I. The Growth of Capitalism

A.Laissez-faire: Economic policy of letting owners of

industry and business operate without interference

from government. (“let do”)

1. Based in the ideas of French Economic philosophers

of the Enlightenment.

2. Argued against tariffs (taxes) on foreign goods.

3. Government regulations interfered with wealth

production.

A. Adam Smith: wrote The Wealth of Nations about a

free economy (free markets) and the 3 laws of

economics.

1. Law of Self-Interest- People work for their own good.

2. Law of Competition- forces people to make a better

product or someone else will.

3. Law of Supply and Demand- enough goods would be

produced at the lowest possible price to meet

demand.

A. Capitalism: An economic theory based on the beliefs laissez-faire

economics, Adam Smith and other economists.

1. Capitalism: An economic system in which the factors of production

are privately owned and money is invested to make a profit.

2. Thomas Malthus- population grows faster than food supply.

Without wars/epidemics to kill of extra people, most were destined

to be poor.

3. Laissez-faire thinkers opposed government efforts to help workers

such as the minimum wage/improved (regulated) working

conditions. They felt such regulations would lower profits and

interfere with the production of wealth.

I. Socialism: An economic system developed by individuals who

thought the government should intervene to improve people’s

lives.

A. Jeremy Benthem: introduced the idea of Utilitarianism in the late

1700s.

1. Utilitarianism: People should judge ideas, institutions and actions

based on their utility/usefulness.

2. Government should promote the greatest good for the greatest

number of people.

3. Government should only pursue policies that promoted this goal.

4. In general, an individual should be free to pursue his/her own

advantage without interference from the state.

A. John Stuart Mill: felt that it was wrong that

workers should lead such awful lives.

1.Wanted government policies that would lead to a

more equal division in profits.

2.Wanted a cooperative system of agriculture.

3.Give women the right to vote.

4.Governments should adopt policies to do away

with great differences in wealth.

A. Socialism: an economic system where the factors of

production are owned by the public (the government) and

operate for the good of all.

1. The government should plan the economy.

2. Government control of factories, mines, railroads and other

key industries would end poverty and promote equality.

3. Public (government) ownership would help workers who

were at the mercy of their employers.

4. On way to change society was by expanding the right to vote

(to the lower classes).

I. Communism- a radical form of Socialism developed by Karl

Marx and Friedrich Engles. Often Called Marxism.

A. The Communist Manifesto: 23 page pamphlet explaining

Marxism. 1848

1. Human society has always been divided into Haves and

Have Nots who are at war.

2. “Haves”= employers and owners called the bourgeoisie.

3. “Have Nots”=the workers or the proletariat.

4. The wealthy controlled all the means of production while

the poor labored under terrible conditions.

A. Marx believed that Capitalism would soon destroy itself.

1. Factories would drive small artisans out of business leaving

just a few in control of all the wealth.

2. The proletariat would revolt and seize control of the factories

and mills and produce what society needed.

3. Workers would share the profits and bring economic equality

for all people.

4. Workers would control the government in a “dictatorship of

the proletariat.”

5. Eventually, the state would disappear and a classless society

would emerge.

A.Pure Communism: complete socialism in which the

means of production – all land, mines, factories, railroads

and businesses would be owned by the people.

1. No personal property would be needed or allowed- all

goods and services would be shared equally.

2. Produced some revolts in 1848-1849 but they fizzled out.

3. 1900s- Revolutions in Russia (Lenin), China (Mao Zedong)

and Cuba (Castro).

4. Pure communism never emerged in these revolutions

only dictatorship.

A. Why didn’t workers revolt worldwide as Marx had

expected?

1. Marx and Engles believed that ONLY economic forces

dominated a society.

2. Failed to account for the influences of religion,

nationalism, ethnic loyalties and the desire for freedom.

3. The gap between the rich and poor widened but not in

the way Marx expected because conditions for the poor

improved because of the development of unions and

government reforms.

I. Labor Unions and Reform: Working people grew tired of long hours,

dangerous working conditions and low wages. By the 1800s, they

became more interested in politics and reform.

A. Unions: Formed to press for reform. Workers joined together in

voluntary labor associations (groups).

1. Unions spoke for all workers in a particular trade.

2. Collective bargaining: negotiations between workers (represented by

the unions) and employers.

3. Unions bargained for better working conditions and higher pay.

4. Strike: a collective refusal to work if owners refused union demands.

5. Skilled workers led the way because they could not easily be replaced.

6. Governments in both the US and Britain passed laws outlawing unions.

7. Workers joined unions anyway and they eventually became legal.

A. Other Reforms.

1. Governments began to investigate child labor and working

conditions.

2. Factory Act (England) 1833- made it illegal to hire children

under 9 years old. Kids 9-12 couldn’t work more than 8

hours. Kids 13-17 couldn’t work more than 12 hours.

3. 1842- Mines Act- prevented women and children from

working underground.

4. Unions eventually joined the fights to ban child labor

completely since it lowered wages for all workers.