– They believed that no difference between

rich & poor = no fighting between people.

• Why do you think utopians were referred to as “impractical dreamers?”

Robert Owen• Born a poor Welsh boy

—later became a successful mill owner.

• He refused to use child labor.

• Lobbied the government to pass laws limiting child labor and encouraged the organization of labor unions.

Robert Owen(1771-1858)

Robert Owen• Owen’s vision of ‘Utopia’

– Built a factory and a model village in New Lanark, Scotland.

– Built homes for workers, opened a school for children.

– Workers were generally treated well, illustrating an employer could offer decent living and working conditions while still running a profitable business.

• By the 1820s, people visited New Lanark to study Owen’s reforms

Robert Owen(1771-1858)

The Philosophers of Marxism • Definition of Marxism: A radical type of socialism

introduced by Karl Marx, a German journalist

Karl Marx(1818-1883)

Friedrich Engels

(1820-1895)

Karl Marx• A German journalist• Agitated for reform as a

young man.• A socialist who despised

capitalism, which he argued, created prosperity for a few and poverty for many.

• Forced to leave his homeland because of his radical ideas.

• First lived in Paris and then settled in London, where he met Friedrich Engels.

• Along with Engels, they outlined their economic ideas in a 23-page pamphlet called the Communist Manifesto

Karl Marx(1818-1883)

Friedrich Engels• A German socialist residing

in London, England

• His father owned a textile mill in Manchester, England.

• Teamed up with Karl Marx, to outline their economic ideas in a 23-page pamphlet called the Communist Manifesto Friedrich Engels

(1820-1895)

Marx & Engels: The Communist Manifesto

• Marx and Engels argued that human societies have always been divided into two warring classes:

– The middle class, “haves” or employers, called the bourgeoisie

• The wealthy controlled the means of producing goods

– The working class, “have-nots” or employees called the proletariat

• The poor performed backbreaking labor under terrible conditions.

Marx & Engels: The Communist Manifesto

• The Industrial Revolution enriched the wealthy and impoverished the poor.

• Marx and Engels Predicted that the workers would overthrow the owners:– “the proletarians have nothing to lose but

their chains. They have a world to win. Workingmen of all countries unite.”

The Future According to Marx

• Marx argued the capitalist system would destroy itself in the following ways:– Factories will drive small artisans out of

business

– Small number of manufacturers will control the wealth, causing a huge gap between classes

– The large proletariat will revolt, seize factories & mills from capitalists

Karl Marx(1818-1883)

not only anticipated the ability

of capitalism to achieve unprecedented rates of economic

growth

but also predicted the exacerbation of income

inequality: a larger pie but more disparate slices

Marx and Alienated Labor (Labour)

• “The devaluation of the human world increases in direct relation with the increase in value of the world of things. Labour does not only create goods; it also produces itself and the worker as a commodity, and in the same proportion as it produces goods. 1818-1883

Karl Marx (1818-1883)Karl Marx (1818-1883)

The Future According to Marx

• Results of the proletarian revolt:– Workers will share in the profits– Economic equality will be established for

all– Cooperative living & education will yield

a classless society and the state/government will disappear.

• The final phase of Marxism is called communism

Communism• Definition of communism: an economic

system in which all means of production—land, mines, factories, railroads, and businesses—are owned by the people, private property doesn’t exist, and all goods and services are shared equally.

• A form of socialism that sees class struggle between employers and employees as unavoidable.

Communism

• Economics as the Foundation• Mode of Production• “The history of all hitherto existing society

is the history of class struggle.”• Theory of “surplus value.”• Dialectical Materialism• Mode of Production and material

conditions drive ideas• Violent Revolution as inevitable• Classless Society -- bourgeois state will

“wither away.”

Short-Term Results of Communism

• 1848-1849:– Many revolts in Europe– European leaders put down revolts

• 1900s:– Marxism inspired revolutionaries in Russia

(Lenin), China (Mao Zedong), and Cuba (Fidel Castro).

– These leaders adapted Marxism to their own specific situations and beliefs