Introduction to Capitalism, Socialism, and Communism

1. Post-Industrial Economic
Theories
Capitalism, Socialism, and Communism

2. Capitalism

3. Key Ideas
Private Ownership of Industry
Freedom of Competition
Economic Inequality

4. Key Thinkers – Adam Smith
 Famous Works

The Theory of Moral Sentiments (1759)

The Wealth of Nations (1776)
 Belief: Invisible Hand
 Smith argued that there was “an
invisible hand” within the economic
market that ensured the market stayed
regulated
 Belief: Laissez-Faire Economics
 “Laissez-faire” literally translates to
“allow to do.”
 Smith argued that government should
not interfere with economics at all.

5. Key Thinkers – Adam Smith
“Every individual... neither intends to promote the public
interest, nor knows how much he is promoting it... he
intends only his own security; and by directing that
industry in such a manner as its produce may be of the
greatest value, he intends only his own gain, and he is in
this, as in many other cases, led by an invisible hand to
promote an end which was no part of his intention.”
- Adam Smith, The Wealth of Nations (1776)

6. Key Thinkers – Thomas Malthus
 Famous Works
 An Essay on the Principle of
Population (1798)
 Belief: Malthusian
Catastrophe
 Population increases geometrically
 Food supply increases
arithmetically
 THEREFORE, someday, there will
not be enough food to feed the
population

7. Key Thinkers – Thomas Malthus
“The power of population is so superior to the power of the earth to
produce subsistence for man, that premature death must in some shape
or other visit the human race. The vices of mankind are active and able
ministers of depopulation. They are the precursors in the great army of
destruction, and often finish the dreadful work themselves. But should
they fail in this war of extermination, sickly seasons, epidemics,
pestilence, and plague advance in terrific array, and sweep off their
thousands and tens of thousands. Should success be still incomplete,
gigantic inevitable famine stalks in the rear, and with one mighty blow
levels the population with the food of the world.”
- Thomas Malthus, Essay on the Principle of Population (1798)

8. Key Thinkers – David Ricardo
 Famous Works
 On the Principles of Political
Economy and Taxation (1817)
 Belief: “The Iron Law of
Wages”
 See next slide for details
 Ricardo argues that if bosses never
pay their workers more, the cyclical
changes can be avoided.

9. Wages
increase
Fewer
workers in the
labor market
Parents have
more children
Parents have
fewer children
More workers
in the labor
market
Wages fall

10. Key Thinkers – David Ricardo
“As population increases, these necessaries will be constantly rising in price,
because more labour will be necessary to produce them. If, then, the money
wages of labour should fall, while every commodity on which the wages of
labour were expended rose, the labourer would be doubly affected, and would
be soon totally deprived of subsistence... These, then, are the laws by which
wages are regulated, and by which the happiness of far the greatest part of
every community is governed. Like all other contracts, wages should be left to
the fair and free competition of the market, and should never be controlled by
the interference of the legislature.”
- David Ricardo, On the Principles of Political Economy and Taxation (1817)

11. Socialism

12. Key Ideas
Government Ownership of Industry
Economic Equality
Goal: Classless Society

13. Key Thinkers – Claude Henri de Saint-Simon
 Famous Works
 Introduction to Scientific
Discoveries of the 19th Century
(1803)
 Notes on the Study of Man (1813)
 Belief: Utopian Socialism
 Through a socialist economy, SaintSimon argued, society could
achieve perfection

14. Key Thinkers – Claude Henri de Saint-Simon
“The whole of society rests upon industry. Industry is the
sole guarantee of its existence, the single source of all its
wealth and all its prosperity. The state of things most
favorable to industry is by that very reason the most
favorable to society.”
- Claude Henri de Saint-Simon, 1894
Quoted in Georges Weill’s A precursor of socialism:
Saint-Simon and his work

15. Key Thinkers – Robert Owen
 Famous Works
 A New View of Society (1813)
 Revolution in the Mind and Practice of
the Human Race (1849)
 Belief: Utopian Socialism
 Owen became manager of the mill
business in New Lanark, Scotland (a
town of about 2,500 people), which he
turned into a Socialist Utopia.
 The business faired very well, but
Owen’s partners were unhappy with
the extra expenses.
 1825: Owen left New Lanark to start
New Harmony in the United States

16. Key Thinkers – Robert Owen
“They would receive the same care and attention as those who belong to the
establishment. Nor will there be any distinction made between the children of
those parents who are deemed the worst, and of those who may be esteemed
the best members of society: indeed I would prefer to receive the offspring of
the worst, if they shall be sent at an early age; because they really require more
of our care and pity and by well-training these, society will be more essentially
benefited than if the like attention were paid to those whose parents are
educating them in comparatively good habits.”
- Robert Owen, Address to the Inhabitants of New Lanark (1816)

17. Key Thinkers – Karl Marx
 Famous Works
 The Communist Manifesto (1848)
 Das Kapital (1867-1894)
 Belief: Socialism was a stepping
stone toward Communism
 See next slide

19. Key Thinkers – Karl Marx
“Centralization of the means of production and
socialization of labor at last reach a point where they
become incompatible with their capitalist integument
[click for definition]. Thus integument is burst asunder. The
knell of capitalist private property sounds.
The expropriators are expropriated [click for definition].”
- Karl Marx, Das Kapital, Volume I (1867)

20. Communism

21. Key Ideas
Public Ownership of Industry
Classless Society
No Need for Government

22. Key Thinkers – Karl Marx
 Famous Works

The Communist Manifesto (1848)

Das Kapital (1867-1894)
 Belief: Communism is the highest
form of Socialism

The people want a classless society; the
government does not need to regulate it.
 Belief: History is the story of class
struggle

Class struggle will no longer exist when
there are no classes

Communism can eliminate classes

23. Key Thinkers – Karl Marx
“In place of the old bourgeois society, with its classes and class
antagonisms, we shall have an association in which the free
development of each is the condition for the free development of
all.”
“The Communists disdain to conceal their views and aims. They
openly declare that their ends can be attained only by the forcible
overthrow of all existing social conditions.
Let the ruling classes tremble at a communist revolution.
The proletarians have nothing to lose but their chains. They have a
world to win.
Working Men of All Countries, Unite!”
- Karl Marx & Friedrich Engels, The Communist Manifesto, 1848