FCPS World II SOL Standards: WHII 9b

FCPS HS Social Studies © 2014

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

Results of CapitalismCapitalism 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.

Adam SmithSource:http://commons.wikimedia.org/wiki/File:AdamSmith.jpg

Pro-Communist Poster 1911 Source: http://02varvara.files.wordpress.com/2013/10/00-pyra-mid-of-the-capitalist-system-1911-iww.jpg

CommunismCommunism 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.

Results of CommunismCommunists 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.

Responses to the Industrial Revolution: Economic Systems (cont.) WHII 9b

FCPS HS Social Studies © 2014

Connection to TodayThe United States passed laws to help reduce the injustices of capitalism. What types of laws could help workers?

ResourcesABC-CLIO● Capitalism http://worldhistory.abc-clio.com/Search/Display/309337?terms=capitalism● Communism http://worldhistory.abc-clio.com/Search/Display/309346?terms=communism

Key VocabularyCapitalism: economic system in which individuals own both private property and the means of production

Means of production: physical structures or objects that are used to make goods, such as factories, machines, and tools

Proletariat: the working class, often used when describing the theories of Karl Marx

Bourgeoisie: the middle class, used in the 1700s and 1800s

Communism: economic system in which the people as a group own all property and the means of production

Laissez-faire: policy in which the government plays little or no role in the economy

Dictatorship: government in which one person or political party holds all power

Socialism: economic system in which people may own private property but the public controls the means of production

Market competition: struggle between businesses to attract customers and increase profits

Entrepreneurs: people that beginor start new businesses

Economic Systems TodayAfter 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 MarxSource: http://upload.wikimedia.org/wikipedia/commons/a/a2/Marx_old.jpg

Quick Review1. What book belongs at the center of the Venn diagram?

3. Who believed that market competition would help the economy?

2.A. Das KapitalB. Don QuixoteC. The Communist ManifestoD. The Wealth of Nations

The author of this quote was most likely a –

A. CapitalistB. CommunistC. MercantilistD. Socialist

A. Friedrich EngelsB. Karl MarxC. Vladimir LeninD. Adam Smith.

4. What are at least three reasons why someone might choose capitalism over communism?

“The proletarians have nothing to lose but their chains. They have a world to win. Workingmen of all countries, unite.”