Monday, Dec 22, 2014
- Classical British Economic Theory
- Shared Beliefs
- Accepted the laissez-faire policies advocated in Adam Smith’s Wealth of Nations.
- Insisted that supply and demand would act as an “invisible hand” so that selfish individual acts would ultimately benefit the whole society.
- Opposed government regulations that interfered with the competitive free market.
- Believed that government policies should be limited to enforcing contracts, protecting private property, and ensuring national defense.
- Thomas Malthus on Population
- Malthus argued that human population grows geometrically, while food supply expands arithmetically.
- He insisted that human population would inevitably outstrip food production, thus making famine and misery inevitable.
- David Ricardo on Wages
- Influenced by Malthus’s pessimistic appraisal of the plight of the working class, David Ricardo formulated the “iron law of wages.”
- According to Ricardo, labor is a commodity whose price is determined by the law of supply and demand.
- Ricardo contended that increasing working-class wages would prompt laborers to have more children. As the supply of workers increased, their wages would decline.
- The iron law of wages left no room for a better future for working-class families. It provided strong support for opposing labor unions and refusing to raise wages.
- Working-Class Protests in Great Britain
- The Luddites
- Named after Ned Ludd, frustrated English workers known as Luddites broke into early textile factories and smashed the machinery.
- These acts of despair could not stop the Industrial Revolution. Parliament quickly responded by passing a law making the destruction of machines a capital offense.
- Workers gradually came to realize that destroying machines would not improve their lives. Instead, they had to form labor unions to fight for higher wages and better working conditions.
- Early Labor Unions
- The Combination Acts of 1799 and 1800 prohibited British workers from organizing to improve their condition.
- Under pressure from labor and middle-class reformers, Parliament repealed the Combination Acts in 1825.
- In 1875, British trade unions won full legal status, including the right to strike.