What We Will Learn Today



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  • What We Will
  • Learn Today:
  • Who was Adam Smith, and what is laissez faire?
  • Who was Malthus, and what was his view on population growth?
  • What is Ricardo’s “iron law of wages?”
  • What is socialism, and how does it differ from Marx’s communism?
  • Smith
  • Marx
  • Malthus
  • Ricardo
  • The problems caused by the Industrial Revolution caused many to look for solutions. While some believed the market would eventually fix the problems, others believed there should be a change in government.
  • Laissez-Faire Economics
  • Adam Smith
  • In his book The Wealth of Nations, British economist Adam Smith promoted “laissez fairecapitalism, which became the leading economic system during the Industrial Revolution.
  • Laissez Faire (hands off) policy allowing businesses to operate with little or no government interference.
  • Smith
  • Capitalism – economic system in which the means of production are privately owned and operated for profit.
  • Profit Motive
  • Market Economy
  • Competition
  • Free Enterprise
  • Private Ownership
  • Capitalism
  • Adam Smith
  • Smith argued that the free market forces of supply and demand would produce more goods at lower prices, and encourage capitalists to invest their money in new ideas.
  • Smith claimed that the “invisible hand” of capitalism led individuals who worked for their own good to actually promote the good of the entire community.
  • Laissez-Faire Economics
  • Smith
  • Thomas Malthus
  • In his 1798 Essay on the Principle of Population, Malthus predicted that population growth would outpace food supply.
  • Laissez-Faire Economics
  • Malthus
  • Thomas Malthus
  • Laissez-Faire Economics
  • Malthus
  • Thomas Malthus
  • Malthus’ predictions did not come true because food supply grew even faster than population.
  • Laissez-Faire Economics
  • Malthus
  • David Ricardo
  • Ricardo’s “iron law of wages” stated that population and wages are connected and go through a cycle:
  • Laissez-Faire Economics
  • Ricardo
  • High Wages 
  • Workers have more Children
  • Surplus of Workers  Lower Wages
  • Lower Wages 
  • Workers have fewer Children
  • Shortage of Workers  Higher Wages
  • David Ricardo’s Iron Law of Wages
  • Ricardo advised families to be hard workers, thrifty, and have a small family.
  • David Ricardo
  • Laissez-Faire Economics
  • Ricardo
  • The Birth of Socialism
  • Socialism – system in which the people as a whole rather than private individuals own all property and operate all businesses.
  • Socialists claimed that industrial capitalism had created a large gap between the rich and poor.
  • Socialists cared less about individual ownership rights, and more about the interests of society.
  • Utopians socialists sought to create self-sufficient communities where all property and work would be shared, wealth would be equal, and fighting would end.
  • The Birth of Socialism
  • Utopian Socialism
  • In Scotland, Robert Owen set up a Utopian factory community when he supplied good housing, education, and fair wages.
  • Owen
  • New Lanark, Scotland
  • Marxist Socialism
  • German philosopher Karl Marx promoted “scientific socialism,” which he claimed to be more realistic than utopian socialism.
  • In 1848, Marx teamed up with fellow German economist Friedrich Engels and published The Communist Manifesto.
  • Karl Marx
  • Engels
  • Marx
  • Marxist Socialism
  • Communism
  • Marx
  • Communism – a form of socialism that sees class struggle between employers and employees as inevitable.
  • Marxist Socialism
  • In The Communist Manifesto Marx argued the following points:
  • History was a class struggle between the bourgeoisie (wealthy capitalists), and the proletariat (working class).
  • In order to make profits, the bourgeoisie exploited the proletariat.
  • Communism
  • Marxist Socialism
  • The proletariat society would take control of the means of production and establish a classless communist society where wealth and power would be shared.
  • The proletariat would eventually revolt and overthrow the capitalist system, creating their own society.
  • In The Communist Manifesto Marx argued the following points:
  • Communism
  • Marx’s Industrial Age Social Pyramid
  • Bourgeoisie
  • (capitalists,
  • the “haves,”
  • the oppressors)
  • Proletariat
  • (workers, the “have-nots,” the oppressed)
  • Marxist Socialism
  • Marx called for an international struggle to bring down capitalism, which he hated. His slogan was “workers of the world unite!
  • Socialist political parties formed in Western Europe, but by 1900 the standard of living for the working class improved, and communism lost popularity.
  • Communism
  • Marxist Socialism
  • By 1900 most people still felt stronger ties to their nationality and county rather than their economic class, and there was no worldwide communist revolution.
  • Communism
  • However, in 1917 revolutionaries toppled Czar Nicholas II in Russia and set up the first communist state.
  • Lenin leads the
  • Revolution in Russia


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