Part%201:%20Capitalism%20Part%202:%20Industrialization%20Part%203:%20Socialism%20Theme:%20Comparing%20social%20and%20economic%20systems%20and%20understanding%20those%20systems%20as%20responses%20to%20change%20and%20development

1
Part 1 Capitalism Part 2 IndustrializationPart
3 SocialismTheme Comparing social and
economic systems and understanding those systems
as responses to change and development

• Lesson 6

2
Word Association

• Capitalism

3
Capitalism

• An economic system with origins in early modern
  Europe in which private parties make their goods
  and services available on a free market and seek
  to take advantage of market conditions to profit
  from their activities

4
Adam Smith (1723-1790)(Review from Lsn 4)

• Focused on economics and held that laws of supply
  and demand determine what happens in the
  marketplace
• Wrote An Inquiry into the Nature and Causes of
  the Wealth of Nations in 1776 which argued the
  virtues of a free market economy

5
Adam Smith(Review from Lsn 4)

• Free enterprise system
• The role of self-interest and laissez-faire
• Through an invisible hand self-interest guides
  the most efficient use of resources in a nations
  economy, with public welfare coming as a
  by-product
• State and personal efforts to promote social good
  are ineffectual compared to unbridled market
  forces
• Provides the intellectual rationale for free
  trade and capitalism
• (Well discuss capitalism in Lsn 6)

6
Precursors to Capitalism

• Population growth
• Improved nutrition from the Columbian Exchange
  and reduced mortality as a result of recovery
  from epidemic disease led to dramatic population
  growth in Europe
• 1500 population was 81 million
• 1700 population was 120 million
• 1800 population was 180 million

7
Precursors to Capitalism

• Urbanization
• Population growth led to the growth of cities as
  centers of government, commerce, and industry
• Madrid, Paris, and London were especially
  dramatic
• Significant growth also occurred in Amsterdam,
  Berlin, Copenhagen, Dublin, Stockholm, and Vienna

18th Century London
8
Capitalist System

• Center of the system is the free market in which
  businessmen compete with each other, and the
  forces of supply and demand determine the prices
  received for goods and services

9
Capitalist System

• Private parties pursuing their own economic
  interests hire workers and decide for themselves
  what to produce
• Economic decisions are the prerogative of
  capitalist businessmen, not governments or social
  superiors
• Private parties own the land, machinery, tools,
  equipment, buildings, workshops, and raw
  materials needed for production

10
Capitalist System

• If businessmen organize their affairs
  efficiently, they realize a profit
• If they are inefficient, they incur losses or
  maybe even lose their businesses
• One way to spread the risks were the joint stock
  companies we discussed in Lesson 3
• Insurance companies also were formed to mitigate
  financial losses

11
Developments that Fueled Capitalism

• Wanting to make money was nothing new, but during
  early modern times, several developments
  transformed the economic order
• Efficient networks of transportation and
  communication allowed businessmen to take
  advantage of market conditions
• Banks held funds for safekeeping and granted
  loans
• Business newsletters provided information about
  not just the markets, but about the political
  impacts on the economy
• Stock exchanges provided markets to buy and sell
  shares

12
Capitalism and Politics

• Capitalism grew with the active support of
  governmental authorities within the context of
  imperialism
• Especially the English and Dutch
• Remember the discussion of trading post empires
  from Lesson 3
• Fortified trading posts
• Joint stock companies
• Seven Years War

13
Organizational Changes

• Guild system
• Had monopolized the production of goods such as
  textiles and metalwares in European cities for
  centuries
• Fixed prices and wages and regulated standards of
  quality but did not seek so much to make a profit
  as to protect markets and preserve members
  positions in society
• Thus the system discouraged competition and
  sometimes resisted technological innovation

• Putting-out system
• Capitalist entrepreneurs sidestepped the guild
  system by moving production to the countryside
  where labor was cheaper
• Delivered unfinished materials to rural
  households where workers would turn them into
  finished goods
• Putting-out system produced such items as cloth,
  nails, pins, and pots

14
Capitalism and Social Change

• The putting-out system brought considerable new
  wealth to the countryside
• Increased wealth brought material benefits but
  also undermined long-established patterns of
  rural life
• The new income allowed young adults and women to
  become increasingly independent of their families
• At the same time, young nuclear families
  (husband, wife, children) were strengthened
  because love became more of the reason for
  marriage than improving financial interests of
  extended families

15
Moral Implications

• Profit-making motives challenged traditional
  beliefs that encouraged individuals to look at
  the welfare of the larger community rather than
  just their own
• Adam Smith countered that society as a whole
  prospered when individuals pursued their own
  economic interests
• Nonetheless, capitalism generated social strains
  that sometimes manifested themselves in violence
  such as robbery

16
Discussion

• Are unions good or bad?
• Should the government provide for individual
  members of society or is Smith right that all of
  society prospers when individuals pursue their
  own economic interests?
• What does all this say about contemporary issues
  such as social security, national health
  insurance, agricultural subsidies, and welfare?

17
Industrialization

• The process that transformed agrarian and
  handicraft-centered economies into economies
  distinguished by industry and machine manufacture
• Key to the process were technological and
  organizational changes that transformed
  manufacturing and led to increased productivity
• Machines
• Factories

18
Importance of Coal

• Until the 18th Century, wood had been the primary
  fuel in Great Britain
• Britains natural abundance of coal allowed it to
  convert to this more efficient fuel which paved
  the way for industrialization through such means
  as iron production and the steam engine

Woman coal drawer in a British mine
19
Importance of Textiles

• In addition to coal, the triangular trade
  supplied Britain with large amounts of cotton
  from America
• Consumer demand for cotton products transformed
  the British cotton industry and started the
  larger industrial expansion

20
Mechanization of the Cotton Industry

• Demand for cotton products encouraged the
  development of faster spinning and weaving
  processes
• In 1733, John Kay invented the flying shuttle
• Before cloth could be woven only up to the width
  of a man's body because he had to pass the
  shuttle backwards and forwards, from hand to hand
• Kays invention allowed the shuttle, containing
  the thread, to be shot backwards and forwards
  across a much wider bed

21
Social Impact

• With the Flying Shuttle, one worker could do the
  work of two, even more quickly
• This threatened jobs and in 1753 an angry mob of
  weavers, afraid of the competition, wrecked Kays
  house and destroyed his looms
• Moreover, manufacturers formed an association
  which refused to pay Kay any royalties
• He lost all of his money in legal battles to
  defend his patent and died a poor man

Portion of a mural depicting Kay escaping from
his home after being attacked by local textile
workers
22
Other Inventions The Spinning Jenny

• In 1764, James Hargreaves invented an improved
  spinning jenny, a hand-powered multiple spinning
  machine that was the first machine to improve
  upon the spinning wheel
• The original spinning jenny used eight spindles
  instead of the one found on the spinning wheel
• Later models had 120 spindles
• Like Kay, Hargreaves suffered from violence at
  the hands of workers who saw his machine as a
  threat
• In 1768 a group of spinners broke into
  Hargreaves house and destroyed his spinning
  jenny machines

23
Other Inventions The Mule

• In 1779, Samuel Crompton invented the mule
• It was adopted for steam power in 1790
• A worker using a steam-driven mule could produce
  a hundred times more thread than a worker using a
  manual spinning wheel

24
Steam Power

• Steam engines burn coal to boil water and create
  steam which then drives mechanical devices that
  perform work
• In 1756, James Watt developed a general-purpose
  steam engine which used steam to force a piston
  to turn a wheel whose rotary motion converted a
  simple pump into an engine that had multiple uses

25
Steam Power

• By 1800, thousands of Watts steam engines were
  in operation in the British isles, especially in
  the textile industry
• In 1773, James Watt and Matthew Boulton formed a
  partnership
• In 1785, Edmund Cartwright patented the first
  version of his power loom which combined the
  steam engine and the textile industry
• Cartwright set up a factory in Doncaster.

James Watt
26
Factories

• Cartwrights Doncaster factory was just one of
  many
• By the end of the 19th Century, the factory had
  become the predominant site of industrial
  production in Europe, the United States, and Japan

27
Factories

• The size and cost of machines led to production
  being centralized in selected locations
• Mass production strongly encouraged new divisions
  of labor and specialization
• In the handicraft traditions, a single worker did
  the entire job
• In the factory system, each worker performed a
  single task

28
Adam Smiths Description of Work at a Pin Factory

• One man draws out the wire, another straightens
  it, a third cuts it, a fourth points it, a fifth
  grinds it at the top for receiving the head and
  the important business of making a pin is, in
  this manner, divided into about eighteen distinct
  operations, which, in some manufactories, are all
  performed by distinct hands, though in others the
  same man will sometimes perform two or three of
  them.

29
Working Conditions

• Factory work required strict discipline, a fast
  pace, and close supervision
• Work became monotonous and repetitive
• Safety suffered
• Workers lost their broad-range of skills, could
  easily become obsolete to technological
  developments, and became completely dependent on
  the factory owners for their livelihood
• Some workers such as the Luddites revolted
  against the new system by destroying textile
  machines

Luddites burning a textile machine
30
Industrial Capitalism Mass Production

• Eli Whitney developed the technique of using
  machine tools to produce large quantities of
  interchangeable parts in firearm making
• Allowed unskilled workers to make a particular
  part of the musket, replacing skilled workers who
  used to make the complete product
• By the 19th Century, mass production of
  standardized articles was becoming the hallmark
  of industrial societies

31
Industrial Capitalism Assembly Lines

• Introduced by Henry Ford in 1913 for automobile
  production
• Used a conveyor built to carry components past
  workers at the proper height and speed
• Each worker performed a specialized task from his
  fixed point
• Reduced the time to produce a chassis from 728 to
  93 minutes
• Increased production meant lower prices so that
  millions of ordinary Americans could own cars

32
Industrial Capitalism Corporations

• Corporations are private businesses owned by
  individual and institutional investors who
  finance the business through the purchase of
  stocks representing shares in the company
• By the late 19th Century, corporations controlled
  most businesses requiring large investments in
  land, labor, or machinery

33
Industrial Capitalism Monopolies

• To protect their investments some big businesses
  sought to eliminate competition by forming
  monopolies
• Vertical monopolies dominated all facets of a
  single industry
• Through Standard Oil Company, John D. Rockefeller
  controlled almost all oil drilling, processing,
  refining, marketing, and distribution in the
  United States

34
Industrial Capitalism Monopolies

• Horizontal monopolies tried to eliminate
  competition by the consolidation or cooperation
  of independent companies in the same business
• Ensured prosperity of the cartel members by
  absorbing competitors, fixing prices, regulating
  production, or dividing up markets
• IG Farben, through the merger of many chemical
  and pharmaceutical manufacturers, was able to
  control 90 of production in chemical industries

35
Discussion

• What were the good things about
  industrialization?
• What were the bad?

36
Word Association

• Socialism

37
Socialism

• Political and economic theory of social
  organization based on the collective ownership of
  the means of production its origins were in the
  early nineteenth century, and it differs from
  communism by a desire for slow or moderate change
  compared to the communist call for revolution

38
Socialist Goals

• Socialists sought to alleviate the social and
  economic problems caused by capitalism and
  industrialization, particularly economic
  inequities and worker exploitation
• Expanded on the Enlightenment idea of equality,
  understanding it to have an economic dimension as
  well as political, legal, and social ones

39
The Utopians

• The term socialism appeared around 1830 to
  refer to the thought of social critics such as
  Charles Fourier and Robert Owen
• Sought to establish ideal communities that would
  point the way to an equitable society

40
Charles Fourier (1772-1837)

• Spent most of his life as a salesman but loathed
  the competition of the market system and called
  for social transformations to better serve the
  needs of mankind
• Planned model communities held together by love
  rather than coercion
• Everyone worked in accordance with personal
  temperament and inclination
• Work would be pleasurable

41
Charles Fourier

• Considered civilization to be the great enemy
  and sought to replace it with social organization
  based on association and harmony
• The community or phalanx was housed in a
  phalanstery of 1,500 to 1,800 people which
  Fourier hoped would be as varied as possible
• In reality, the phalanxs were much smaller than
  Fourier envisioned and their practices fell short
  of Fouriers ideals
• Phalanx members refused to be passionately
  attracted to all the things they needed to do to
  run a community and the old civilizations
  corruptions, including greed and religious
  disputes, refused to vanish.
• Ronald Walters, Earth as Heaven

42
Robert Owen (1771-1858)

• Was a successful businessman who transformed the
  squalid cotton mill town of New Lanark, Scotland
  into a model industrial community
• Owen raised wages, reduced the workday from 17 to
  10 hours, built spacious housing, and opened a
  store that sold goods at fair prices
• Of the 2,000 residents, 500 were children from
  nearby poorhouses
• Owen kept children out of the factories and sent
  them to a school he opened in 1816

43
Robert Owen

• Despite the costs of the reforms, the New Lanark
  mills generated profits
• Owens indictment of competitive capitalism, his
  stress on cooperative control of industry, and
  his advocacy of improved educational standards
  for children left a lasting imprint on socialism

Mill at New Lanark
44
Legacy of the Utopian Socialists

• Most of the communities soon encountered economic
  difficulties and political problems that forced
  them to fold
• By the mid-19th Century, most socialists were
  looking to large-scale organization of working
  people rather than utopian communities as the
  best means to bring about a just and equitable
  society
• Marx and Engels

45
Karl Marx (1818-1883) and Friedrich Engels
(1820-1895)

• Met in Paris in 1844 and viewed the utopian
  socialists as unrealistic dabblers
• Developed a belief that the social problems of
  the 19th Century were the inevitable results of
  capitalism
• Combined their efforts
• Marx was best when dealing with difficult
  abstract concepts
• Engels used his ability to write for a mass
  audience

Engels
Marx
46
Marx and Engels

• Held that capitalism divided people into two main
  classes
• Capitalists who owned industrial machinery and
  factories (the means of production)
• The proletariat who were wage earners with only
  their labor to sell
• The state and its coercive institutions (police,
  courts, etc) were agencies of the capitalist
  ruling class and kept the capitalists in power
  and enabled them to continue their exploitation
  of the proletariat

47
Marx and Engels

• Even music, art, literature, and religion served
  the purposes of the capitalists by amusing the
  working classes and diverting their attention
  from their misery
• Marx considered religion especially to be the
  opiate of the masses because it encouraged
  workers to focus on things beyond this world
  rather than trying to improve their lot in society

48
Marx and Engels

• In 1848, Marx and Engels wrote Manifesto of the
  Communist Party and aligned themselves with the
  communists who wanted to abolish private property
  and institute a radically egalitarian society
• (Well more fully discuss communism in Lesson 11)

49
Communist Manifesto

• All human history has been the history of
  struggle between social classes
• The future lay with the working classes because
  the laws of history dictated that capitalism
  would inexorably grind to a halt
• Crises of overproduction, underconsumption, and
  diminishing profits would undermine capitalisms
  foundation

50
Communist Manifesto

• At the same time, members of the constantly
  growing and thoroughly exploited proletariat
  would come to view the forcible overthrow of the
  existing system as their only alternative
• The socialist revolution would result in a
  dictatorship of the proletariat, which would
  abolish private property and destroy the
  capitalist order
• After the revolution, the state would wither away
• Coercive institutions would disappear since there
  would no longer be any exploitation of the
  working class
• Socialism would lead to a fair, just, and
  egalitarian society infinitely more humane than
  capitalism

51
Impact

• Marx and Engels ideas came to dominate European
  and international socialism
• Socialist political parties, trade unions,
  newspapers, and educational associations all
  worked to advance the socialist cause
• However, the cause was not fully united

52
Different Ideas

• Revolutionary socialists (Marx, Engels, et al)
• Urged workers to seize control of the state,
  confiscate the means of production, and
  distribute wealth equitably throughout society
• Evolutionary socialists
• Doubted a revolution would succeed
• Instead advocated representative governments and
  called for the election of legislators that
  supported socialist reforms

53
Social Reforms

• Even before socialists won control of the Russian
  government in 1917, socialist ideas impacted
  society
• Improved protections for female and children
  workers
• Expanded suffrage
• Improved representation to reflect expanding
  populations
• Medical insurance
• Unemployment compensation
• Retirement pensions

Children Workers
54
Trade Unions

• Trade unions sought to eliminate abuses of early
  industrial society and improve workers lives
  through higher wages and better working
  conditions
• Throughout most of the 19th Century, employers
  and governments considered trade unions as
  illegal
• Police and military forces often intervened when
  unions went on strike

Pinkertons Detective Agency was active in
suppressing the coal miners union in Pennsylvania
55
Trade Unions

• Over the long run, unions came to be an integral
  part of capitalist society because they addressed
  workers needs so that a disgruntled proletariat
  wasnt driven to mount a revolution against
  industry

56
Discussion

• So whats wrong with socialism?

57
Next

• Part 1 Global Depression
• Part 2 Debate How should we handle poverty?

Migrant Mother taken by Dorothea Lange in 1936