INDUSTRIAL REVOLUTION

INDUSTRIAL REVOLUTION - 3 The industrial revolution Nick...

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Unformatted text preview: 3 The industrial revolution Nick Crafts Key aspects of structure and performance standards of the time. Although the population was still predominant] rural, there was by now a substantial amount of urbanisation and industrial: and commercial activity. While most people were indisputably poor, th economy had a considerable surplus above basic subsistence needs although much of that surplus was concentrated in the hands of those i the top 10 per cent or so of the income distribution. Tables 3.1 and 3.2 provide snapshots at discrete intervals of som important aspects of the socio-economic structure. These tables give broad outline which is reasonably reliable (Wrigley 1985, 19873), but is, should be remembered that the quality of the underlying data is often quite" imperfect and the information given here and elsewhere is generally in that nature of ‘best guesses’ rather than ‘hard facts’. In particular, man H families divided their labour time through the year between sectors and th industrial or agricultural proportion is not exactly known. course, that there was a change in the character of this employment over; time as new factory-based activity displaced some of the earlier cottage and small-scale industry. Nevertheless, even in 1840, perhaps around 60 per 7‘ cent of industrial employment was still in this traditional mode. If, as; Mathias suggests, the most important feature of an ‘Industrial Revolution ’ is the ‘fundamental redeployment of resources away from agriculture, ’ (1983: 2), then the remarkable change in Britain between 1760 and 1340 certainly qualifies for this description. The eighteenth century also saw a gradual rise in the share of resources ‘ devoted to investment. The rise would probably have been somewhat ‘ greater but for the ‘crowding out’ effects of government military 44 ' ' 45 The industrlal revolutlon Table 3.1. Patterns of employment, income, expenditure and residence, 1700,1840 (%) 1700 1760 1800 1840 Male employment in agriculture \/ 612 528 40-8 M316 employment in industry 18-5 23-8 24.9 - Income from agriculture 37-4 37-5 19.8 315 Income from industry 200 20-0 76.3 801 Consumption/income 928 73-6 8.5 10.8 InveStmem/income V :13 146:1: 15-7 14-3 Exports/Income V 17-0 21-0 33-9 48-3 Urban population u. ' ' ' ded to include revised - s: based on Crafts (1985a. Tables 3.6 and 6.6) amen glovuer;t:nent estimates from Feinstein (1988) and urbanisation figures for England only for 1700 and 1760 based on Wrigley (1985). expenditures, notably after 1793 (J. G. Williamson 1985). Investment before the industrial revolution was concentrated in agriculture, transport and housing; when a sectoral breakdown is first avallable 1n the 17605 these sectors accounted for 32 per cent, 19 per cent and 19. per cent respectively (Feinstein 1988: Table II). Only in the 18205 did investment 1n manu- facturing at last exceed that in agriculture. . The urbanisation of the population in 1700 represents a cons1derable increase from a level of perhaps 5 per cent in the early Sixteenth century, due in particular to the growth of London which by now comprised 11 per cent of the English population (Wrigley 1985). London was an expanding port and commercial centre which required food and fuel from elsewhere in the country. This was an important stimulus to the commercrahsation of agriculture and to improvements in transport (Wrigley 1967). After 1750, London’s share of total population fell slightly and by 1800 further urbanisation was starting to be based on the growth of new centres of manufacturing such as Leeds and Manchester. . ‘ The social tables in Table 3.2 are revised and improved from the original Contemporary investigations by Gregory King for 1688, Joseph Mas51e for 1759 and Patrick Colquhoun for 1801/3 using burial records and wage data. Two points stand out from this table. First, and not surprismgly, 1t iS Clear that income was unequally distributed. Second, it is apparent that Virtually all families, even in 1688, were involved in market-based act1v1ty rEither than subsistence agriculture. The pre-industrial revolution economy was experiencing a steady rate of eCOnomic growth, although that rate was modest by later standards. 7 l l 47 . . . . . ' ‘ 1 ti n 46 The economic hlstory of Britain smce 1700 The mdusmal revo u 0 Table 3.3. Output growth, 1700—1831 (“/0 per year) ff/I—‘l’f’a’f—fi New estimates Old estimates Table 3.2. Lindert and Williamson ’s social tables for England and Wales in 1688, 1759, 1801/3 Family £m ;' Agri_ Agri— numbers % of total incomes "/6 of total . GDP Industry culture GDP Industry culture 1688 . . - . . 1-0 0'2 1. High titles and gentlemen 19,626 1-4 8-81 16-2 ’ ' HOMO 0.7 (1):; 3i (ti-is 0-5 0'5 2 Professions 42,960 3-1 4-46 8-2 F ‘ IMHO 0'6 2.0 0.8 2-1 3-4 0-6 3 Military and maritime 94,000 6-8 2-13 3-9 , ’ 178(HSOI 1-4 2.8 1-2 3.1 4-4 1-6 4. commerce“ y, W/// 5. Industr and buildin 25 866 18-5 ~ 8 1 -6 ‘ - . . r m an 6 Agricullureb g 2273:440 16-4 1321 22-4 ii. ‘ Note: the periodisation is based on the 9x18690165 0f the 8a.” SOf‘fifejgfife‘f‘gjt?n§;fes of 7 Labourers” 284,997 205 4-27 7-8 ‘5 ' attempt to diStinguish Separate “Won.” epochs‘ The ‘evfifififisfifim improved procedures 8 Cottagers and paupers" 313,183 22-5 2‘04 37 : Deane and Cole (1962), also reported in Table 3-3, “tonal. articular sub—sectors of the 9. Vagrants 23,489 1-7 0-04 01 i to deal with index number problems and revtsed series P Tom] 1,390,586 54.44 L Ecoji‘igylnew estimates based on Crafts and Harley (1992) and Crafts Ugssa)’ 01d 1759 f estimates based on Deane and Cole (1962). 1. High titles and gentlemen 18,070 1-2 11-74 l7-6 :3 - 2- meeSSions 57-000 3'7 5'09 7‘6 if I Income per head was rising at about 0.3 per cent per year in liomoflégch: 3. Military and maritime 86,000 5-6 2-13 3-2 . 1a ter decades Ofthe century saw an increase both in output an POP h 4' commerce“ 200500 13'0 14‘01 21‘0 g 1 h h the former is now generally accepted to have been rat er 5. Industry and building 366,252 238 11-72 17-5 g ‘ growl" a t ,Oug h 1 ' 1'ke1 that the growth of income 6. Agriculture” 379,008 246 16-66 24-9 - less dramatlc than was on.“ Phoug t' “S 1 )1; 1 run re-industrial 7. Labourersc 240,000 15-6 4-20 6-3 ' per head only moved Significantly above t e ong— T3156 3 3 reports 8. Cottagers and paupersd 178,892 11-6 125 1-9 '1‘ average in the second quarter of the nineteenth century.d d f 6m crafts 9. Vagrants 13,418 0-9 0-04 0-1 1:, ., output growth estimates by Crafts and Harley (1992) up ate r Total 1,539,140 66-84 -: 1985a _ . . 1801/3 ‘ g ( Implrfections 0f the available data are 51”“ that theifiefldsieigfiaiil: 1. High titles and gentlemen 27,203 1-2 27-54 13-9 ‘1 ~ margin of error around such figures- Indusméd outputllsf antitafive 2. Professions 74,840 3-4 17-31 8-7 _‘ measured but even here there are sectors which have 6 t 110 Cl“ h to be 3. Military and maritime 244,348 111 1038 5-2 : - record (Berg and Hudson 1992). Agricultural data leave-mile 1t 4. Commerce“ 205,800 9.4 39-21 19-7 . , - d, 1th0u h alternative methOds of estimauon give Similar resu s 5. industry and building 541,026 24-7 51-07 25-7 ‘ desm ’ a g - co in the short run (Allen 1991a). 6. Agriculture” 320,000 14-6 38-00 19-1 over the long run, there is less congruen d b the use of 7. Labourers” 340,000 15-5 10-54 5-3 The service and government sectors can only “be trace 13/ em and 8. Cottagers and paupers"l 260,179 119 2-60 1-3 somewhat doubtful proxy measures based mamly on emp Gym 9. Vagrants 179,718 8-2 1-92 1-0 _, ' assumptions about productivity increase. _ t favour Total 2,193,114 198-58 5 Future revisions are, nevertheless, highly unlikely to restore .0 th - among economic historians the picture of a rapld acceleratior; 1n stylzivn Notes: '1 Includes tradesmen, some of whom should be in ‘industry and building’. 2 '- aftgr 1780 which was until recently conventional Wisdom an 2:989; hat: ’7 Excludes labourers; constituted of ‘freeholders’ and ‘farmers’. . feature of Deane and Cole’s estimates. Further work by Jackson ( ) th c In 1801/3 ‘labouring people in husbandry and labourers in industry counted in Z- L; ' confirmed the findings of Harley (1982) and Crafts (1985a) that on e 7 row 5; in earlier years ‘labourers’ is a term used Without any clear sectoral demarcation and includes both agricultural and non-agricultural labourers. 3, . presently avallable evldence ~ ’1 Described just as ‘paupers’ in 1801/3. ' ‘ industrial output growth was muc Source: Lindert and Williamson (1982). .- I mostly from trade and taxation records - a; h less than used to be believed. Moreover, 1} \1 I} \ 48 The economic history of Britain since 1700 the sectors for which data on growth are still not available would have h to be implausibly large and to have grown unbelievably fast to resurrad‘ Deane and Cole’s estimate; if the unobserved sectors were as large as 1: observed sectors and grew at 4.8 per cent per year in 1780—1801 and 6.4 cent per year in 1801—31, this would approximately reproduce Deane all): fully exploited — the growth of London epitomises this. Given the lar weight that agriculture still had in the economy, it is also important thatgi continued to accomplish increases in productivity which had been i progress since medieval times. By the eighteenth century productivit advance was coming notably from better crop rotations and from itcgggoyies of scale due to the rising size of farms (Overton 1984; Allen» a . ' Exports rose distinctly more quickly than GDP during 1700—60 (see , Table 3.1) and accounted for about 37 per cent of purchases of increase industrial output during the eighteenth century (Crafts 1985a: 132). Bu this should be seen as the result of gains from specialisation in internationa trade‘particularly with the New World (Davis 1969) rather than as a net addition to aggregate demand and output. In general, it would seem tha ‘ .The economy was characterised by quite considerable short—run fluctu- ations in output and employment which have been the subject of recen econometric research. The results confirm the traditional view that there was no.regu1ar business cycle in the eighteenth century and that these fluctuations were the effect of severe random shocks from variations in the harvest and from wars, which, of course, affected exports (Crafts et al. 1989). There also appears to have been a tendency, contrary to what was ; once thought, for changes in exports to lead rather than follow changes in imports, suggesting that external factors may have instigated many of i these movements particularly in the second half of the century (Hatton et " a]. 1983). Industrial growth in the first half of the eighteenth century was fairly equally spread across the main traditional sectors, notably textiles, the leather industries and building, which together may have accounted for close to two-thirds of industrial output. From the 17603 onward there was The industrial revolution 49 40 35F % per annum M o 0.5 0.071111IlqlllllldlLlllJ‘i 1700 1720 1740 1760 1780 1800 1820 1840 1860 1880 1900 Figure 3.1 Trend growth in British industrial production, 1700—1914 Source: Crafts 6! a]. (1991). a spectacular acceleration in the growth of output of cotton textiles and also strong growth in iron, the most famous modernising industries of the industrial revolution period. It should be remembered, however, that these sectors were initially quite small relative to industry (together less than 10 per cent of output in 1770) and even more so relative to GDP. Proper recognition of this point has been fundamental to the downward revisions to estimates of late eighteenth- and early nineteenth-century growth rates (Harley 1982). Modern econometric techniques provide improved insights into the timing of the acceleration in the underlying trend of overall industrial output growth during the later eighteenth century; in particular they remove the need arbitrarily to specify periodisation and they let ‘the data Speak for themselves’, which is a major advantage given the severe disruptions during these years created by wars and the variability of the harvest. Figure 3.1 reports the results of an analysis of this kind based on the best available annual series which has been constructed as nearly as possible on the same basis as the estimates of Table 3.3. The notable feature of the estimated trend growth is that it increases steadily from the mid-eighteenth century all the way to the second quarter of the nineteenth Century. The picture which emerges does not single out any particular short period, such as the much-touted 17805 as a decisive phase. Figure 3.1 also puts into perspective the growth rates of the industrial revolution as Compared with those of Victorian Britain. Despite its increasing prowess the eighteenth-century economy was quite unable to match the industrial growth of the more mature economy of a century later. 50 The economic history of Britain since l'i'00 Although the impact of technological change on overall growth in early eighteenth century was still rather slight. it is important to note there were signs of increasing inventive activity prior to the c industrial revolution period (see Mokyr. ch. 2 above). Famous Bri inventions from these years include. in iron. Darby‘s coke smelting p1- t-._\ “709): in coal. Newcomen‘s steam pumping engine (1712); in power Watt’s steam engine (U63); in cotton textiles. Hargreaves‘ jenny (1? and Arkwright‘s water frame (I769). A recent analysis of the data patents suggeSIs that there was a sharp acceleration in patenting da from the late HSOS {Sullivan I939). The implication is that the econo was starting to develop the capability for a new and faster rate of cocoa _' growth based on a considerably greater contribution from improvem in technology. In 1776 as well informed an observer as Adam Smith was clearly q“ unable to foresee the rapid industrialisation process of the next quarters of a century. If the metamorphosis of the economy to ‘workshop of the world‘ is seen as the outcome of the application of . types of energy and capital equipment (coal and iron replacing water : wood}. the major transformation had still to come. Yet by 1780 a start I -. been made. The sources of economic growth Many of the central questions of eighteenth-century economic his - -' revolve around issues of how and why increased economic growth u: about. A provisional answer to the first ofthese can be obtained using methodology of ‘growth accounting’: the growth rate of output dc ' on the growth rate of inputs on the one hand and the growth rate of productivity of those inputs on the other hand. In turn. the total growth of factor inputs is measured in terms 0 weighted average of the growth rates of the factors of production, capi and labour. The weights must reflect the importance of the particular inp in the productive process of which a convenient measure is the inpu_ share in costs. For example. in making iron the spending on fuel to burn Tl. the blast furnace is clearly more important than that on quill pens to _. out invoices. Labour force growth is therefore weighted by the share ’3' wages in national income and capital stock growth by the share of profits-.3- Thus we have the expression for the proportional change in output: a Y/ r = sthK+ BL/L +r" (ll-I where Yis output. K i5 capital. L is labour. at and Bare the shares ofprofitS-i and wages in national income respectively, while A represents ‘the change- The industrial revolution 51 Table 3.4. Sources of growth, 1700483! A WY Due to 41ka Due to .41.”. r‘ _ New estimates 7700—60 0-? 05 x07 05 x0-3 0-2 [ital-1801 [-0 05xl-0 0-5x0-B 0! 1301—3! l-9 0-5x l"! 0-Sx 1-4 0-35 {L Old estirrmfes 1161—1300 H 05x10 05x08 0-2 1801-30 2-? 0-5 x I4 05 x 1-4 l-3 1831—60 2-5 0-5 x 2-0 05 x l-4 0-8 __________—_—_————_____——————-————————_ Note: these measnres of factor inputs are crude. especially that for-labour. crafts (1985a: 32} gives reasons why inputs of labour may have been growing a bit more qutckly than indicated here. in‘. The growth rate of output per unit of all inputs together (total factor productivity) is r’. which is found as a residual once information on the other variables in the equation has been collected; it can loosely be equated with improvements in the quality of men and machines. Equation (1) says. in words, that the rate of growth of output is the rate of growth of the capital stock times the share of profits in national income plus the rate of growth ofthe labour force times the share of wages in national income plus the rate of growth of total factor productivity. Table 3.4 reports estimates based on this growth accounting procedure. Table 3.4 indicates that the acceleration of growth in the later eighteenth century was based on a faster growth of inputs rather than or: faster total factor productivity growth which did, however, occur In. the early nineteenth century. Even in 1801—3] only one eighth of the difference in growth of GDP from WOO—60 was. on these estimates, due to extra productivity growth. The payofl‘ to the increase in inventiveness noted above did not bear its full fruit until the second quarter of the nineteenth century as the scope for application of the new technology widened and it difi‘used more widely. The impact of the technical progress on productivity growth in the later eighteenth century was too small to outweigh an apparent decline in agricultural productivity advance at this time. Table 3.4 also shows that recent research has led to a considerable reassessment of the scale of productivity growth. Thimain reason for this has been the replacement of D_eane and C_ol_e_‘s _output_ growth estimates, Which were—di—scussed above, although Feinstein (1988) also provides better estimates'forthe growth of the capital stock. The new estimates themselves may be subject to errors. as Berg and Hudson (1992) have stressed. S2 The economic history of Britain since I700 although the net effect of these could go either way. Aside from _ problems of accurately measuring the growth rates of inputs and 0].“. .51 the weights attached to capital and labour have been questioned. '— The theoretical conditions under which the shares of wages and profi i would be exactly the right weights to be used in these calculations unlikely to have been completely fulfilled. Fortunately, however, capital and labour grew at relatively similar rates. in practice any bias fr ._ this source is likely to be very small. Crafts and Harley (1992) calculate a the ma.t‘i‘ninni range for r“ in 1760—180] is 0.1 plus or minus 0.04 and 180l—3l 0.35 plus or minus 0.18 while the 95 per cent confidence in - would be a great deal less. If the growth accounting estimates are in the main problems would lie in the output and, to a lesser extent, the I growth estimates. I ' This model is a way of accounting for now grOWth rates changed bull is, of course. far too simple to c0pe with the much harder but in intriguing questions as to why the rate ofinnovation or capital forrna or population growth accelerated as the economy moved into the inning revolution. To approach these issues it is necessary to allow for interacti 0;: between the variables ofequation (l) and to cease to regard the right 1. side variables as wholly exogenous (Le. determined outside the econo system). We may be able to throw further light on the circumstances prompted the subsequent increase in the pace of growth and struct change by an investigation into the forces which might have rest ' capital formation and innovation in the eighteenth-century economy. ' modern standards the investment ratios reported in Table 3.1 are very 1 especially in the early eighteenth century. Why was this so? A nurnbe factors played a part and it is difficult to be sure of their importance. : Savings and investment First, it is important to note that the economy had' a considerable sa ' and investment potential as a result of its relatively high income and highly skewed income distribution which is reflected in Table 3.2. potential was rather little used at the start of our period but it is readil. :- confirmed by the country’s ability to finance extremely expensive During the French Wars (1793—1815} the investment rate was maintained at a level twice that of 1700. Second, there were institutional weaknesses relating to banking, financt’}. and company legislation which must have had some inhibiting effects both '. on savers and on business investment. English banks were restricted 10' The industrial revolution 53 5mall-scale partnerships and thus to low levels of capitalisation by an Act of 1708. The Bubble Act of I720 stood in the way of access to pint-stock company status and joint-stock companies with limited-liabtl-lty requrred Spccgal parliamentary dispensation until 1855. Asymmetrtes ofmforrnatton in the absence ofmodern forms ofcompany regulation, auditing. etc., were a fundamental obstacle here. Nevertheless, research in the past twenty years has tended to suggest that to a large extent these problems could have been overcome by alternative arrangements. at least in the pre-railway age when in most activities scale was modest and overall capital requirements were still relatively limited (Mathias 1973). Thus. Cottrell (1980) stresses the use of the partnership form of organisation as a flexible basis for industrial production and Hudson (I986) shows that locally based sources of funds were available to growth industries in ways which minimised information problems. Third. if. as seems likely in the light of these points. the supply of savings was relatively elastic, perhaps the main reasons for low investment are to be found in a paucity of attractive and profitable projects, Le. a low marginal efficiency of investment. The chronology of parliamentary enclosure which entailed a major investment effort seems to confirm this with the timing much influenced by actual and expected agricultural prices {Crafts 1977b). From the late eighteenth century onward. this shortfall was remedied primarily by opportunities arising from technological progress (Mokyr 19903 and ch. 2 above). This interpretation is supported by the rising output to capital ratio of the early nineteenth century (see Table 3.4) which suggests that a rising payoff to investment rather than an independent increase in savings propensities may have underpinned the higher investment rate. In terms ofequation (I) a positive shock to r“ promoted a rise in A'K/K. indeed there will be an automatic tendency for this to happen. K = sY; Kfl’ = v where s is the propensity to save and v is the capital to output ratio. So K = vi” and K/K = sY/vY = s/v. The rise in r“ promotes a rise in Y relative to K and thus a fall in v. This implies a higher s/v and thus a higher K/K. Invention and innovation Accordingly. as we look for the emerging eighteenth-century origins of eventually faster growth in per capita income, our emphasis should be Primarily on factors influencing the rate of innovation. Here too economic historians have generally argued that the acceleration in technological Change should be thought of as largely endogenous rather than something happening quite independently of economic circumstances. The rationale 54 The economic history of Britain since 1700 for this view is that in eighteenth—century Britain: ‘This is not a story of sophisticated inventions breaking through some technological barrier, and so creating the conditions for expansion. Developments that were technically so simple can only be responses to social and economic conditions’ (Lilley 1973: 195). This point of view can naturally be extended to suggest that in the eighteenth century the inducements to invention and innovation must have been stronger in Britain than in other leading European economies, and hence Britain was the first to enter the industrial revolution. Such an analysis was undertaken by Crouzet in a well-known article which concluded that ‘The inventions were designed to make possible the replacement of relatively scarce and expensive resources, such as wood, water-power, and labour, by others which were relatively plentiful and cheap, such as coal, steam power and capital...these shortages and bottlenecks, which in England exerted strong pressure in favour of innovation did not exist in France’ (1966: 168). It is certainly true that one of the major successes of the industrial revolution was a move to growth based on a mineral-based energy economy, as Wrigley (1988) in particular stresses; he points out that (1988 : 77) a coal miner for 20 per cent of the food of a horse could deliver through the steam engine about four times the mechanical energy. Nevertheless, it is much easier to find evidence of the role of economic factors in the subsequent take-up and diffusion of innovations than in their initial invention. Coke smelting illustrates this rather well: achieved in 1709 it was not generally taken up until charcoal prices rose in the 17605 and 1770s (Hyde 1977). Although the search for improvements was doubtless encouraged by prospects of profit, the success of such a search was highly uncertain. It may be wrong to look for something special about the mid- eighteenth-century economy which marked it out beforehand as more likely to embark on rapid industrialisation than the economy of, say, fifty years earlier—there was an element of randomness in the timing of particular inventions (Crafts 1977b). Indeed Crouzet (l990b) concluded that the factor scarcity hypothesis could not sustain the weight that he and others had put on it and that the search for the origins of the spurt in inventiveness had been inconclusive. Perhaps it is appropriate still to think of exogenous technological shocks raising the rates of return and economic growth. While it may be unwise to rely too much on arguments that eighteenth- :entury growth led to the bidding up of prices of scarce factors of production and thus inexorably to a successful technological response, the long period of industrial growth in the centuries before the industrial 'evolution did lead to a build-up of expertise. At a time when improvements ' 55 The industrial revolution in productivity were often achieved by trial and error methods and thrtourg: continuing incremental advances based on experience of using inven it;1 1; Britain had a major advantage in realising the potential gains wden technological change materialised. In particular, this has been strgsse nd the case of coal-based technologies (Harris 1976) but‘Mokyr (19 I: a ch. 2 above) argues that it applies also to engineering and mac mery technologies generally. Underlying mechanisms of growth and structural change Population Wrigley and Schofield’s (1981) reconstruction of English demographg:f history allows us to apply a Malthusian-type analys15 to the economy1 4 the sixteenth to the mid-eighteenth centuries (see also Schofield in c . ‘ ortant oints emerge. I belligbalim: loiliirlriarriaigje and thus fertility acted to facilitate progress towards high income levels by the eighteenth century and averted t e ‘Malthusian Trap’. This is the proposition that a rismg level of real incotmhe per head may generate sufiiciently fasterlpopulation growth to rtelverse tee; initial gains in living standards. Such a Situation is more likely t elvgi‘fz:1 S is the response of birth and death rates to income levels in the wayh a “:1 supposed (positively and negatively respectively) and the less T Inland growth gives rise to additional investment or innovation. Wrig e3 d Schofield found that ‘preventive checks’ in the form of delayed or re uce incidence of marriage reflected in highly variable fertility levels were instrumental in slowing down excessive population growth. In the shorter run, however, the economy was very much prone to fluctuations in llVlig standards as marriage behaviour changed-relatively slowly and solt 6 economy tended to experience quite big swmgs around a long-run, s ow- i rium. . grOS‘thblnfdlmrllEring the eighteenth and early nineteenth centuries thhe economy developed a much greater ability to Withstand demograp ic pressure as investment and innovation rates rose. In keeping With the lolng- swing pattern, the crude birth rate is estimated to_have risen from 2 ovdv point of 26.8 in 1661 in a period of falling population to 36.3 in 177 arih 41.9 in 1816 (Wrigley and Schofield 1981 : 528-9), With population grotw rising from — 0.3 per cent to 0.9 per cent and finally to about 1.5 per cer: 71:: year. Wrigley and Schofield find that, in the two centuries before 1d be, population growth of 0.5 per cent per year was the most that con . sustained without downward pressure on liVing standards. Seen against this background the impressive result of the industrial revolution period is the avoidance of a big decline in living standards in a MalthuSian CI‘lSlS. 56 The economic history of Britain since I700 G orernmen! Although demographic restraint was important, the progress towards relatively high income levels was, as noted above, also predicated on the achievement of an increasingly efficient allocation of resources. In this regard, it is important to recognise the importance of economic and political institutions in creating adequate incentives and obviating market failures. I At the most general level Jones (E. l... 1988) has persuasively argued that Impulses to growth which come from the pursuit of self-interest were always “potentially to be found, provided that they were not swamped by institutions or governments who diverted energies into rent-seeking or stifled initiative with excessive taxation. Obviously well-defined and.- sustained property rights are essential for appropriate incentives and resource allocation. North and Weingast (1989) suggest that, particularly 'I following the Glorious Revolution of 1688, the balance of power between the monarch and Parliament was more conducive to the elimination of the problems to which Jones refers. O‘Brien 0988: 3 and ch. 9 below)- calculates that between 1700 and l780 taxes as a share of national income were always held within the range 8.7 to 1].? per cent, while Beckett and Turner (1990: 386—?) point out that the main impact of taxation with its heavy reliance on customs and excise fell on consumption expenditures rather than savings and investment. Parliamentary Acts were also directly of importance in achieving I Improvements in productivity via institutional innovation. Most ob- viously, the invention of the parliamentary enclosure act removed the sometimes intractable bargaining problems which could prevent the voluntary enclosure of land. The coming of parliamentary enclosure is a good example of the changed balance of power between the Crown and Parliament (McCloskey 1975: I33). Perhaps more important, however were the Navigation Acts and the invention of the turnpike trust which led to significant investment and cost reductions in river and road transport and so improved the integration of markets. Transport _Road transport is now regarded as much more important to the indus‘tnallsing economy than was once thought; for example, London‘s carrying trade rose sixfold between 1?15 and 1765 (Chartres and Turnbull I983: 85). The first turnpike trust was established only in 1663 but by 1772 there were 519 trusts operating 14.000 miles of toll roads including all major trunk routes to London (Pawson 1977: 121). Such roads were The industrial revolution 5'! generally kept in a much better state of repair. permitted heavier loads and considerably reduced journey times. perhaps reducing transport costs by as much as 30 per cent (Albert 1983: 54}. Essentially the toll road was a (second best) solution to a well-recognised problem of market failure. the 'I inadequate provision of ‘public goods‘, otherwise known as the ‘free- ,- rider’ problem, with which the previous ‘parish repair‘ system had failed adequately to deal and which had led to sub-optimal provision of high- class roads. By no means all such market failures were so well tackled. Although Municipal Improvement Acts. of which there were 125 between 1736 and 1199, led to the provision of better urban amenities through powers of property taxes (Jones and Falkus 1979}, urban politics and taxation policies were generally such as to lead during the rapid urbanisation of the industrial revolution period to serious underinvestment in public health and housing (Williamson 19903). The shift from agricalture The first section of this chapter explained rising income levels in the first half of the eighteenth century as based on better integration of markets and agricultural advance. It is important now to review the links between these developments and the structural changes which were involved in the fundamental redeployment of resources away from agriculture which is at the heart of the industrial revolution. In an economy closed to international trade, the crux of the in- dustrialisation problem has been captured by models of the release of labour. Suppose agriculture is characterised by diminishing returns to labour and suppose also that food demand grows at the same rate as population. If the relative share of labour is to fall, it is necessary that the growth rate of the labour force in agriculture is less than the growth rate of population and the labour force overall. This appears to pose problems, for whilst the demand for food grows with population the food supply grows less rapidly, even if all the extra labour were to be used in agriculture (which would, of course, amount to deindustrialisation). Clearly. to feed all the extra population and also ind ustrialise it is necessary to secure rising output per agricultural worker, which itself requires either innovation or investment in agriculture to permit the release of labour. It is clear that between l700 and 1160 the condition for release of labour was easily met by British agriculture. In fact, the sector could also cope with the additional demand for food associated with higher incomes per person (Crafts 19853: 116—20). Indeed, productivity growth in agriculture was faster than elsewhere in the economy and over the period 1500—1800 53 The economic history of Britain since [700 Table 3-5. Net exports of wheat and Wheaten flour from Britat' N. 7' 700—75 (000 of quarters) _-———-———————'—- _——————————— 1700 481': 1725 1 53-2 1750 543-3 I775 — I494 [800 — 7801} [825 — 587-8 1840 — 2,6390 _————_—_—__ ____———_—_—__I- Source: Mitchell ([938: 220—1); figures are five-year averages centred on the year stated. British agriculture was far more successful in achieving the conditions for labour release than was the casein other leading economies such as France ' (thrigley 1985). By the mid«nineteenth century labour productivity in British agriculture was easily the highest in Europe. In reality. Britain was heavily involved in international trade and the model JLISI reviewed is therefore rather misleading as a result. Of itself the very success of agriculture at home in raising productivity might have operated not to speed up but rather to slow down the industrialisation of the economy—or led to Britain becoming not the workshop but the granary of the world! There are even hints in the trade statistics of a tendency in this direction during the early eighteenth century with a growmg surplus in trade in cereals. a position vastly different from that in the first half of the nineteenth century. as Table 3.5 reports. The reason for the reversal of the early eighteenth-century trends in trade can be found in the idea of comparative advantage and was very clearly understood by Ricardo; as he put it in 18”: a country possessing very considerable advantages in machinery and skill and which may therefore be enabled to manufacture commodities with much less labour than her neighbours. may in return for such commodities. import a portion ofthe corn required for its consumption. even ifits [and were more fertile. and corn could be grown With less labour than in the count from h' h ' ' (1817;1971cdn: l54') W W ‘C '1 “5 ‘mpone‘i- Comparative advantage and the pattern of specialisation in trade depend on relative. not on absolute efficiencies. and during the later eighteenth and early nineteenth centuries Britain developed through technological change a productivity lead in exportable manufactures notably cotton textiles. which outstripped that in agriculture (Crafts The industrial revolution 59 1989a). Cotton textiles became a huge export and agricultural goods became importables. Taken together with the argument above which suggested that there was a good case for regarding the timing of the famous inventions in cotton textiles as a random exogenous shoe}: IE discussion leads to the impligiggjhat_the rapid stmctura'ch’a'nges characteristic-of the iiid ustrial revolution were not readily predictable in the mid-eighteenth century. l'i'i o'ther words, technological change provoked a serious switch in directi'im from the course which was inherent in the type of growth experienced up to that time and the outcome can be regarded as truly revolutionary. Conclusion This survey has ranged selectively over many aspects of the eighteenth- century economy. In doing so it has presented both estimates of the magnitude of economic growth and structural change over time and an interpretation of the change in the nature of economic development which had materialised by the beginning of the nineteenth century. The macro- economic framework developed here provides a context into which can be placed the more detailed discussions of the chapters which follow while the exposition of the arguments offers a starting point for further discussion. The issues raised here are of long-standing interest and will, of course, continue to be the subject of much debate. Eighteenth-century economic history is not the subject for those who wish for certainty but it is a field in which progress can be made. The current state of knowledge is already substantially different from that embodied in the textbooks of twenty or even ten years ago. In time, as more evidence comes to light and as more sophisticated modelling is possible. the estimates and. no doubt, some of the judgements made here may require amendment. It is as well, therefore, to regard the story told here as an interim rather than a final report. ...
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This note was uploaded on 01/27/2009 for the course ECON 4514 taught by Professor Shuie during the Fall '08 term at Colorado.

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INDUSTRIAL REVOLUTION - 3 The industrial revolution Nick...

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