Adam Smith- Wrote “The Wealth of Nations” and promoted the economic theory of capitalism.

Laissez-Faire- French term meaning the government should keep their “hands off” the economy.

Capitalism- Economic theory that promotes investing in business in hopes of making a profit.

Karl Marx- Known as the father of communism. He wrote the book “The Communist Manifesto” proclaiming his ideas.

Socialism- Economic system where the factors of production are owned by the public and operate for the good of all.

Communism- Extreme type of socialism where the gov’t owns all factors of production and decides what will be produced.

I have decided that no one shall receive less than a C in my course

However, in order to make this happen I must take higher grades away from other students. So students with A’s and B’s must give up some points.

This way everyone in class shall receive no lower or higher than a C. Everyone will be equal.

Adam Smith (1776) Wrote “The Wealth of

Nations” which advocated Laissez-faire economics.

Laissez-faire, or hands off, advocated an economic policy that favors a free market unregulated by the government.

Known as Capitalism, a system in which money is invested in businesses in hopes of profit.

Capitalism Supporters: Thomas Malthus (1798)

Wrote “Principle of Population” and argued that population grew faster than food supply and most people were destined to be poor.

David Ricardo (1817) Believed as population

increases wages would always be forced down.

Smith, Ricardo and Malthus opposed gov’t efforts to help the poor, believing it would upset the free market system.

Industrial progress widened the gap between the rich and poor.

Business leaders wanted the government to stay out of economic affairs.

Reformers felt the government should play an active role in bettering conditions for the poor.

Utilitarianism Jeremy Bentham

Argued that the government policy should promote the greatest good for the greatest number of people

John Stuart Questioned unregulated

capitalism and called for policies that would lead to a more equal division of profit

Utopian ideas Factory owner

Robert Owen improved working conditions for his employees.

Built houses near the mill, prohibited children under 10 from working, and provided free schooling

Believed there needed to be a new form of government and economic system to solve the problems of the Industrial Revolution In socialism the factors

of production; factories, railroads, mines and other industry are owned by the public.

This would abolish poverty and promote equality.

Karl Marx and Friedrich Engels write “The Communist Manifesto”. Radical type of socialism Argued that society was

divided into the “haves” or Bourgeoisie, and the “have-nots” or proletariat.

Advocated violent revolution where the workers would overthrow the owners

The proletariat would then own all the factors of production and produce what society needed.

Profits would be shared and the workers would control the government in a “dictatorship of the proletariat”.

The government would then itself wither away as a classless society developed. All factors of

production would be owned by the people and private property would not exist.

These predictions have since been proved wrong.

However, “Marxism” did inspire revolutionaries such as Lenin in Russia, Mao Zedong in China, and Fidel Castro in Cuba.

Capitalists and governments respond to Marxism and begin to allow reforms.

They are willing to make concessions to workers in the interest to preserving the system.

Workers are eventually allowed to join unions. Unions engaged in

collective bargaining and strikes to get better pay and working conditions.

Governments passed laws to protect children, women, and improve working conditions.

Unemployment insurance, sick leave, vacation days, workman’s compensation, etc. also eventually resulted.

What economy did the new grading policy resemble?