6.3 Capitalism and the First Industrial Revolution
3 min read•june 24, 2024
The transformed economies from to . This shift, sparked by 's ideas, led to private ownership, free markets, and wage labor. These changes reshaped society, causing and the rise of a new .
Marx criticized capitalism, arguing it exploited workers and was unstable. He believed in class struggle, predicting the working class would overthrow the ruling class. His ideas about labor value and communism challenged the capitalist system, influencing future economic and political movements.
Economic Theories and Industrialization
Mercantilism to Capitalism
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- Mercantilism
- Dominant economic theory in Europe 16th-18th centuries emphasized nation's wealth and power determined by gold and silver holdings
- Encouraged governments to maintain positive balance of trade through tariffs and trade restrictions to accumulate precious metals
- Transition to capitalism
- Adam Smith's "" (1776) challenged mercantilist ideas arguing free trade and competition lead to economic growth and prosperity
- Emphasized "invisible hand" of market in regulating prices and production through supply and demand
- Capitalism
- Economic system based on private ownership of means of production (factories, land) and pursuit of profit
- Characterized by free market competition, wage labor, and capital accumulation (investment)
- Emerged as dominant economic system during Industrial Revolution in late 18th and 19th centuries
Mechanization Impacts
- Social impacts
- Urbanization: Rural population moved to cities for factory work leading to overcrowding and poor living conditions
- Family structure changes: Women and children entered workforce altering traditional gender roles and family dynamics
- Working class rise: Factory workers formed new social class with distinct living and working conditions often involving long hours and low wages
- Economic impacts
- Increased productivity: Mechanization enabled faster and more efficient goods production leading to economic growth
- Industry growth: New industries emerged and expanded rapidly (textiles, steel) transforming economic landscape
- Wealth inequality: Factory owners and investors accumulated vast wealth while workers faced poor wages and working conditions
- Political impacts
- Labor movements: Workers organized unions (trade unions) and political parties to advocate for better working conditions and rights
- Government regulation: Governments intervened in economy to address social and economic issues caused by industrialization (child labor laws, factory safety regulations)
- Imperialism: Industrial nations sought new markets and raw materials leading to expansion of colonial empires (British Empire, French colonial empire)
Marxism and Capitalism
Marxism Core Ideas
- Critique of capitalism
- argued capitalism led to exploitation of working class by bourgeoisie who owned means of production
- Believed capitalist system inherently unstable and prone to crises due to overproduction and underconsumption
- Class struggle
- Marx viewed history as series of class struggles between ruling class and oppressed class (bourgeoisie vs proletariat)
- Argued proletariat would eventually overthrow bourgeoisie through socialist revolution leading to classless society
- Labor theory of value
- Marx believed commodity value determined by amount of labor required to produce it, not market forces
- Argued workers not fairly compensated for labor as bourgeoisie extracted surplus value (profit) from their work
- Communism
- Marx envisioned classless society where means of production owned and controlled by community as a whole, not private individuals
- Believed communism would be final stage of human history following period of socialism where workers controlled means of production
Key Terms to Review (29)
Adam Smith: Adam Smith was an 18th-century Scottish economist and philosopher, widely regarded as the father of modern economics. He is best known for his influential work 'The Wealth of Nations,' which laid the groundwork for classical economics and introduced concepts such as the invisible hand, division of labor, and free markets. His ideas became foundational for capitalism and shaped economic thought during the transition from mercantilism to industrial capitalism.
Capitalism: Capitalism is an economic system where private individuals or businesses own and control the means of production, distribution, and exchange of goods and services for profit. This system encourages competition and innovation, leading to economic growth and the development of a market-driven economy. It plays a crucial role in shaping global trade, industrialization, and political dynamics throughout history.
Chartists: Chartists were members of a working-class movement in Britain during the 1830s and 1840s that aimed to gain political rights and influence for the working classes. They sought to address the injustices brought about by industrialization and the rise of capitalism, advocating for reforms such as universal male suffrage, secret ballots, and payment for Members of Parliament. This movement played a significant role in the broader struggles for democratic representation during the First Industrial Revolution.
David Ricardo: David Ricardo was a prominent British economist in the early 19th century, best known for his theories on comparative advantage and the dynamics of international trade. His ideas significantly influenced economic thought during the period of capitalism and the First Industrial Revolution, as he argued that nations should specialize in producing goods where they have a relative efficiency, thus benefiting from trade. Ricardo's insights laid the groundwork for understanding how economies could grow and prosper through specialization and trade, impacting industrial development and global economic relations.
Division of labor: Division of labor is the separation of tasks in any economic system so that individuals or groups can specialize in specific tasks. This concept is central to understanding how production processes became more efficient during the rise of capitalism and the First Industrial Revolution, as it allowed for faster and more effective manufacturing methods, leading to increased productivity and economic growth.
Edmund Cartwright: Edmund Cartwright was an English inventor and clergyman known for inventing the power loom in 1785, a revolutionary machine that mechanized the process of weaving cloth. His invention played a critical role in the textile industry, significantly enhancing production speed and efficiency, which was a key factor in the shift towards industrial capitalism during the First Industrial Revolution.
Enclosure movement: The enclosure movement was a significant process in England during the 18th and 19th centuries where common lands were privatized and enclosed, converting them into individually owned plots. This transformation allowed for more efficient agricultural practices, leading to increased productivity, but also resulted in the displacement of rural communities and changes in social structures as people moved to cities for work. The enclosure movement played a key role in setting the stage for the rise of capitalism and fueled the labor force needed for the First Industrial Revolution.
Factory system: The factory system refers to a method of manufacturing that emerged during the Industrial Revolution, characterized by the concentration of production processes in a single location, using machinery and a division of labor. This system marked a significant shift from traditional handcraft production to mass production, greatly increasing efficiency and output while reducing costs. It also played a crucial role in the development of capitalism by promoting factory-based economies and urbanization.
Free market economy: A free market economy is an economic system where the prices of goods and services are determined by supply and demand, with minimal government intervention. This system encourages competition, innovation, and consumer choice, which were pivotal during the rise of capitalism and the First Industrial Revolution, driving industrial growth and shaping modern economies.
Friedrich Engels: Friedrich Engels was a German philosopher, social scientist, and journalist known for his role in developing communist theory alongside Karl Marx. His contributions to understanding capitalism, industrial society, and class struggles were crucial during the First Industrial Revolution, shaping both critiques of industrial life and revolutionary ideologies.
Industrial bourgeoisie: The industrial bourgeoisie refers to the social class that emerged during the First Industrial Revolution, consisting of wealthy capitalists who owned and managed factories and other means of production. This group played a crucial role in shaping modern economies, as they were key drivers of industrial growth, innovation, and the expansion of capitalist economies.
Industrial capitalism: Industrial capitalism is an economic system characterized by private ownership of the means of production, where capital is invested to generate profits through industrial production and manufacturing. This system emerged during the Industrial Revolution, leading to significant changes in society, including urbanization, shifts in labor practices, and the rise of factory systems that transformed economies around the world.
Industrial Revolution: The Industrial Revolution was a period of major industrialization and economic transformation that began in the late 18th century and continued into the 19th century, marked by the shift from agrarian economies to industrialized ones. This revolution fundamentally changed how goods were produced, leading to urbanization, changes in labor patterns, and the rise of capitalism as a dominant economic system.
James Hargreaves: James Hargreaves was an English inventor best known for creating the spinning jenny, a key innovation in the textile industry during the First Industrial Revolution. His invention significantly increased the efficiency of yarn production, which helped fuel the growth of capitalism by enabling mass production in factories and meeting the rising demand for textiles. Hargreaves' work exemplifies how technological advancements contributed to the rapid industrialization and economic changes of the time.
James Watt: James Watt was a Scottish inventor and mechanical engineer who is best known for his improvements to the steam engine in the late 18th century. His innovations significantly increased the efficiency and power of steam engines, making them a key driver of the Industrial Revolution and capitalism by enabling more efficient manufacturing processes and transportation.
Karl Marx: Karl Marx was a German philosopher, economist, and political theorist best known for his critique of capitalism and his role in developing the theory of socialism and communism. His ideas laid the groundwork for understanding class struggle and the socioeconomic forces that shape history, connecting deeply to the evolution of economic systems, social reforms, and revolutionary movements in the modern world.
Laissez-faire: Laissez-faire is an economic philosophy advocating minimal government intervention in the economy, allowing businesses and individuals to operate freely. This concept gained prominence during the First Industrial Revolution, reflecting a belief that free markets would naturally regulate themselves through competition and consumer choice, leading to increased efficiency and innovation.
Luddites: The Luddites were a group of English workers and artisans in the early 19th century who protested against the industrialization of the textile industry by destroying machinery that they believed threatened their jobs and livelihoods. This movement emerged during the First Industrial Revolution, reflecting the struggles between traditional craftsmanship and the rise of mechanized production, which fueled capitalism and altered labor dynamics.
Marxism: Marxism is a socio-political and economic theory founded by Karl Marx and Friedrich Engels, which argues that history is driven by class struggle and advocates for the working class to rise against capitalist systems. This ideology critiques capitalism, asserting that it leads to the exploitation of labor and results in social inequality, ultimately calling for a revolutionary transition to a classless society where the means of production are collectively owned.
Mass production: Mass production is the manufacturing process of producing large quantities of goods efficiently and at a low cost, often using assembly line techniques. This method significantly changed the nature of industries, allowing for the rapid production of standardized products and playing a crucial role in economic growth and consumer culture.
Mercantilism: Mercantilism is an economic theory that emphasizes the role of the state in managing international trade to enhance national power and wealth. This theory promotes the idea that a country should export more than it imports and accumulate precious metals, like gold and silver, as a measure of wealth, leading to significant impacts on colonial expansion and trade policies.
Power loom: The power loom is a mechanized weaving device that significantly increased the efficiency of textile production during the Industrial Revolution. By using steam power to automate the process of weaving, the power loom revolutionized the textile industry, allowing for mass production of fabric and reducing the reliance on manual labor. This innovation played a crucial role in the rise of capitalism by enabling faster production and lower costs.
Spinning jenny: The spinning jenny is a multi-spindle spinning frame invented by James Hargreaves in 1764, which revolutionized the textile industry by allowing a single worker to spin multiple spools of thread simultaneously. This innovation marked a significant advancement in the mechanization of textile production, contributing to increased efficiency and productivity during the early stages of the First Industrial Revolution.
Steam engine: The steam engine is a heat engine that performs mechanical work using steam as its working fluid. This innovation was crucial during the First Industrial Revolution, as it transformed various industries by providing a reliable power source that enabled mass production, transportation, and technological advancements.
The Wealth of Nations: The Wealth of Nations is a seminal work published in 1776 by economist Adam Smith, which lays the foundations for classical economics and introduces key concepts such as the division of labor, free markets, and the 'invisible hand' that guides economic prosperity. This text is crucial for understanding the principles of capitalism, particularly during the First Industrial Revolution, as it advocates for minimal government intervention and highlights the benefits of competition and innovation in driving economic growth.
Triangular Trade: Triangular Trade refers to the transatlantic trading system that connected Europe, Africa, and the Americas, creating a three-legged trade network during the 16th to 19th centuries. This system facilitated the exchange of goods, resources, and enslaved people, profoundly impacting economic structures and social systems across these continents.
Urban proletariat: The urban proletariat refers to the working class that emerged in cities during the Industrial Revolution, particularly in the late 18th and 19th centuries. This group was primarily composed of factory workers and laborers who were employed in industrial settings, often facing harsh working conditions and low wages. The urban proletariat played a crucial role in the development of capitalism, as their labor fueled industrial production and contributed to the growth of cities.
Urbanization: Urbanization refers to the increasing population and expansion of cities, driven by the movement of people from rural areas to urban centers in search of economic opportunities and improved living standards. This process is closely linked to industrialization and economic growth, which transform societies and create new social dynamics.
Working class: The working class refers to a social group primarily composed of individuals who earn their living through manual labor or industrial work, typically in factories and mines. This group emerged prominently during the Industrial Revolution, where rapid economic changes reshaped labor dynamics and social structures. Their role was crucial in the growth of capitalism, as they provided the workforce needed for industrial production and urban development.