Industrial Revolution and Capitalism: Economic Doctrines, Anarchism, and Marxism

Theme 3: The Industrial Revolution and the Origins of Modern Economic and Political Thought

The Industrial Revolution originated capitalism, a new economic doctrine and political system that brought sustained economic growth. The new system spread to Europe, the United States, and Japan.

Principles of Classical Liberal Economics (Adam Smith)

• The interests of the individual and the maximization of profit drive the economy.
• Diverse interests find equilibrium in the market, where prices adapt supply and demand.
• The State should abstain from interfering in the economy, allowing the free development of particular interests (free trade).

Industrial Capitalism

Under industrial capitalism, the productive system is structured around the means of production (factories, etc.), which are privately owned by the bourgeoisie. The workers of the factories, the proletariat, own no property and, in exchange for a wage, sell their labor.

Capitalism lacks planning, and constant output growth leads to cyclical economic crises. Production increases faster than demand, companies go bankrupt, stocks accumulate, and, as a consequence, workers lose their jobs.

Banking and Finance

Banks supply capital to companies through loans and act as direct investors by purchasing shares. Stock exchanges facilitate the buying and selling of shares, and banks act as intermediaries.

Joint-stock companies (sociedades anónimas) raise capital by dividing the company into shares (acciones). These shares can be bought and sold by individuals on specialized institutions: the stock exchange.

The Expansion of Industrial Capitalism

Industrialization extended through France and Belgium during the 19th century, with heavy industry (steel) and the textile industry. Between 1850 and 1870, Russia, Japan, and the United States also industrialized.

New Energy Sources and Industries

The invention of the dynamo (1869) made it possible to produce electricity in hydroelectric power plants, and the transformer (1897) allowed electricity to be transported over long distances. Electricity had multiple applications: industry (as a driving force for machines), transport, communication, entertainment, and lighting.

Petroleum began to be exploited in the mid-19th century. The explosion of the internal combustion engine enabled its use as fuel for automobiles (1885).

Key Industries

• Metallurgy: The Bessemer process gave a major boost to production. New metals were developed, such as aluminum, and steel became widely used in the automobile industry (Henry Ford) and in the construction of the United States' utilitarian coaches.
• Chemical industry: Chemistry played an important role in developing new products, including fertilizers, pesticides, chemical products (sulfuric acid, dynamite, etc.), and pharmaceuticals. Dyes were also produced, and the use of reinforced concrete allowed the construction of the first skyscrapers.

New Industrial Organization

Taylorism divided production processes into specific tasks, performed at high speed. Each worker carried out one very specific process, eliminating useless movements and maximizing productivity. The United States and the Ford factory were pioneers in implementing this system.

To restrict competition, companies formed agreements to fix prices and influence markets. These arrangements took several forms:

• Cartel: agreements between different companies.
• Trust: mergers of companies.
• Holding company: a financial group that holds shares in most of a group of companies and banks.
• Monopoly: the exclusive right of a company to market a product.

Anarchism

Anarchism is the first doctrine and radical movement that champions the individual. It is a set of thinkers whose main tenets share three basic principles: the exaltation of individual freedom, the defense of social solidarity, and criticism of private property and of the authority of the State.

Anarchists defended the action of workers and revolutionary struggle to destroy the existing society and establish a new collective society without the State. They opposed participation in political life and organization in parties.

Goal of the workers: social revolution.

Internationalism

Internationalism is a political movement that advocates cooperation among nations for mutual benefit, both economic and political.

Marxists and anarchists defended the need for the working class of the whole world to unite to dislocate the central capitalist system.

• 1864: The First International (Marx) was founded, bringing together workers' associations. Marxists, anarchists, and syndicalists joined.
• 1876: The First International dissolved due to major ideological differences.
• 1889: The Second International was founded, initially exclusively socialist, with the objective of coordinating the actions of different socialist parties.

Some of these organizations adopted symbols of identity of the workers' movement.

Socialism and Marxism

In the nineteenth century, Marx and Engels denounced the exploitation of workers and defended the need for a workers' revolution to destroy capitalism. Through the revolution, the proletariat would conquer political power and create a workers' State that would socialize the ownership of the means of production. Private property would gradually disappear, along with social classes.

Starting in the last third of the nineteenth century, Marxists proposed the creation of socialist parties. Their objective was the realization of the proletarian revolution, although they also defended political intervention through participation in elections and entry into national parliaments.