Grace Chen MYP Honors World History

Sec: 19-4: Living and Working Conditions

12/17/11 Mods 5-6

A. Adam Smith 1. Group of economists, Physiocrats, attacked idea of mercantilism. Economic theory based on belief that world contained only fixed amount of wealth, country had to take some wealth from another country. 2. Natural laws should be left to govern economic life; any attempt to interfere with natural economic laws would bring disaster. 3. Scottish finance person, Adam Smith, accepted idea of Physiocrats, wrote a book called The Wealth of Nations in 1776. -2 natural laws, Supply and Demand and Law of Competition regulated all business and economic activity. -In any business prices and profits will be fixed by relationship of supply and demand. -Article is scarce and in great demand, people will pay high price for it. Profits from sales will rise, makers of product will invest money to produce more of scarce article. -Manufacturers face competition, must reduce price or improve quality or both. 4. IF too many manufacturers produce same product, price will go down, that some manufacturers wont make enough money to cover costs. Least efficient businesses forced out of business. 5. Every person should have freedom to start any business of choice, persons business should be operated for greatest advantage. 6. System was complete free-enterprise. -Ideas appealed to industrialists because they supposedly worked automatically. Laws and regulations were thought of as interfering with workings of natural law of economic forces. B. Thomas Malthus and David Ricardo 1. Smiths ideas received strong support from Thomas Malthus and David Ricardo. 2. Malthus was Anglican clergyman became professor of economics. Wrote book called An Essay on the Principle of Population in 1798. 3. Population increases present greatest obstacle to human progress, multiply more rapidly than food supply, human misery and poverty inevitable. 4. David Ricardo an English businessman who amassed large fortune early in life and elected to House of Commons. Wrote book on how working-class poverty is inevitable, Principles of Political Economy and Taxation, 1817. Supply and demand determine wages. 5. Labor is plentiful, wages remain low, labor is scarce, wages soar. Population grows, wages drop. IRON LAW OF WAGES. C. Socialism 1. Great Britain, most influential socialist was Robert Owen, 1771-1858. 2. Quit school at age 10, went to work. Age 19, managed large cotton mill. Able to purchase a spinning mill in New Lanark, Scotland. 3. Owen ran mill for decades in spite of switching partners, in 1814 Owen entered into partnership with Jeremy Bentham. 4. If people lived in good environment, they wouldnt act selfishly. Owen felt responsible for his workers and devoted much time and money to making lives happier and more secure. Built good homes, established stores selling cheaper items, set up schools for children. 5. Owen also believed workers shouldnt rely too much on employers, encouraged formation of worker unions. Established cooperative communities in Great Britain and United States.

D. The Theories of Karl Marx 1. Karl Marx believed entire capitalist system should be changed. Born in Prussia in 1818, moved around Europe, settled in London until death in 1883. 2. Believed all great changes in history came from changes in economic conditions. Partnered with German Friedrich Engels, published Communist Manifesto, containing ideals. -Each stage of history involved inequality, struggle in 1800s between bourgeoisie (owners) and proletariat (working class). -All wealth is created by labor. Under capitalism, labor receives only small fraction of wealth it creates, most wealth goes to owners as profits. -Time would come when capitalist society would divide into 2 classes: few capitalists, and vast proletariats. Proletariats concentrated in cities, suffer poverty and unemployment. 3. Capitalists would continue to amass wealth while oppressing proletariat; proletariat in most advanced and industrialized nations would unite, seize power in revolution, and establish socialism. 4. People wouldn't initially accept socialism, workers need to control government. "Dictatorship of proletariat." Truly classless society = Pure Communism. 5. A communist was one who believed that people would live cooperatively without being forced to do so. "Scientific Socialism." E. Jeremy Bentham 1. Jeremy Bentham was British reformer, published An Introduction to Principles of Morals and Legislation in 1789. 2. Every act of society should be judged in terms of its utility or usefulness. Utilitarianism. - Laws were useful and led to happiness of people. Believed people needed education in order to determine what things were good for them and happiness in the future. 3. Advocated reform of prison system; education and legal reform.