Operations Management in Hotels

3. Explain the view of capitalism that was expressed in Adam Smith’s Wealth of Nations.

Technological innovations and early factories: the pressure to produce more goods for the growing market and reduce labor costs of manufacturing was directly rated to the first decisive breakthrough of the industrial revolution. Also, some technological

The introduction of many new crops like corn, tomatoes and potatoes to Europe from the Americas previously had all but eliminated wide-spread famine in the region. These new food sources had also made Europeans healthier resulting in generally increased lifespans and more offspring generating a significant population increase in the region, thus creating more demand for the products and goods consumed by every growing society. The increased population also provided for an abundant labor pool of workers to man the factories which were to become the engines of the emerging industrial society of the west. Favorable environmental factors were important too. The availability of an abundance of ports and waterways and large coal and iron deposits fueled the early surge of the industrial revolution in the west.

In his Wealth of Nations, Adam Smith celebrated capitalist society. The central thesis of The Wealth of Nations is that capital is best employed for the production and distribution of wealth under conditions of no governmental interference, or laissez-faire, and free trade. In Smith's view, the production and exchange of goods can be stimulated, and a consequent rise in the general standard of living attained, only through the efficient operations of private industrial and commercial entrepreneurs acting with a minimum of regulation and control by governments. To explain this concept of government maintaining a laissez-faire attitude toward commercial endeavors, Smith proclaimed the principle of the "invisible hand": Every individual in pursuing his or her own good is led, as if by an invisible hand, to achieve the best good for all. Therefore any interference with free competition by government is almost certain to be injurious. The division of labor is another crucial component of capitalist society. According to Smith, division of labor benefits society in three ways:

The development of locomotives, and steamboats manufactured goods could now be sold around the globe. Families moved from the villages of their ancestors to new industrial towns and a new class of people emerged, workers who produced goods. The industrialist, the people who owned the factories, employed hundreds even thousands of people, and made enormous profits. A major concern was the growing numbers, the masses of the urban poor that arrived and settled in the city. While the industrial innovations brought wealth to some and jobs for others, it all came with a cost: pollution from coal powered factories turned the cities black. Lack of housing created the first urban slums.

While the new textile industry was growing, the agricultural economy at the time was stagnant. It became harder and harder for farmers to pay off their debts. Many farmers lost their land and had to find a new means to support themselves and their families. The factories and

Capitalism/ pg. 178: An economic system characterized by the private ownership of the means of production, the pursuit of profit, and market competition.

The large number of practical and useful inventions brought forward during the time leading up to and including the period known as the Industrial Revolution had a significant impact on both American society and the world. The transition that took place resulted in reliance on mechanical sources of power/energy rather than the traditional human or animal sources to produce the products needed (Hackett, 1992). One of

Throughout the book An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith uses the term “commercial society” rather than more accustomed words like “capitalism.” Smith explains what he means by this term,

By definition, Capitalism is an economic system controlled chiefly by individuals and private companies instead of by the government. In this system, individuals and companies own and direct most of the resources used to produce goods and services, including land and other natural resources labor, and “capital”. “Capital” includes factories and equipment and sometimes the money used in businesses (Friedman, 5).

The advent of the ideal of capitalism is often attributed to Adam Smith. Sometimes called “The Father of Economics,” Smith was an 18th century moral philosopher from Scotland. Smith is perhaps most known for writing the book “An Inquiry Into the Nature and Causes of the Wealth of Nations.” In this book Adam Smith considers and advances the ideas of the division of labor, the invisible hand, the pursuit of self-interest, the proper role of government and the idea of a Laissez-Faire (or noninterventionist) economy. Each of these ideas were considered heavily during the establishment and development of the United States. Because of their adoption into the new American government, the United States became the forerunner to the free-market.

In the mid-19th century, a great system of economics, which would change our lives forever, was formed. That system was called capitalism. Capitalism is an economic system that was created by combining many parts of many other economic systems. Capitalism was based on the idea that private individuals, and business firms would carry out all factors of production and trade. They would also control prices and markets on their own. Mercantilism was the precursor to Capitalism although each of them different in many ways. Mercantilism was for the wealth of the state, while the motive of capitalism was for the wealth of the individual.

It was at this stage in James Watt's life that he began learning the principals behind the workings of a steam engine. He learnt information from his friend Dr. Black about heat; temperature and the properties of steam itself. After studying steam engines for a period he became the only person with enough knowledge to improve on the steam engine at that time. Even though Newcomen had already developed the steam engine before James Watt, it was about to be improved substantially without even knowing the results it would have on the industrial revolution. As Watt was fixing the machine he was intrigued on how much fuel it burned. He then thought about ways to reduce the fuel consumption and found out it was mostly caused by the pistons and other metal work heating cooling, always requiring extra heat.

(a) make sure that the way he manages the hotel is appropriate to the way it competes for business;

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