Economic Theories of the

Industrial Revolution
Capitalism

Prepared by: Abdelrahim Husham

 Old Ideals: Mercantilism

• An economic theory followed by Europe in

the 1600s that stated a nation should
maintain and increase its wealth by
exporting goods more than importing
 Capitalism
• Capitalism – an economic system
based on private ownership and on
the investment of money in
business ventures in order to make
a profit.
 New Ideas about Economics
Capitalism and New Roles for Business
Competition Leaders
• Old mercantile system • Shift in wealth and power
restricted trade
• Entrepreneur
• Laissez-faire economics
• Banking and finance
• Adam Smith, market
• Andrew Carnegie, rags to
economy
riches
• Thomas Malthus, poverty
• Robber barons
unavoidable
• Industrialization succeeded
and spread
 Capitalism
• System of production, distribution, and exchange in
which private owners invest accumulated wealth for
the sake of gain
• Defined by:
– free open market,
– private ownership, and
– private businesses competing for profit
 Capitalism
• Private Property
• Free Trade
• Low Taxes
• Light Regulation
 Economists on Capitalism
• Adam Smith
• Thomas Malthus
• David Ricardo
 Thomas Malthus
David Ricardo

Adam Smith
Capital system political cartoon.
Political Cartoons
• 'Punch' cartoon, 1894:
Important meeting of
smoke makers
Political Cartoon
• 'Punch' cartoon, 1847:
A boy falls through the
gap between 'voluntary'
and 'state' education
 Capitalism
• Positive Effects:
–Competition led to progress
• Negative Effects:
–Unequal distribution of wealth led
to social unrest
 Industrial Capitalism –
Positive Effects
• Unprecedented exploration and technological advancements---major
economic growth
• Less responsibilities for govt…more freedom
• War less likely.
• Urbanization opens people’s minds to new ideas.
• New ideas makes society more complex and advanced in terms of
technology, science, etc…
• Economic production centralized
• Encourages a strong work ethic---motivated by greed---forces people
to work harder and improve
• Allows for the best prices for quality products
• Growth and importance of the middle class
 Industrial Capitalism –
Negative Effects
• Destroys important human values, replacing even
religious belief with naked exploitation---child labor,
etc…
• Undermines an individual’s sense of personal value in
one’s work---unfair wages, hours, conditions
• Undermines human relationships; all relationships are
based on cash.
• Destroys human freedom. The only freedom it protects
is free trade.
• Allows for monopolies
• Allows for problems to develop unchecked…bigger issue
later
• One mistake can blow up the economy
 Capitalism
• Sometimes called
“capitalism” or “market
economy.” Ex. U.S.A.
• People own companies
and decide what to
produce to make
consumers happy.
• Business owners can earn
big profits or can lose
their money if a business
fails. New York Stock Exchange
• Some businesses sell
stock to get more capital
to invest.