Development of Liberalism SBA PREP

Vocabulary

Bourgeoisie - They were a wealthy social class in which profited from the means of production(factories, land, and business); wealthy class where they earn their income through capital rather than labor.

  • Were seen during the late Middle Ages, but became a more dominant class during the Industrial Revolution

Proletariat - Poor working class who would sell their labor for wages

  • The Bourgeoisie would exploit the proletariats(poor working class) by paying them low wages, forced to work for long hours, often with little to no breaks, and unsafe working conditions

  • This pattern had lead to class conflict and social inequality(Marxism)

Marxism(Communism/Scientific Socialism) - A social, political, and economic theory developed by Karl Marx(Father of Communism) during the Industrial Revolution that focuses on the conflict between the proletariat and bourgeoisie.

  • The theory advocates for a classless society through communism where the means of production are communally owned

  • Sided with the proletariats and their class struggles as he believed capitalism is evil, a system where the rich get richer and the poor get poorer

  • Supported a planned economy

  • Scientific socialism as in focuses on the analysis of history, economics, and class struggles and predicting how capitalism will collapse and socialism will emerge. Based on scientific reasoning and social evidence, not just idealistic hopes

Democratic Socialism(moral/belief) - Promotes an economy governed through democratic principles rather than by a central authority

  • Citizens have a direct voice in both political and economic decisions

  • Also includes having a voice in workplaces

  • Means of production is collectively owned and focuses on meeting the people’s needs than maximizing profit, replacing capitalism

  • Democratic socialism emphasizes freedom, equality, and participation within a market-based or decentralized economy that still values democracy and human rights

Utopian Socialism - The idea of creating a perfect and fair society through cooperation and shared wealth, where communities are based on egalitarian values and the common good

Demand - Desire, ability, and willingness of consumers to buy a good or service at a certain price.

  • Law of demand: price goes up = demand goes down, price goes down = demand goes up

Supply - The amount of a good or service that producers are willing and able to offer for sale at difference prices

  • Law of supply: Price increase = more supply, price decrease = less supply

Command/Planned Economy - type of economy where the government makes all decisions regarding production and distribution of goods instead of letting the market(supply and demand) decide. Aimed to eliminate economic and social inequality

  • a.k.a socialism, communism, centrally planned, public enterprise

Market Economy - type of economy where decisions about what to produce, how to produce, and for whom to produce are made by individuals and business through supply and demand, not by the government

  • Prices are driven by competition

  • a.k.a capitalism, free market, private enterprise

Laissez-Faire - An economic policy where the government should interfere only to protect the country against foreign enemies, ensure competition, maintain law and order and protect individual property rights

  • Believes that the free market will work best left alone

Invisible Hand - A term coined by Adam Smith to describe the self-regulating nature of the marketplace, where individual who pursue self-interest in a competitive environment leads to economic prosperity for all. 

Iron law of wages - An idea developed by David Ricardo in the early 1800s where if wages rise = able to create larger families = too many workers = even lower wages

  • Therefor, wages will naturally stay low because of competition among workers and supply and demand for labor

Individualism - belief that stresses the importance of the individual over the group or society

  • Emphasizes the freedom to make your own choices without being controlled by outside authority and taking responsibly for your own well being and relying on your own abilities instead of depending on others

Collectivism - belief that stresses the importance of the group over the individual

  • Emphasizes people relying on each other and focuses on achieving/prioritizing the needs of the group over the individual interests

Social Darwinism - The concept that suggests in natural law, your place in society will be determined by your abilities and the best and brightest will prosper and the unworthy will not; you are paid what you are worth

  • Based on Darwin’s theory of “survival of the fittest”

  • Competition will ensure only the fittest will survive and will only benefit society as a whole

Utilitarianism - Theory that suggests the best action or decision is the one that creates the greatest good for the greatest number of people

  • Focusing on the actions over the intentions 

  • Maximizing overall happiness and well being in society

  • John Stuart Mill - believed happiness and well-being should guide moral decisions

Welfare Capitalism - Economic system where a country primarily operates under capitalism, but the government still provides social programs to support the well-being of the citizens

  • Combines free-market with social welfare policies; mixed economy

  • Ex) Canada

Nanny State - Type of government that enacts policies deemed as too overprotective, interfering with person choice

  • The government is a “nanny” to the citizens

  • Includes restrictions on eating, alcohol consumption, and smoking

Industrial Revolution(late1700s-1800s) - Period of major industrialization, change in economic technological, and social change that began in Britain in the late 18th century. 

  • Increase use in machine-based manufacturing

  • Rise in factories and mass production

  • Advanced transportation

  • Growth of capitalism and change in labor system

Outside of factories:

  • People moving from rural areas to the city

  • People were forced to live in city slums

  • Huge amounts of pollution

  • Overcrowded cities = filthy conditions, spread of diseases, smelly

Inside factories:

  • Workers were treated cruelly and inhumanely

  • Factories were gloomy, unsafe, overcrowded, and noisy

  • Lung disease due to little ventilation

  • Dangerous work = injuries were common

  • Little to no breaks and people working long hours

  • Child labor was common

  • Poor wages

Luddites - People who protested against the change in their society during the industrial revolution

  • Saw technology as a threat to their way of life as skilled laborers

  • Would break into factories, destroy machinery, and attack business owners

  • British government responded by having military troops protect factories and enforced laws that breaking machinery was punishable by death

Chartists “The People’s Charter” - Radical campaign for parliamentary reform of inequalities and more political rights for ordinary people

  • Wanted universal male suffrage, secret ballots, and annual elections

The Great Depression(1920s) - Severe worldwide economic hardship where people struggled financially, widespread poverty, and unemployment

Why it happened:

  • Huge increase in consumer goods

- Purchased through credit - people weren’t actually paying for them

- Economy looked stronger than it was

  • Speculation of the Stock Market

- People were heavily investing in stocks without real evidence of wealth backing them up

  • Stock Market Crash(Oct 1929)

- Fear made people sell their shares

  • Banks collapsed due to everyone trying to take out their money

  • Massive unemployment → people could not afford to feed themselves or their family

Influence of President Hoover

  • He was a classical liberal, believing that the government should not intervene; situation only got worse

How did he help the nation get out of depression?

  • Raising Tariffs on important goods, but this only hurt international trade

Adam Smith - Father of Capitalism

  • View on Human Nature: People need individual freedom to contribute the most to the collective

  • View on Government: Opposes mercantilism, support laissez-faire(free market). Believed individuals pursuing self-interest would naturally guide the market without government interference(invisible hand)

5 Pillars of Capitalism

  1. Profit Motive

  2. Competition

  3. Freedom to buy and sell

  4. Private property

  5. Laissez-faire

Pros of Capitalism

  • Market motivates producers to produce goods the public wants

  • Market provides an incentive to acquire useful skills

  • Wide variety of goods and services

  • Uses resources efficiently 

  • Competition encourages good quality at lower prices

  • Productivity is rewarded by higher profits

  • Develops self-reliance

  • Able to become very wealthy

Ex)

  • Growth of the middle class

  • Rapid industrialization

  • Growth of the US and other consumer countries compared to those nations with high levels of socialism

Cons of Capitalism

  • Consumers can be manipulated by advertising

  • Prices and incomes may not reflect what’s best for society

  • Business cycle experiences many ups and downs(layoffs/unemployment)

  • Monopolies and oligopolies can emerge that charge unreasonable prices

  • Extreme income inequality

  • Industry cost-cutting can lead to environmental problems

  • Insecurity is present on a large scale

  • difficult to break out of the cycle of poverty

Ex)

  • Lack of concern for workers, seen in industrialization nations from Great Britain’s factories, US slavery, sweatshops in Asia

  • The Great Depression

  • Competition does not mean a fair playing field

  • Global climate change brought about by the increasing consumerism promoted by capitalism

Thomas Malthus’s Beliefs

  • The world’s population is advancing faster than the world’s ability to produce food

  • Population growth in the past was maintained by famine and disease

  • Government intervention with charity would only unbalance the system

Ricardo’s Beliefs

  • Used Malthus’s agreement to state that poverty was inescapable

  • Iron Law of Wages: increasing wages = ability to have bigger family = too many workers = even lower wages

  • Poverty was a natural law of limiting population that the government should not challenge

Karl Marx - Father of Communism

  • a.k.a radical form of socialism

  • His ideas were born out of terrible living conditions of the majority of people in the cities and saw how evil the industrial revolution and capitalism was

5 parts of Scientific socialism

  1. Historical Materialism - Economics is the driving force of history

  2. Class Struggle - Bourgeoisie vs Proletariat

  3. Surplus Value - Bourgeoisie bought products the proletariat made at a cheap price and sold them back profiting the difference

  4. Inevitability of Socialism - Lower class with eventually rise up, start a revolution, and establish a “dictatorship of the proletariat” - a centrally planned economy with fair income distribution

  5. Classless Society - Workers will share everything equally and people will begin to work for the “common good”

  • No class society = communism 

  • The role of the state withers away

Edmund Burke - Father of Conservatism

  • A reaction to classical liberalism, Burke wanted to revert back to the things were before

Classical conservative beliefs

  • Society should be hierarchical - people are not equal, some people are better suited for leadership

  • Limited electorate(with special rights/responsibilities) to choose government

  • Care for the welfare of others

  • Stability of society is most important - achieved through law and order and the maintenance of the customs and tradition that bind society together

Robert Owen - Father of British Socialism

  • Owen was a social reformer who reacted to the extreme poverty during the Industrial Revolution

  • He believed the distress of workers and poor was because of competition of human labor with machines

  • To solve this problem, Owen thought to get rid of machines and people unite together 

  • To eliminate poverty, he encouraged creating smaller co-operative communities like New Harmony

New Harmony  - A experimental community that followed utopian socialistic values founded by Robert Owen in 1825

  • Created with the goal of making a perfect, cooperative society where people would live and work together for the common good instead of for profit.

  • He shortened working hours, restricted child labor, and provided sick days for his employees and cared for how they lived

  • Valued education and provided them to his workers children, “institution for the formation of character”. 

  • Furthermore, Owen emphasized the importance of moral education and personal development as integral to achieving societal harmony, believing that by fostering a well-rounded character, individuals could contribute positively to the community.

Overall, the community had failed

  • Despite the ideals of not only Owen, but the many people who joined his community, their was a lack of leadership and cohesive vision

  • There was also a lack of skills from members who didn’t have the right skills for trades and agriculture leading to inefficiencies and economic instability to stay self-sufficient

  • The reality did not meet to the standards Owen had been advocating for, thus the members high expectations were not met and people were left disillusion and dissatisfied. In the end, they left the community.

New Deal - Keynesian economy put into practice by president Franklin Roosevelt

  • Goal of the New Deal: pull the USA out of the Great Depression

- 3 goals: 3 R’s

  1. Relief - money to the people in need

  2. Recovery - put people back to work and short term solutions

  3. Reform - regulate economy to prevent future depressions

  • It was based on Keynes theories which suggested that during times of recession, government should spend more and reduce taxes, while during boom times, government should spend less money and raise taxes(mixed economy)

  • Government would spend money to create jobs by investing in infrastructure projects, supporting small businesses, and providing incentives for companies to hire more workers.

  • People working meant money in circulation, therefore stimulating the economy