37 - Economic - Smith to Marx

AP European History Hancock

In Search of an Economic View of the World: Smith to Marx Background: With the advent of the Commercial Revolution in the sixteenth century, national monarchs adopted mercantilism as their economic policy. The chief objective of mercantilism was to gain a favorable balance of trade by restricting imports and promoting exports. In the eighteenth century a group in France called the physiocrats, who were influenced by the natural law thinking of the Enlightenment, sought to remove all man-made barriers to trade. In particular, they opposed the restrictions imposed by guilds and mercantile laws. The physiocrats desired the elimination of all restrictive economic policies to permit the natural laws of the marketplace to regulate the flow of goods. This concept developed into the doctrine of laissez faire, which greatly influenced and aided the development of classical economics. The industrial capitalist’s adoption of the philosophy of laissez faire resulted in the exploitation of industrial workers. Many important thinkers, reacting to the economic and social abuses existing in the early Industrial Revolution, found in the doctrine of socialism the only solution to the problem. A common conviction developed among them that private property and the competitive spirit were thoroughly evil. The struggle for survival among capitalists and between capitalists and workers brought out the worst in human nature. A variety of socialistic schemes was presented and tried by Saint-Simon, Fourier, Owen, Blanc, and Marx. Socialism and capitalism struggled and competed throughout the nineteenth and early twentieth centuries until an accommodation was achieved in most modern states. Directions: Study the following chart on the back then on a separate sheet answer the questions below. Be prepared to share your responses. Questions: 1. How would each of the people view the role of government? Classify them on the political spectrum. Smith, Ricardo, Owen: held that government should remain divorced as much as possible from the economic activity of the country. Blanc & Marx held a diametrically opposed view. 2. Why must economic philosophy be allied with political power to effect change? Although most economic philosophies would have some impact without government support, they would operate only on a very limited scale. 3. Why does the implementation of an economic theory lag in adoption? An economic theory analyzes current economic conditions but does not dictate policies. If converts are made in government and industry, the theories may develop into policies. Often gaining this acceptance requires a considerable period of time. 4. Why does an economic philosophy tend to be less radical in practice than in theory? The idealism of a theory tends to become distanced from reality. When a theory is put into practice, it confronts the intracacies of the economic world which do not admit the smooth implementation of an idea. In addition, there are social and political elements that oppose the introduction of new economic procedures. Compromise often results.

PEOPLE Adam Smith

RESPONSE to existing conditions or theories Inspired by the ideals of the French physiocrats who argued that mercantilism was no longer an acceptable economic policy.

IDEAS for change In Wealth of Nation, questioned governmental policy that imposed restrictions on trade. Suggested that every individual should operate freely in the marketplace without government regulation. Then, the nation would profit. The wealth of a nation depended not as much on a centralized economy as on the sum of the individual wealth of all the people.

INFLUENCE of ideas Liberal laissez-faire ideas in the mid-nineteenth century were influenced by his work.

David Ricardo

Took a more pessimistic view of the idea of laissez faire and, in so doing, turned economics into the “dismal science.”

Agreed with Adam Smith that the wealth of a nation was based on the total of individual efforts. However, he suggested that Smith’s view was naive because reality showed that only some people would be successful. The masses would never be able to compete and would be exploited; but this was the law of nature and there was nothing to be done about it.

Ricardo’s realistic impression dominated much of the nineteenthcentury industrial world and served as support for the ideology of Social Darwinism.

Robert Owen

An English factory owner, he Unlike many nineteenth-century capitalists, was one of the first socialists. he organized his business empire on a fraternal basis and spent a lifetime crusading for social reform. Owen believed that the only solution to the exploitation of the workers rested in the hands of the wealthy who should voluntarily organize schemes to improve the lives of the workers.

His ideas, while not popular, reappeared throughout the nineteenth century in other idealistic policies.

Louis Blanc

Found himself at the head of the French government at the end of the Revolution of 1848.

He had been one of the most eloquent spokesmen for socialist reforms, arguing that the government should involve itself in “social workshops” to solve the problems of the famished unemployed. A confirmed republican, he demanded elections to support his new government, but his policies alienated the conservative countryside, and he was tossed from power before he could implement his early socialistic schemes.

Blanc’s ideas found embodiment in many twentieth-century social welfare programs.

Karl Marx

Represented an extreme understanding of social-ism that developed into communism. Marx and his colleague, Friedrich Engels, highlighted the necessity of government intervention in the economic woes of the masses.

The government would be created by a mass uprising of proletarians who would create a universal community of shared wealth based on shared labor.

The ideas of Marx, significantly altered, found full expression in the Russian Revolution of 1917 and the consequent development of a worldwide communist ideology.