Chapter 7-4: New Ways of Thinking

In a little more than 100 years the Industrial Revolution converted Europe from a farming economy centered in the country into a industrial economy based in the growing urban (city) centers.

In the short-term, industrialization brought great wealth and prosperity to only a select few, while for the majority of the people it brought great hardships. In the long-run it provided material benefits to all people but at what cost? Industrialization led to new ways of thinking about people and society. These new thinkers of the industrial age sought to understand the problems facing society through scientific reasoning and worked to create economic "solutions" to these troubling problems.

Utilitarianism is the idea that the moral worth of an action is solely determined by its contribution to all of society. In other words, how can an action best maximize happiness or pleasure for the greatest number of people? Inspired by Enlightenment thought, like Rousseau’s General Will theory, utilitarian ideology gained momentum due to the vastly changing societal conditions brought about by industrialization.

The key to understanding the various definitions of capitalism and socialism begins with understanding the concept of the capitalist. To the early social reformers, capitalists were seen as wealthy and greedy business owners who controlled the resources of industry and exploited their positions of power over employees. Exploitation is central to this concept. A capitalist was seen as unfairly using the workers to expand his own wealth while keeping them in continual poverty. Marx saw workers as being caught in a trap—wage slavery—needing work, but only receiving minimal wages. Surplus value was the term he applied to the value created by workers above that paid to them as wages. He claimed that capitalists hoarded surplus value, which rightfully belonged to workers.

Socialism literally sprang from observing the success of capitalism, while believing that conditions for workers could be improved if the control of production were moved from capitalists to the state. A top-down control system, such as that used in large business, was the model for socialist society. Yet the true engine of capitalism, the free market, was overlooked and left out of the plan.

Social reformers, from the early Utopian Socialists to the Marxists, were literally awed by the tremendous success of capitalistic industrial production. In The Communist Manifesto Karl Marx stated:

“The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together. Subjection of Nature's forces to man, machinery, application of chemistry to industry and agriculture, steam-navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalization of rivers, whole populations conjured out of the ground—what earlier century had even a presentiment that such productive forces slumbered in the lap of social labor.”

The socialists did not want to disrupt this technological miracle, but merely to distribute the profits of it more fairly. They observed the workers earning profits for the wealthy business owners and maintained they were being unfairly exploited. Believing the strength of the system was in its structure, they didn't want to eliminate businesses, but merely to replace the wealthy business owners with the state.

Concept connections: laissez-faire, utilitarian, socialism, communism