Transcript Document 7149477

Part 1: Capitalism
Part 2: Industrialization
Theme: Comparing social and economic
systems and understanding those
systems as responses to change and
development
Lesson 6
Putting It All Together
Enlightenment
Coal
Capitalism
Steam powered
machines
More incentive,
more capability,
more demand,
more supply
Factories
Triangular
trade
Cotton
Socialism
More goods, more money,
but some unpleasant social
developments
Word Association
• Capitalism
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
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
Adam Smith
(Review from Lsn 4)
• Free enterprise system
• The role of self-interest and laissezfaire
– Through an “invisible hand” self-interest
guides the most efficient use of
resources in a nation’s 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
– (We’ll discuss capitalism in Lsn 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
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
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
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
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
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
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
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
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
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
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?
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
Importance of Coal
• Until the 18th Century, wood had been the primary fuel in
Great Britain
• Britain’s 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
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
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
– Kay’s invention allowed the
shuttle, containing the thread,
to be shot backwards and
forwards across a much wider
bed
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 Kay’s
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
Other Inventions: The Spinning
Jenny
• In 1764, James Hargreaves invented
an improved spinning jenny, a handpowered 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
Other Inventions: The Mule
• In 1779, Samuel
Crompton invented the
“mule”
• It was adopted for
steam power in 1790
• A worker using a steamdriven mule could
produce a hundred
times more thread than
a worker using a
manual spinning wheel
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 generalpurpose 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
Steam Power
• By 1800, thousands of Watt’s
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
Factories
• Cartwright’s
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
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
Adam Smith’s 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.”
Working Conditions
• Factory work required strict
discipline, a fast pace, and
close supervision
• Work became monotonous
and repetitive
• Safety suffered
• Workers lost their broadrange 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
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
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
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
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
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
Discussion
• What were the good things about
industrialization?
• What were the bad?
Next
• Part 1: Socialism
• Part 2: Global
Depression
Migrant Mother taken
by Dorothea Lange in
1936