FCPS World II SOL Standards: WHII 9b Responses to the Industrial Revolution: Economic Systems (1776-Present) You Mean People Disagreed about How to Reward Hard Work? Capitalism (Free Market Economy/ Free Enterprise System)
In capitalism, individuals own both private property and the means of production (factories, machines, tools, etc.). People make all economic decisions based on their own self-interest. In a pure capitalist system, only the forces of supply and demand control the economy. When people want more goods, businesses make more goods. If too many products exist, however, the owners lower their prices to sell the rest. Adam Smith argued for capitalism in The Wealth of Nations (1776). He believed that market competition would force owners to make more goods at lower prices. Smith liked entrepreneurs because they began new businesses. He said that competition forced people to find the best ways to make the products. Smith liked a laissez-faire policy in which the government plays little or no role in the economy. He stated that the “invisible hand” of supply and demand should work with little interference Adam Smith Results of Capitalism Source:http://commons.wikimedia.org/wiki/File:AdamSmith.jpg Capitalism and market competition fueled the Industrial Revolution. Wealth increased the standard of living for some people, and the middle class grew. However, the lack of laws to protect people led to problems. Many people disliked the poor working conditions and unequal distribution of wealth. Alternate economic ideas emerged as new ways to address these problems.
Communism Communism responded to the injustices of capitalism. In communism, the people as a group own all property and the means of production. No private property exists. Society makes all economic decisions based on the common interest. In a pure communist system, everyone works hard in order to help society. The people then share all goods and services equally. People take what they need. Karl Marx argued for communism in The Communist Manifesto (1848) (written with Friedrich Engels) and Das Kapital. Marx saw history as a series of class struggles. In his own time, Marx pointed to the conflict between employers (the “haves”) and employees (the “have-nots”). He said that the middle class (bourgeoisie) controlled the working class (proletariat). Marx thought that the problems would get so bad that the workers would revolt. They would seize the means of production, redistribute wealth, and create a classless society. In theory, the government would become unneeded and would gradually wither away.
Pro-Communist Poster 1911 Source: http://02varvara.files.wordpress.com/2013/10/00-pyra- Results of Communism mid-of-the-capitalist-system-1911-iww.jpg Communists took power in many countries during the 1900s. Examples included the Soviet Union, China, North Korea, and Cuba. The communist economies usually did poorly, however, because people had few incentives to work hard. They received the same goods and services even if they did little work. In addition, the governments never withered away as Marx had predicted. Instead, a dictatorship frequently emerged. Only a strong leader could force people to work in this unfair system. Communist party members became the “haves,” while most people stayed poor. FCPS HS Social Studies © 2014 Responses to the Industrial Revolution: Economic Systems (cont.) WHII 9b
Economic Systems Today After the fall of the Soviet Union, communism failed as an economic system. Capitalism, in turn, flourished. However, there is no purely capitalist or communist economy in the world today. The capitalist United States has a Social Security System and a government-owned postal service. Communist China now allows its citizens to keep some of the profits they earn. Another economic system, socialism exists in many European countries today. Their main goal is to narrow the gap between wealth and poverty. In these nations, the government has a responsibility to redistribute wealth to make society more fair and just.
Karl Marx Source: http://upload.wikimedia.org/wikipedia/commons/a/a2/Marx_old.jpg
Key Vocabulary Bourgeoisie: the middle class, used in the Socialism: economic system in which people Capitalism: economic system in which 1700s and 1800s may own private property but the public controls the means of production individuals own both private property and Communism: economic system in which the the means of production people as a group own all property and the Market competition: struggle between Means of production: physical structures means of production businesses to attract customers and increase profits or objects that are used to make goods, Laissez-faire: policy in which the government such as factories, machines, and tools plays little or no role in the economy Entrepreneurs: people that beginor start new businesses Proletariat: the working class, often used Dictatorship: government in which one when describing the theories of Karl Marx person or political party holds all power
Quick Review 1. What book belongs at the center of the Venn diagram? 2. The author of this quote was most likely a – A. Das Kapital B. Don Quixote “The proletarians have nothing to lose but their C. The Communist Manifesto chains. They have a world to win. Workingmen D. The Wealth of Nations of all countries, unite.”
A. Capitalist B. Communist C. Mercantilist D. Socialist
3. Who believed that market competition would help the economy? 4. What are at least three reasons why someone might choose A. Friedrich Engels capitalism over communism? B. Karl Marx C. Vladimir Lenin D. Adam Smith.
Connection to Today Resources The United States passed laws to help reduce the injustices of ABC-CLIO capitalism. What types of laws could help workers? ● Capitalism http://worldhistory.abc-clio.com/Search/ Display/309337?terms=capitalism ● Communism http://worldhistory.abc-clio.com/Search/ Display/309346?terms=communism
FCPS HS Social Studies © 2014