UNIT 5 TOPIC 7

Economic Developments & Innovations

THEME : Economic Systems
LEARNING OBJECTIVE 1 : Explain the development of economic systems, ideologies, and institutions and how they
contributed to change in the period from 1750 to 1900.

Let’s continue our jaunt through the Industrial Revolution and consider now how realities
affected change from 1750-1900.

THE SLOW DEATH OF MERCANTILISM

The first big economic during this period was the slow death of . We talked
about this in the last unit, and you’ll remember, mercantilist economics was a system and
played a massive role in European and imperialism. But during this period, mercantilism
was increasingly in favor of a new economic system that better fit the realities of
industrialization, namely, which was not state-driven but driven.

Now a significant on this transition was the publication of by our

. In it he criticized mercantilism as and benefitting only a few members of
society, namely, the . The alternative, he argued, was more policies, which is to
say, get the out of the economy and let people make their own economic .
And in that way, suppliers and would react to each other based on the of supply
and demand, a process Smith called the , and in that way everyone would be a lot
off. And if this kind of market scheme was applied, then wealth would be more
distributed and prosperity would know no bounds.

This transition didn’t happen all and certainly not quickly. But after 1815, several western
governments some of their state regulations on trade which resulted in trade
and greater wealth, thus proving Smith right.

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Economic Developments & Innovations

THE SLOW DEATH OF MERCANTILISM cont’d.

Even so, free market had its critics. You only had to the most industrialized
nations for five minutes before you that the whole “free markets distribute wealth more
evenly” thing Smith described wasn’t the whole story. In fact, this capitalist form of economics created a
that in many cases were exceedingly and who labored under great duress.

One critic by the name of argued that the cure for the suffering of the working class
and the rest of was not free market economics but rather government
addressing social problems. And another critic was German economist who rejected global
free market principles as a kind of that the British were trying to play on the rest of the world in
order to bring other economies under its own . And if you ask China or or a
slew of other places during this period, List had good for believing that. Anyway, his work led to
the development of the , which was a kind of customs that bound many German
states together into an economic unit that reduced trade between them but erected tariffs on
goods, especially from Britain, in order to protect the beginnings of their industrial
project. But critics aside, free market economics became more and more the that
industrial nations adopted.

SUMMARIZE the previous section in your own words. (2-4 sentences)

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Economic Developments & Innovations

TRANS-NATIONAL CORPORATIONS

As these new economic practices and the of trade became more and more the norm,
that led to the proliferation of . Basically a transnational corporation is a
that is established and controlled in country but also establishes large operations in
many other . And there are many of these, but I’ll just give you examples.

First is the . It was opened in 1865 in British controlled Hong

Kong in order to and control the flow of British imperial in the area. How else
are they going to keep on the tons of wealth generated by selling illegal to the Chinese
populace?

Soon another was opened in Shanghai and later in Japan, all of which generated enormous wealth for
bankers.

Second is the which was a joint company established by the British and the
that manufactured household goods, most notably, . To keep the world’s populations
sudsy and clean, Unilever factories in several countries across the world while sourcing its raw
from colonial holdings, especially in West Africa and the Belgian .

these massive transnational corporations was pretty , and so they relied

on newly developed practices in banking and . First was the rise of . In
order to finance the building of these large businesses, they raised funds by selling ,
which were small of ownership in the corporation. People could those stocks on various
international stock markets like the in the United States, and when the company
profited, so too did the stock .

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Economic Developments & Innovations

TRANS-NATIONAL CORPORATIONS cont’d.

Second there was the expansion of the scope of corporations. This was a way of
organizing a business that the financial investment of its owners, kind of like -stock
companies 2.0. This meant that owners could take by investing money into a corporate venture but
they enjoyed a certain amount of protection, namely, they could only the amount
they invested and no more.

SUMMARIZE the previous section in your own words. (2-4 sentences)

EFFECTS OF INDUSTRIAL CAPITALISM

Although the growing economy that was becoming increasingly defined by industrial capitalism
experienced three major in the 19th century, on the whole, all western industrialized nations
were far in 1900 than they were in 1800. And the main effect of that for our purposes is the rising
and greater access to people enjoyed in those places.

The rapid enrichment of industrialized created a new and growing which

was wealthy enough to purchase the dizzying array of consumer goods that were flooding
the market. And with the further development of manufacturing that made the production of
goods more and therefore , more and more people had access to everyday goods
that their lives.

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Economic Developments & Innovations

EFFECTS OF INDUSTRIAL CAPITALISM cont’d.

And finally, in many industrialized societies, the continued development of farming led to
abundant harvests that both increased the variety of available thus leading to longer
for many people.

SUMMARIZE the previous section in your own words. (2-4 sentences)

RESPOND to the learning objective with an evidence-based, argumentative thesis.

LEARNING OBJECTIVE 1 : Explain the development of economic systems, ideologies, and institutions and how they
contributed to change in the period from 1750 to 1900.

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TM

*Advanced Placement® and AP® are trademarks registered and/or owned by the College Board, which was not involved in the production of, and does not endorse, this product. page 5 of 6
 UNIT 5 TOPIC 7

Economic Developments & Innovations

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TM

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