Capitalism and Its Discontents:
Economic Theories and the Rise of Labor Unions

Capitalist ideals and policies supporting competition and private ownership fueled the Industrial Revolution. As the economy expanded, many people became more wealthy as the standard of living went up, and the middle class began to expand.

One of the main philosophers who supported capitalism was Adam Smith. In his book The Wealth of Nations, he promoted the idea that competition among businesses and a lack of government regulation was the best way to ensure that businesses created the products that people wanted at a price they were willing to pay.

Strikers take over train - Pullman Strike 1894

Many in the working class did not share Smith's enthusiasm for capitalism. From their perspective, they were paid low wages and had poor working conditions and were powerless to change these circumstances. As a result, many workers formed labor unions in an attempt to balance the power of the factory owners. Worker-organized strikes demanded increased wages and improved working conditions. They also lobbied for laws to improve the lives of workers, including women and children and sought collective bargaining as a means to resolve issues between labor and management.

Some argued that the unequal distribution of wealth was inherent in the capitalist system, and they promoted other economic theories that they believed would produce a more equitable and just society such as socialism and communism.

Karl Marx wrote The Communist Manifesto with Engels and Das Kapital where he laid out his theories, many of which were in direct opposition to capitalism. He advocated the redistribution of wealth and government ownership of all industries.

Socialists also responded to the injustices of capitalism, but they advocated government ownership of some parts of the economy in order to make sure that poverty and injustice were eliminated.

Despite these alternative theories, capitalism remained the main force behind the Industrial Revolution as well as the imperialist expansion of developed countries into new areas where they could access more resources and labor at a minimal cost. In the next topic, you will explore the impact of the Industrial Revolution on imperialism.