Capitalism, Classical Economics, And the Changing Nature of - PowerPoint Presentation

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Capitalism, Classical Economics, And the Changing Nature of WorkSlide2

Capitalism

The Industrial Revolution coincided with – and mutually affected – the fall of mercantilism and the rise of capitalismIt is important to remember that the central feature of mercantilism was strict governmental control over the economy

By the end of the 1700s, a number of economic thinkers began to argue that economies were more likely to flourish when they were left alone to function freelySlide3

These classical, or laissez-faire, economists theorized that competition, free trade, and the laws of supply and demand, operating by themselves, created greater wealth for all nations and all people

These became the key principles of capitalismThe first major capitalist thinker was the Scottish philosopher Adam SmithSmith’s The Wealth of Nations

(1776) used the elegant metaphor of the “invisible hand” to describe how the laws of supply and demand naturally increased prosperitySlide4

Other classical economists accepted Smith’s principles and approved of capitalism, but were not so optimistic that the new economic approach would benefit all people, especially the working masses

One of these was England’s Thomas Malthus, whose Essay on Population (1799) argued that population growth caused povertyHis reasoning was that, while population growth grew at a geometric rate, food supply grew at an arithmetic rate

Malthus saw war, disease, and starvation as natural mechanisms by which population growth was regulatedSlide5

David Ricardo created the theory known as the “iron law of wages”Ricardo stated that an employer will naturally pay his workers no more than whatever it takes to keep them at a subsistence level

If population growth expands more quickly than the economy, too many workers will compete for too few jobsWages will decline and those without jobs will starveHowever, according to Ricardo, to interfere with this “iron law” will only lead to economic ruinSlide6

The pessimism of thinkers like Malthus and Ricardo caused classical economics to be nicknamed the “dismal science”

Nonetheless, classical capitalist thought became the dominant economic approach of the nineteenth and early twentieth centurySlide7

Socialism, Marxism, and Communism

Another economic approach, socialism, remained in the minority – and, in some times and places, it became illegalSocialism’s basic principle is that economic competition is inherently unfair and leads to injustice and inequality

There were many different forms of socialist thoughtThe earliest socialists, who appeared between the 1810s and 1840s, were known as the utopian socialistsSlide8

These included the Scottish industrialist Robert Owen, as well as the French thinkers Charles Fourier and Comte de Saint-Simon

Rejecting capitalism and Ricardo’s “iron law,” utopian socialists felt that, by means of good planning and judicious regulation, economies could be made to prosper without exploiting the working classSlide9

Marxism

A more radical form of socialism appeared later, during the 1840sThis was Marxism (also known as communism)It was originated by the German philosophers and radicals Karl Marx and Friedrich Engels

The movement’s fundamental principles came from The Communist Manifesto (1848)

and

Das Kapital

(1867-1894)

Based heavily on the philosophy of G.W.F. Hegel, Marxism condemned capitalism and economic competitionSlide10

Marx and Engels argued that, since ancient times, social and historical development have always been driven by the class struggle between the upper classes (who control capital, or the means of economic production) and the lower classes (who are forced to labor for the upper classes)

They felt that their own age – the capitalist era, during which the class struggle pitted the bourgeoisie (capitalists) against the proletariat (industrial working classes) – was the final stage of human history before the achievement of socialismSlide11

From socialism, human society would pass to communism: an economic state of perfect justice, social equality, and plenty

In order to bring about socialism, however, revolution was necessaryMarx and Engels therefore advocated and fought for, the overthrow of the capitalist orderMuch more so than utopian socialism, Marxism captured the imagination of hundreds of thousands of intellectuals and workers, and it would go on to become one of the most influential doctrines of the modern eraSlide12

Yet the rapid expansion of the middle class and the birth of the industrial working class affected politics in many ways

The gradual widening of political representation was due largely to agitation and ambition on the part of both of these classesEarly in the 1800s, the middle class, which favored liberalization, won greater political rights and economic privileges for itself, both by means of reform (in countries like Britain) and more drastic political action like opposition or revolt (as in France)Slide13

Working-Class Radicalism

What options were open for the working class?The most desperate tended to turn to radical forms of agitation: socialism, communism, even anarchism (developed as a political movement by the Russian revolutionaries Mikhail Bakunin and Prince Pyotr Kropotkin)

Marxism drew most of its strength from disgruntled workersBut as a movement, it was often led by radicalized intellectuals who promoted communism as the way toward social equality and economic justiceSlide14

Trade Unions

Most workers turned to trade unions rather than radicalismAt first, unions were illegal in Europe, as well as the United States, and joining one could be very risky: union members were often in danger of arrest, even injury, especially if they went on strike

Over time, however, trade unionism became a less extreme way of carrying on the struggle for greater political rights and fairer treatment in the workplace (higher wages, shorter workday, shorter work week, safety regulations, pensions, employee insurance)Slide15

Workers’ parties also emerged; one of the most famous was the Labour Party, which became (and remains) a major force in British politics

Unions and workers’ parties tended to be left leaning, but not as far to the left as socialist and communist groupsSlide16

Industrialization and Imperialism

Europe was the first major civilization to develop a modern industrialized, capitalist economy and the effects of this new economy spread quickly to the rest of the world

The United States also industrialized and by the late 1800s and early 1900s, was doing so more successfully and more quickly than the nations of EuropeWestern industrialization and imperialism were also intimately connectedSlide17

First, industrialization made Western nations, particularly Britain and France, more able to conquer and colonize other parts of the world during the 1800s

Industrialization made European nations richer, it made them more technologically adept, and it boosted the scientific knowledge needed to explore or know better parts of the world that were not yet under Western controlPerhaps most important, industry placed new weaponry in the hands of Westerners: gunboats, artillery, quick-firing and accurate rifles, and machine guns, all of which made Western armies extremely difficult for poorly armed native warriors to resistSlide18

Second, if industrialization gave Europeans a greater capacity to conquer and colonize, it also gave them a greater variety of motives

Industrialization required ever-greater amounts of raw materials: iron ore, coal, rubber, metals, timber, and chemicals, all of which could be stripped from other parts of the worldThe growing importance of steamships made it necessary for Western nations to maintain naval bases and refueling stations around the globeSlide19

Moreover, as Europe and America produced increasingly large amounts of manufactured goods, they had to have markets overseas to sell them to

All of these needs combined to spur the Western nations’ intense burst of imperial activity during the 1800s, especially the second halfSlide20

Impact on Nonindustrial Nations

Even in non-Western parts of the world that Europe and America did not conquer or colonize, industrialization’s economic clout often had a profound effect

Western businessmen and industrialists struck deals with aristocrats or the political elite to exploit local resourcesThese bargains typically involved the large-scale growth or extraction of a small set of crops or natural resourcesSlide21

This practice, known as monoculture, generally damages the environment and retards the development of a healthy, diverse economy (in the tropics, the derogatory slang term for a country with this type of economy is “banana republic”)

It also exploits these countries’ native workers: Western payments or investments end up in the pockets of a small number of local aristocrats or politicians, rather than adding to the national well-beingYet in the long term, most non-Western parts of the world would come to imitate industrial methods of economic productionSlide22

Industrialization and the Atlantic Slave Trade

One other worldwide effect of early industrialization concerned the Atlantic slave tradeThe 1793 invention of the cotton gin by American engineer Eli Whitney transformed the international textile trade

One of the factors that limited the ability of steam-driven machines such as the spinning jenny, the flying shuttle, and the power loom to speed up the textile industry was the fact that cleaning raw cotton balls by hand took a long timeSlide23

The cotton gin changed this, enabling enough clean cotton to be produced to keep pace with the machines that turned clean cotton into thread and the thread into whole cloth

The effect of this change was to give a phenomenal boost to the English textile trade’s demand for raw cottonAlthough one major source for cotton was Egypt, a chief supplier was the American South, where cotton was grown and harvested primarily by slaves

Most economic historians argue that, before the 1790s, slavery was becoming less profitable in the American South, and might have therefore have died away relatively quickly and easilySlide24

The advent of the cotton gin, however, as well as England’s increased demand for cotton, made slave-based cotton production extremely profitable

Therefore, slavery in America was prolonged for decades – necessitating civil war to end it – largely because of the industrialization of the textile tradeSlide25

Women And Industrialization

Before the Industrial Revolution, European women of the lower (and sometimes middle) class worked alongside men on the farm or in the family business, so motherhood and homemaking were not full-time pursuits

The Industrial Revolution altered that realityIt turned the husband into the wage earner outside the home and the wife the homemakerThus, the Industrial Revolution, gradually created a sharply defined domestic sphere for women, separate from the workplace, which, by the mid-to-late 1800s, would be dominated by menSlide26

However, early in the nineteenth century, for couples of the lower classes, often both husband and wife (and increasingly, their children) were forced to work in factories to make ends meet

Before 1870, women made up 50 percent of the workforce in textile factoriesIronically, this meant that lower-class women had more opportunity to work than those of the middle and upper classesIn this case, however, “opportunity” was not a matter of privilege or right, but economic necessity

Also, women who did work were paid a good deal less than menSlide27

Throughout the nineteenth century, most working women remained in traditional types of female labor, that is, as domestic servants or agricultural workers

Most working women were single, not marriedSome single women, desperate for jobs, left Europe for Australia or the United StatesBy the end of the nineteenth century, large numbers of poor women were working outside the home, in factories, mines, markets, and on farms

Increasingly, though, as salaries improved in heavy industry (making these jobs more desirable to men) and laws restricted the number of hours women were allowed to work, more women in working-class families stayed at homeSlide28

Fewer middle-class (and almost no upper class) women workedIn such a way, a new social pattern emerged that separated work from the home

Men were the primary breadwinners, whereas women became the homemakers who dabbled in low-paying, part-time work to supplement incomeFamilies started to have fewer children, partly as a result of the adoption of child-labor laws and a decline in infant mortality rates

Children were beginning to be perceived more as dependents than family wage earnersSlide29

Around the turn of the century, a mass consumer society began to emerge along with a higher standard of living

Such consumer products as sewing machines, clocks, and cast-iron stoves focused families on obtaining higher levels of consumption and freed up time for women of all classes to pursue activities outside the homeSlide30

Britain was the first country to industrializeNear the end of the 1800s, Germany and the United States began to surpass Britain

In general, northern Europe and the United States industrialized fairly quicklyHowever, southern and eastern Europe tended to lag behindEven more backward was Russia, which remained overwhelmingly agricultural – and, until 1861, economically stagnant, thanks to its reliance on the old-fashioned practice of serfdom

Southeastern Europe and the Balkans remained the most economically outdated region on the continent