Capitalism WHAP/Napp
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“By 1500, ocean voyages of exploration and trade had brought the eastern and western hemispheres together, initiating a new phase of world history. During the next three centuries most of the regions of the world began to enter into a single system of trade and exchange. The organization of this emerging system generally followed the economic principles of capitalism, being dedicated to the pursuit of private economic profit through the private ownership of wealth and the means of producing wealth.
Capitalism claimed to allow individuals to exchange their products and labor in free, unregulated markets. It had little place for the restrictive rules of Church and government. Free-market exchange would determine the prices of goods and labor by reaching a balance between supply and demand. These market prices would then influence what would be produced and what would be consumed. The lure of the market would encourage people to invest their capital, or accumulated wealth, in economic activities that might earn profits (or suffer losses). Despite these free-market claims and their desire to be free of regulation, capitalists frequently persuaded governments to support and assist them in their money-making projects. In exchange, capitalists lent their financial support to government.
By the late eighteenth century, as European economies were expanding, they became the subject of discussion and debate among businesspeople, political leaders, and philosophers. Adam Smith ((1723-90) had already established his reputation as a moral philosopher before he turned to writing what became his most famous work. In 1776 Smith published The Wealth of Nations, a book of a thousand pages, the first systematic explanation of the new emerging philosophy or economics, later called capitalism.
In contrast to the mercantilist views of his day, Smith argued that national wealth was not to be measured by treasuries of precious metals, but rather by quantities of productivity and of trade. He opened his great work with an illustration from a pin factory where a division of labor into specialized tasks of production increased output dramatically, Smith further argued that when workers specialize in what they do best, and then exchange their products in the market, productivity increases. The competitive free market guides production. Goods that consumers want to buy attract higher prices, and producers supply them in order to earn good profits; unwanted goods earn no profits, and producers stop producing them. This law of supply and demand in the market, argues Smith, leads to the production of the amounts and kinds of goods that suit the wishes of consumers and the capacity of producers. Smith also believed that the free, unregulated market would correct most economic imbalances. He opposed government intervention. He argued for a hands-off government policy of laissez-faire toward the market – that is, let people do as they choose.” ~ The World’s History
1- Discuss the economic principles of capitalism. ______
2- Identify Adam Smith’s contributions to explaining the laws and principles of capitalism. ______
I. CapitalismA. Industrial Revolution coincided with fall of mercantilism and the rise of capitalism
B. Central feature of mercantilism was strict governmental control of economy
C. By 1700s, a number of economic thinkers began to argue that economies were more likely to flourish when they were left alone to function freely
D. Classical, or laissez-faire, economists theorized that competition, free trade, supply and demand created greater wealth for all nations and all people
E. First major capitalist thinker was Scottish philosopher Adam Smith who wrote
The Wealth of Nations (1776)
F. Thomas Malthus, Essay on Population (1799), focused on how population growth caused poverty; population increased at geometric rate, food at arithmetic rate
II. Reactions to Capitalism
A. Socialism: economic competition is inherently unfair and leads to inequality
B. Earliest socialists, 1810s and 1840s, known as utopian socialists
C. Included the Scottish industrialist Robert Owen
D. Utopian socialists felt that with good planning and judicious regulation, economies could be made to prosper without exploiting working class
E. Marxism
1. More radical form of socialism appeared later, during the 1840s
2. Originated by German philosophers Karl Marx and Friedrich Engels
3. The Communist Manifesto (1848) and Das Kapital (1867-1894)
4. Based heavily on philosophy of G.W.F. Hegel, condemned capitalism
5. History has been driven by class struggle between upper classes (who control capital, or the means of economic production) and lower classes
6. Bourgeoisie (capitalists) against proletariat (industrial working classes)
7. In order to bring about socialism, revolution was necessary
III. Reform
A. Rapid expansion of middle class and birth of industrial working class
B. Gradual widening of political representation was due largely to agitation
C. Most desperate tended to turn to radical forms of agitation: socialism, communism, even anarchism
D. But most workers turned to trade unions rather than radicalism
E. At first, unions were illegal in Europe, as well as the United States
F. Trade unionism led to higher wages, shorter workday, safety regulations, etc.
G. Workers’ parties also emerged; the Labour Party in Britain
IV. Industrialization and Imperialism
A. Western industrialization and imperialism were also intimately connected
B. Industry placed new weaponry in hands of Westerners: gunboats, artillery, quick-firing and accurate rifles, and machine guns
C. Industrialization required ever-greater amounts of raw materials
D. Growing importance of steamships made it necessary for Western nations to maintain naval bases and refueling stations around the globe
E. Europe and America wanted markets overseas to sell manufactured goods
F. Industrial Revolution, gradually created a sharply defined domestic sphere for women, separate from the workplace
G. And children were beginning to be perceived more as dependents than wage earners
1- What economic system rose with industrialization and what fell? ______
2- Identify characteristics of capitalism. ______
3- How does capitalism differ from mercantilism? ______
4- Define laissez-faire. ______
5- Who was Adam Smith; what did he write; and why was he significant? ______
6- What did the economist Thomas Malthus conclude about population? ______
7- According to Malthus, how did population increase as opposed to the food supply? ______
8- What philosophy was a reaction to capitalism? ______
9- Identify the principles of socialism. ______
10- What did utopian socialists believe? ______
11- Identify one significant utopian socialist. ______
12- What is Marxism? ______
13- Identify the authors of The Communist Manifesto. ______
14- What do Marxists believe about history? ______
15- According to Marxists, who are the bourgeoisie? ______
16- According to Marxists, who are the proletariat? ______
17- According to Marxists, why is revolution necessary? ______
18- How does Marxism differ from utopian socialism? ______
19- What social class expanded rapidly as a result of the industrial revolution? ______
20- What did most workers turn to? ______
21- How did unionism improve the lives of workers? ______
22- How and why did industrialization fuel imperialism? ______
23- How did industrialization change the lives of women and children over time? ______
1. The set of cultural values called “the cult of domesticity” applied primarily to(A) Working-class men in industrial societies
(B) Lower-class women in industrial societies
(C) Peasant families in Southeast Asia and Sub-Saharan Africa
(D) Landed nobility in East Asia
(E) Middle-class women in industrialized societies
2. Which of the following was a new Western motive for overseas territorial expansion in the industrial era?
(A) Missionary drive to convert non-Western peoples to Christianity
(B) Seizure of land to be put to use raising crops
(C) Drive to dominate sources of precious minerals and metals
(D) Need for raw materials for factory production
(E) Access to new markets for the sale of Western manufactured goods
3. Which nineteenth-century political ideology stressed principles of laissez-faire and constitutional rule?
(A) Conservative
(B) Liberal
(C) Fascist
(D) Anarchist
(E) Socialist / 4. Which answer choice includes the major political groupings in nineteenth-century Europe?
(A) Conservative, liberal, radical
(B) Liberal, radical, fascist
(C) Fascist, conservative, radical
(D) Radical, fascist, anarchist
(E) Liberal, fascist, conservative
5. Who does NOT belong in a list of nineteenth- and early twentieth-century nationalist thinkers?
(A) Karl Marx
(B) Albert Einstein
(C) Sigmund Freud
(D) Charles Darwin
(E) John Locke
6. Which of the following was NOT an influential political force in Europe by the late nineteenth century?
(A) Feminism
(B) Social democracy
(C) Socialism
(D) Anarchism
(E) Absolute Monarchy
Thesis Practice: Comparative
Analyze ideological similarities and differences in capitalist economic thought and Marxist economic thought.
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