Download Philosophers who believed in capitalism and

How did Smith, Malthus, and
Ricardo support industrialization
and capitalism?
Chapter 9 Section 4
Was there a Need for Reform?
• During the 19th century, the Industrial Revolution not
only revolutionized the way things were made, but
also created many problems.
• What were the areas of society in which reforms were
needed?
Tensions Created By the
Industrial Revolution
• The gap between the rich and poor widened
• Business owners/leaders argued that the government
should stay out of economic affairs.
• Reformers argued the government needed to play an
active role to improve the conditions for the poor.
• Workers demanded better wages, more rights, and
protection.
• Workers form labor unions increase their influence,
often times clashing with business owners
The Philosophers of Industrialization & their
Economic Philosophies
Philosopher
Adam Smith
Economic Philosophy
laissez-faire
Thomas Malthus
laissez-faire capitalism
David Ricardo
laissez-faire capitalism
Jeremy Bentham
utilitarianism
John Stuart Mill
utilitarianism
Robert Owen
utopian socialism
Karl Marx
Marxism/communism
Friedrich Engels
Marxism/communism
Laissez-faire
• Term is French in origin— “let people do as they please.”
• Economic policy stemmed from the French economic
philosophers of the Enlightenment.
• The Enlightened Philosophers argued:
• against government intervention in the economy and
the use of placing heavy tariffs on foreign goods.
• that government regulations only interfered with
production and wealth.
• if government allowed free trade, the economy would
prosper
Laissez-faire
• Definition of laissez-faire: The idea that the government
should not interfere with or regulate industries and
business.
• An economic policy of letting owners and business
set working condition without interference.
• This policy favors a free market unregulated by the
government.
• What are the advantages/disadvantages of a laissezfaire economy?
Adam Smith
• Professor at the University of
Glasgow, Scotland
• Defended the idea of a free
economy and free markets in
his book, The Wealth of
Nations (1776):
• Economic liberty = economic
progress
• Believed the government
should not interfere with the
economy
Adam Smith
1723-1790
Adam Smith
His arguments rested on what he called the
Three Natural Laws of Economics:
1. Law of self interest— People
work for their own good.
2. Law of competition—
Competition forces people to
make a better product.
3. Law of supply & demand—
Enough goods would be
produced at the lowest possible
price to meet the demand in a
market economy
Adam Smith
1723-1790
Capitalism
• Definition of capitalism: an economic system based on
1) private ownership and 2) the investment of money
in business ventures in order to 3) make a profit
• These ideas helped bring about the Industrial
Revolution and supporters of capitalism believed its
success was due in part by the fact that the
government did not meddle in economics.
The Philosophers of Capitalism
Thomas Malthus
(1766-1834)
David Ricardo
(1772-1823)
Thomas Malthus
• Supported the basic ideas
of Adam Smith and that
natural laws governed
economic life
• His ideas, (along with
David Ricardo’s,) were the
foundations of laissez-faire
capitalism.
Thomas Malthus
(1766-1834)
Thomas Malthus
• In his essay, An Essay on the
Principle of Population
(1798), he argued that
population tended to
increase more rapidly than
the food supply.
• Argued that without wars,
famine, or epidemics to
control the population, most
people would be poor would
suffer.
Thomas Malthus
(1766-1834)
Thomas Malthus
• He urged people to have less
children to avoid overpopulation
and the chance of large families
becoming poor and to avoid
suffering.
• Predictions became a reality
during the 1840s, though the
food supply eventually
increased, living conditions
improved, and people began to
have less children.
Thomas Malthus
(1766-1834)
David Ricardo
• Believed the poor had too many
children.
• Elaborated on Malthus’s theory of
economics in his book Principles of
Political Economy & Taxation
(1817):
• Believed a permanent
underclass would always be
poor
• Many workers + abundant
natural resources = cheap labor
& resources.
David Ricardo
(1772-1823)
David Ricardo
• Principles of Political Economy
& Taxation (1817) continued:
• Few workers + scarce
natural resources =
expensive labor &
resources.
• Believed as the population
increased, wages would
decrease (workers paid
less)
• Iron Law of Wages
David Ricardo
(1772-1823)
Laissez faire thinkers, such as Adam Smith, Thomas
Malthus, and David Ricardo all:
•
Opposed government intervention in the economy,
which included government efforts to help poor
workers.
• Believed people should be left to improve their lot
through thrift, hard work, and limiting the size of their
families.
• Argued creating a minimum wage and better working
conditions would:
1. Upset the free market system
2. Lower profits
3. Undermine the production of wealth in society
Discussion: Laissez-faire Capitalism and the
Philosophers
• How were “workers” viewed by people like Smith, Malthus, and
Ricardo?
• How did they view the poor? Was their view favorable or
unfavorable? Explain your answer.
• According to Malthus and Ricardo, what affect did population
growth have upon society?
• What flaws (if any) can you find with laissez-faire capitalism?
• Could a society have a capitalist economy in which a government
could impose restrictions? Explain your answer. (Hint: Think
about the U.S. economy.)