New Ways of Thinking

1
New Ways of Thinking

• Chapter 7
• Section 4

2

• Thinkers, such as Thomas Malthus and Adam Smith,
  tried to understand the staggering changes taking
  place in the early industrial age.
• As heirs to the Enlightenment, these thinkers
  looked for natural laws that governed the world
  of business and economics.

3
Laissez-Faire Economics

• During the Enlightenment, physiocrats argued that
  natural laws should be allowed to operate without
  interference.
• As part of this philosophy they believed that
  government should not interfere in the free
  operation of the economy.
• In the early 1800s, middle-class business leaders
  embraced this laissez-faire, or hands-off
  approach.

4

• Adam Smith, the main prophet of laissez-faire
  economics, wrote a book entitled, The Wealth of
  Nations, in which he asserted that a free market
  the unregulated exchange of goods and services
  would come to help everyone, not just the rich.
• The free market, Smith said, would produce more
  goods at lower prices, making them affordable by
  everyone.

5

• Thomas Malthus grimly predicted that population
  would outpace the food supply.
• He believed that as long as population kept
  increasing, the poor would suffer. He urged
  families to have fewer children.
• During the early 1800s, many people accepted
  Malthuss views, but they proved to be too
  pessimistic. Although the population boom
  continued, the food supply grew even faster, and
  living conditions for the western world slowly
  improved.

6

• David Ricardo, another British economist agreed
  with Malthus that the poor had too many children.
  
• In his iron law of wages, Ricardo pointed out
  that when wages were high, families had more
  children. But more children meant a greater
  supply of labor, which led to lower wages and
  higher unemployment.
• Neither Malthus nor Ricardo was a cruel man. Yet
  both opposed any government help for the poor.
  These supporters of laissez-fair economics
  believed that individuals could improve their
  life through thrift, hard work, and limiting the
  size of their families.

7
The Utilitarians

• By 1800, Jeremy Bentham was preaching
  utilitarianism, the idea that the goal of society
  should be the greatest happiness for the
  greatest number of its citizens.
• Bentham strongly supported individual freedom,
  which he believed guaranteed happiness.
• Still, he saw the need for government to become
  involved under certain circumstances.

8

• John Stuart Mill, a follower of Bentham, also
  argued that actions are right if they promote
  happiness and wrong if they cause pain.
• He reexamined the idea that unrestricted
  competition in the free market was always good.
  Often, he said, it favored the strong over the
  weak.
• While middle-class business and factory owners
  were entitled to increase their own happiness,
  therefore, government should prevent them from
  doing so in a manner that harmed workers. Mill
  further called for giving the vote to workers and
  women.

9

• Most middle-class people rejected Mills ideas.
• Only later in the 1800s were his views slowly
  accepted.
• Todays democratic governments, however, have
  absorbed many ideas from John Stuart Mill and the
  utilitarians.

10
The Emergence of Socialism

• While the champions of laissez-faire economics
  praised individual rights, other thinkers focused
  on the good of society in general.
• They condemned the evils of industrial
  capitalism, which they believed had created a
  gulf between rich and poor.
• To end poverty and injustice, they offered a
  radical solution socialism.

11

• Under socialism, the people as a whole rather
  than private individuals would own and operate
  the means of production the farms, factories,
  railways, and other large businesses that
  produced and distributed goods.
• Socialists wanted to develop a world in which
  society would operate for the benefit lf all
  members, rather than just for the wealthy.

12

• The Utopians Early socialists who tried to build
  self-sufficient communities in which all work was
  shared and all property was owned in common. When
  there was no difference between rich and poor,
  they felt, fighting between people would
  disappear.
• Although many socialists saw the Utopians as
  dreamers, Robert Owen set up a model community to
  put his ideas into practice.

13

• Robert Owen became a successful mill owner.
  Unlike others, he refused to use child labor and
  he encouraged the organization of labor unions.
• He built homes for workers, opened a school for
  children, and generally treated employees well.
  He showed that an employer could offer decent
  living and working conditions and still run a
  profitable business.
• By the 1820s, many people were visiting Owens
  community to study his reforms.

14
The Scientific Socialism of Karl Marx

• In the 1840s Karl Marx, a German philosopher
  condemned the ideas of the Utopians as
  unrealistic idealism.
• He put forward a new theory, scientific
  socialism, which he claimed was based on the
  scientific study of history.
• Forced to leave Germany, Marx lived in Paris for
  awhile but finally settled in London, England.

15

• Karl Marx and his friend, Friederich Engels
  published a pamphlet entitled The Communist
  Manifesto in 1848.
• They described communism as a form of socialism
  that sees class struggle between employers and
  employees as unavoidable.
• Their philosophy became known as Marxism.

16
Marxism

• In The Communist Manifesto, Marx theorized that
  economics was the driving force in history.
• The entire course of history, he argued was the
  history of class struggles between the haves
  and the have-nots. The haves have always
  owned the means of production and thus controlled
  society and all its wealth.
• Marx said, the haves were the bourgeoisie
  (factory owning middle-class), and the
  have-nots were the proletariat, or working
  class.

17

• Marx believed there would have to be a modern
  class struggle between the bourgeoisie and
  proletariat. He predicted the proletariat would
  be triumphant.
• It would then take control of the means of
  production and set up a classless, communist
  society. Such a society would mark the end of the
  struggles people had endured throughout history,
  because wealth and power would be equally shared.
• Marx despised capitalism. He believed it created
  prosperity for only a few and poverty for many.

18

• Looking Ahead
• Marxs ideas would never be practiced exactly as
  he imagined them.
• Although he predicted the misery of the
  proletariat would touch off a world revolution,
  by 1900 the efforts of reformers and governments
  led to improved conditions for the working class.

19

• Revolutions
• In the late 1800s, Russian socialists embraced
  Marxism, and the Russian Revolution of 1917 set
  up a communist-inspired government.
• For much of the 1900s revolutionaries around the
  world would adapt Marxist ideas to their own
  needs. Independence leaders in Asia, Latin
  America, and Africa would turn to Marxism.
• By the 1990s, however, nearly every nation would
  incorporate elements of free-market capitalism.
  To many people, Adam Smiths ideas seemed to be
  of more lasting value than those of Karl Marx.