Chapter 3-4 Industrial Revolution

• Believed that Higher GDP per capita means higher standard of living. But GDP doesn't measure the qualitative part of standard of living.
• What are other ways to measure quality of life?

  Human Development index
• All economic systems are trying to answer what question?

  Scarcity
• Limited resources + unlimited wants and needs = scarcity
• Scarcity: There are not enough resources to satisfy everyone's needs and wants
• A country needs to have a system to combat scarcity and balance the standards of living and quality of life for its citizens
• Standard of Living: The degree to which we meet our basic needs and the money we have the higher the standard of living in a country.
• Quality of Life: Non-material factors that impact citizen's life
• What are the 3 basic economic questions?

  1. What goods and services should be produced.
  2. How should these goods and services be produced
  3. Who consumes these goods and services
• How the 3 basic economic questions are answers determine the economic system.
• If all 3 economic questions are answered by the government it's communism. Centrally planned, command economy. All economic decisions made by the government.
• If all 3 economic questions are answered by individuals, it's a free market. capitalism, Laissez-faire.
• Laissez-faire is the most extreme form of capitalism
• If all 3 economic questions are answered in combination of the government and individuals, it's socialism; mixed economy.
• What are the 2 types of Economies?

  Barter and Mercantilism
• Barter: Non-cash system and the tradigin of different goods and services
• Mercantilism: Colonies give natural resources to the mother country. Mother country turns them into manufactured goods and sells them back to the colonies.
• Mercantilism is supported by classical conservative economy. Everything is run by the government/monarchy. Focussed on high tariffs (Protectionism). Very few if any economic freedoms. Benefits the home country over the colonies.
• Tariffs are taxes on imported goods. Meant to benefit manufacturers within a country. Harms consumers. MEthod of protecting your own economy. Against capitalism
• Adam Smith Rejects Mercantilism.
• Mercantilism Vs. Capitalism

  Mercantilism

  1. Government regulation of business
  2. Monopolies
  3. Accumulation of wealth by a few people in society

  Capitalism

  1. LIttle or no government regulation of business
  2. Competition
  3. Distribution of wealth across a wider range of society
• Agricultural Revolution occurs before the Industrial Revolution.
• There was insufficient land use there was a 3 fields system. Farmers would rotate their crops between 3 fields. Solutionw as clover planting. LIvestock would feed off the plant and nutrients in the field would be replenished. (Agricultural Revolution)
• Feudal system of land was used during the Middle ages and Renaissance. As it came to the end, land was rented by poor tenant farmers. Mostly on Common land - most of the area was shared common land that farmers in the same community shared. But needed to produce more food for a growing population in England.
• The Enclosure (Consolidation) Act 1801: British parliament passed this act that gave land owners the power to kick tenant farmers off their land. Farmers received minimal compensation for their small strips of land.
• Enclosures act set the condition so that displaced farmers moves to urban settings and fueled the labour supply for the industrial revolution
• Industrial Revolution begins in 1750 in Great Britain. Britain had the necessary requirements to make the Industrial Revolution possible.
• Britain's Economy was traditionally based on agriculture however during the IR this changed to a factory based system in urban centers. England also had colonies (captive market) and natural resources (feed industrialization)
• The IR was the first time Adam Smith's classical liberalism put into practice.
• Cottage industry - A small-scale industry that is usually based in a rural area and is often handicraft-based.
• Britain had the coal to supply the Industrial Revolution. #1 way to power steam engines. Quick to mine. The wages were also the highest in the world because of the small population. Due to high wages and cheap fuel innovation means less labour and saving money.
• The most important industry for the IR were Textiles. Cotton of their colonies (India/13 Colonies)
• The IR is the origins of Laissez-Faire Economics
• Cottage Industry: textiles were made by a person in their own home. requires lots of skill and is labour intensive. Minimal production. Also called domestic production. Low supply of goods, most people unable to afford expensive products, high demand and a high price for goods.
• Mass production: textiles were made in a factory (assembly line). Large warehouses. Machinery was introduced. Thousands of workers. High supply of goods, most people able to afford lower priced products, decreases demand.
• Biggest Benefit of the IR is the Mass production and economic scale.
• Economies Of Scale: Selling millions of product at a low price. Even though they made only two cents of product, making millions of these products lets companies make huge profit. Sell more because it costs less for consumers.
• IR in Great Britain: Had a large naval and merchant fleets that could be used to trade with other areas of the world. Had a large investment capital and expensive labour with many inventors creating new technology. Power shared between parliament and the monarchy. Parliament was made up of powerful landowners. Lead to the Enclosure act. Influenced by Enlightenment thinkers which favoured capitalism.
• NEgatives of the IR in Great Britain: Large gap between the extremely rich and the extremely poor, slums, starvation, child labour and worker abuse, pollution
• Economic Inequality - Growing gap between the extremely rich and the extremely poor.