Title: The British Industrial Revolution in Global Perspective
Author: Robert C. Allen
Scope: 4 stars
Readability: 3.5 stars
My personal rating: 5 stars
See more on my book rating system.
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Topic of Book
Allen overviews the early Industrial Revolution and seeks to explain why it occurred in Britain.
While I do not agree with Allen’s theory that expensive labor and cheap capital and energy caused the Industrial Revolution, he does an excellent job of overviewing the history of early Industrial Revolution.
- The British Industrial Revolution occurred because British labor was expensive and British capital and energy was cheap. This created a demand for labor-saving inventions.
- The unusually high wages in Britain were due to its commercial and imperial expansion between 1500 and 1750.
- Britain, Netherlands and British North America had the highest wages in the world with the rest of Europe being significantly lower. Asian wages were even lower.
- The lower wages gave these societies no reason to invent labor-saving devices. Labor was just too cheap.
- Cheap energy in Britain was created by widespread use of coal, long before any other country. This was also due to its commercial and imperial expansion between 1500 and 1750.
- The macro-inventions of the Industrial Revolution (steam engine, spinning jenny) were labor-saving. The micro-inventions that followed were trail-and-error improvements to those inventions, which saved labor, capital and energy.
- British engineers improved the technologies of the Industrial Revolution to such an extent that they became cost-effective to adopt in the rest of the world where labor was cheaper. So the technologies rapidly spread through Europe.
- The great achievement of the British Industrial Revolution was the creation of the first large engineering industry that could mass-produce productivity-raising machinery.
Important Quotes from Book
This book is about a historical problem: why did the Industrial Revolution happen in Britain, in the eighteenth century?
My explanation proceeds in two stages. Part I of this book analyzes the expansion of the early modern (i.e. 1500–1750) economy and shows that it generated a unique structure of wages and prices in eighteenth-century Britain: Wages were remarkably high, and energy was remarkably cheap. In Part II, I show that the steam engine, the water frame, the spinning jenny and the coke blast furnace increased the use of coal and capital relative to labour. They were adopted in Britain because labour was expensive and coal was cheap, and they were not used elsewhere because wages were low and energy dear.
The Industrial Revolution, in short, was invented in Britain in the eighteenth century because it paid to invent it there, while it would not have been profitable in other times and places. The prices that governed these profitability considerations were the result of Britain’s success in the global economy after 1500, so the Industrial Revolution can be seen as the sequel to that first phase of globalization.
The slow adoption of British technology on the continent had less to do with war, institutions and culture than with the economics of the new technology, which was not profitable to adopt outside Britain. This situation did not persist, however – thanks to British efforts. British engineers studied the steam engine and the blast furnace and improved them in order to lower costs.
Britain’s success in the early Industrial Revolution was based on inventing technology that was tailored to its circumstances and useless elsewhere. By the middle of the nineteenth century, the genius of British engineering had improved the technologies, thereby eliminating the competitive advantage they had given Britain. The cotton mill, the steam engine and the coke blast furnace were now globally appropriate technologies, and their use quickly spread outside Britain. Global diffusion marked the end of the Industrial Revolution, and it was determined by the life-story of technology.
The modern culture facilitated the Industrial Revolution, but it was not enough to bring it about. Like capitalism, minimal government and the Scientific Revolution, modern culture has a fatal weakness as an explanation. These developments may have been necessary conditions for the Industrial Revolution, but they were not sufficient. Getting the institutions right, increasing knowledge of the natural world, and focusing people’s minds on an empirical approach to production may have increased the supply of technology, but they would have had little impact on invention without a demand for new techniques. This book explores how Britain’s high wages and cheap energy increased the demand for technology by giving British businesses an exceptional incentive to invent techniques that substituted capital and energy for labour. I do not ignore supply-side developments like the growth of scientific knowledge or the spread of scientific culture. However, I emphasize other factors increasing the supply of technology that have not received their due, in particular the high real wage.
Britain’s unique wage and price structure was the pivot around which the Industrial Revolution turned.
Between 1500 and 1750, the economy of Europe was transformed… The reconfiguration of the European economy was precipitated by an increase in international trade.
In 1500, most Europeans lived in backward economies. This is indicated, in the first instance, by the fraction of the population engaged in agriculture. About three-quarters of the people were agricultural in England, Austria–Hungary, Germany, France and Poland.
England was the most successful country by far. The fraction of its population in agriculture dropped to 35 per cent – this was the biggest decline and the lowest value reached in Europe.
The Industrial Revolution was the result of a long process of social and economic evolution running back to the late middle ages. The commercial and imperial expansion of Britain was a fundamental feature of this evolution, but not its totality.
The expansion of the early modern economy was underpinned by favorable institutional and cultural developments. The end of serfdom and the establishment of a stable legal environment favourable to capitalist enterprise undoubtedly promoted growth. The gradual decline in superstition and medieval religion and the corresponding rise of a scientific attitude inclined more and more people to look for practical solutions to life’s problems rather than trying to solve them by manipulating supernatural agents. The demands of trade and the enormous drop in the price of books spread literacy and numeracy. New products, many obtained from abroad like cotton, tea, sugar and tobacco, enlarged the aspiration to consume and increased the incentive to work and earn high income. Political institutions favourable to capitalist development, as well as the growth of literacy, numeracy and hard work, followed from the expansion of international commerce and cities.
The upshot of the commercial expansion of the early modern economy was the unique wage and price structure that Britain enjoyed in the eighteenth century. Wages were high and energy was cheap. These prices led directly to the Industrial Revolution by giving firms strong incentives to invent technologies that substituted capital and coal for labour. The famous technologies of the Industrial Revolution – the steam engine, mechanical spinning and coke smelting – had these characteristics.
One of the most distinctive features of the British economy in the eighteenth century was the high level of wages.
The history of diet suggests that there really was a range of living
standards around the globe. Northwest Europe stands out as having the highest standard of living in view of the apparent widespread consumption of expensive and highly refined foods like white bread, meat, dairy products and beer. In contrast, workers and peasants in France, Italy, India and China ate a quasi-vegetarian diet of grain, often boiled, with scarcely any animal protein. Diets like these were consumed only by the poorest people in Britain or the Low Countries.
The gap between northwestern Europe and Asia was very large. Continental wages were probably marginally above Asian wages, but the differential was less. Asia, in other words, looks a lot like the lagging parts of Europe.
Aside from the advanced parts of Europe, there was one region in the world where living standards exceeded these rock bottom levels, and that was the east coast of North America.
High real wages in the eighteenth century were indicative of the dynamism of the Atlantic economy, which was transforming Britain, but had little immediate import for the evolution of industrial technology, for there was little industry in America. As the United States expanded in the nineteenth century, however, American wages pulled ahead of those in Britain and took on great significance by prompting the invention of labour-saving technology.
We can now see the boundaries of the high wage economy. Its core was always the maritime ports – London and the cities of the Low Countries. In the core, even unskilled workers always earned enough to buy the respectability budget. Skilled workers, of course, did better. In the course of the seventeenth and eighteenth centuries, the high wage economy advanced north through England, so that unskilled workers in northern cities could buy the respectability lifestyle early in the nineteenth century. On the continent, there was no evidence of geographical spread, but there were pockets of moderately high incomes in cities like Paris and Vienna.
Here are five aspects of life that were influenced by real incomes:
People living at bare bones subsistence were usually hungry, so the usual response to rising incomes was increased food consumption.
Not only did people in the high wage economy eat more food, they ate more expensive food. During the fifteenth century, when real wages were very high, desirable diets emphasized bread, meat and alcohol. During the seventeenth and eighteenth centuries, imported commodities like sugar and tea were added to the list of preferred foods.
The higher level of food consumption in northwestern Europe led to better health, longer life and a more productive workforce.
The income and diet differences may have had implications for economic performance. One was work intensity. People subsisting on low calorie diets had less energy to work.
Workers in northwestern Europe could enjoy their new-found affluence in ways other than eating or consuming; in particular, they could acquire learning and skills. Sometimes this was done for pleasure and sometimes for gain.
Three aspects of ‘human capital formation’ were literacy, numeracy, and trade skills.
Widespread literacy, numeracy and craft competence reflected the demand for skills in the advanced economies, and the high wages those economies generated gave workers the money to pay for schooling and apprenticeships.
Agriculture played an important role in the expansion of northwestern Europe… Most of the causation, however, ran from expanding world trade, to the growth of urban manufacturing, to rising agricultural productivity, and, finally, to large farms and enclosures. The city drove the countryside – not the reverse.
Three different patterns are apparent… The first is exemplified by present-day Belgium. Medieval Flemish agriculture was renowned for its efficiency, and the high labour productivity of the province meant that the farmers could support a large urban population. Pockets of high productivity were also found elsewhere in Europe, notably in northeastern Norfolk
The Dutch and the English exemplify the second pattern. Seen in their totality, neither country exhibited impressive productivity in the middle ages (Allen 2005). Between 1600 and 1750, each experienced an agricultural revolution in which output per worker reached and exceeded Belgian levels. Both countries are famous for their agricultural revolutions, and they show up dramatically in the graph of labour productivity.
The third group is all the rest… All the major continental countries showed a similar drop in productivity between 1400 and 1800 as the expansion of the farm population ran into diminishing returns.
But expensive labour was not the only way in which Britain stood apart from other countries. Even more striking was the price of energy. The early development of the coal industry in Britain meant that it had the cheapest energy in the world. Learning to use that energy was an important incentive to technical change, and one which distinguished Britain from other high wage countries in Europe like the Netherlands.
Indeed, coal was one of the success stories of early modern Britain.
The medieval economy was propelled by animals, humans, water and wind. Wood and charcoal were the main sources of thermal energy for heating and industrial processes. A little coal was taken from all the major fields but did not account for a significant share of the energy supply… The situation was broadly similar in other countries, for small amounts of coal were scratched from outcrops on all of the major coal fields. Nowhere was the coal industry large, and Britain was certainly not in the lead.
All this changed after the mid-sixteenth century. Between 1560 and 1800, output increased sixty-six-fold (Table 4.1). Half of the growth was accounted for by mines in Northumberland and Durham, and the bulk of that coal was shipped to London, which was growing rapidly. The rest of the coal was mined in the coal fi elds of western Britain, Scotland and Wales and generally served more local markets. The only other place in the world with a large industry was what is now southern Belgium. The mines around Liège and Mons were producing about 2 million tons a year around 1800.
Elsewhere in the world, output was very low, scarcely above medieval levels. There is no doubt that Britain’s coal industry took a commanding lead before the Industrial Revolution. In 1800, Britain was producing the vast preponderance of the world’s coal.
This abundant coal made energy very cheap – at least in the mining districts.
Did the cheap energy economy matter? Coal was, indeed, critical for British industrialization because it provided an inexhaustible (pace Jevons) supply of cheap energy. Coal was also important, as we shall see, for its technological spin-offs, the steam engine and the railway. Combined with metals, coal was the basis of the engineering industries that mechanized manufacturing and integrated the world economy in the nineteenth century. In all of these ways, coal separated Britain from the rest of the world, including, in particular, the high wage economy of the Low Countries.
I argue that the decisive factor explaining the growth of the coal industry was Britain’s success in the world economy. This led to the expansion of London with its high wage economy and, in consequence, an enormous growth in the demand for fuel in southeastern England. Coal met that demand. For that response to occur, however, residential housing had to be redesigned so that coal could be used in the home. The high rate of house construction in London was a fertile ground for those design innovations. Once the coal-burning house was invented, it spread to western and northern Britain where coal had always been a cheap – but unusable – fuel. Growing residential demand (rather than the exhaustion of woodlands) led to growing output outside of the northeast coast.
We can now see the take-off of England’s coal industry in global perspective. In Chapter 1, we argued that British urbanization – including the growth of London – was the result of the expansion of international trade. In the seventeenth century, the expansion was within Europe and based on wool; in the eighteenth century, the expansion became intercontinental and broader in its composition. The growth of London, in turn, drove the growth of the coal trade. Combining these propositions implies that Britain’s early exploitation of coal was due to her success in the international economy… But the mere presence of coal was not sufficient to cause the coal trade. It was only activated by the growth of the international economy. Coal was a social artifact as well as a natural fact.
The cheap energy economy was a foundation of Britain’s economic success. Inexpensive coal provided the incentive to invent the steam engine and metallurgical technology of the Industrial Revolution… book. The cheap energy economy also sustained the high wage economy.
Northwestern Europe’s ascent began in the century before the American and Asian trades became important… the commercial revolution began in the seventeenth century before the Atlantic trades became significant and was an intra-European reorganization in which northwestern Europeans out-competed Mediterranean producers in woolen textiles. The ascendancy of northwestern Europe and the eclipse of Italy, on this reading of the evidence, predated the rise of the Atlantic economy. Northwestern Europe’s success was based on a two-step advance – the first within Europe, the second in America and Asia.
Economic success in the early modern economy was not due to limited government, high literacy, efficient agrarian property rights or slow population growth. Ecological factors deserve considerable credit, for they were responsible for the population decline that led to the conversion of arable to pasture and the improved feeding of sheep. This resulted in heavier fleeces with longer staple wool and, ultimately, for the new draperies, which were the manufactured realization of that raw material. The export tax on raw wool also played a role, for it ensured that it was worsted cloth rather than sacks of wool that England exported. These cloth exports propelled the English economy forward. In the seventeenth and eighteenth century, it received further powerful boosts from the expansion of intercontinental trade, whose growth was largely dependent on aggressive mercantilism and empire, and the availability of low cost fuel, which maintained living standards and industrial competitiveness. It may, indeed, have been the case that the availability of new consumer goods imported from Asia and America was stimulating consumer demand and leading to an ‘industrious revolution’ of harder work and more vigorous entrepreneurship. The success of the British economy was, thus, due to long-haired sheep, cheap coal and the imperial foreign policy that secured a rising volume of trade.
The Industrial Revolution was one of the great, transformative events of world history… But what was the Industrial Revolution? Its essential characteristic was technological innovation.
My analysis is based on two distinctions. The first is between macro-inventions and micro-inventions. Newcomen’s steam engine and Hargreaves’ spinning jenny, for instance, were macro-inventions. They set in train long trajectories of advance that resulted in great increases in productivity. Fundamentally for my analysis, they also radically changed factor proportions, substituting energy and capital for labour. For this reason, the macro-inventions of the Industrial Revolution were only cost-effective in Britain. Micro-inventions, on the other hand, refer to all of the improvements in the trajectory of advance that elaborated macro-inventions and realized their possibilities. Economies were made across the board – in the use of inputs with which Britain was abundantly endowed (e.g. coal) as well as in the use of inputs that were scarce in Britain (e.g. labour). As a result, the stream of micro-inventions made steam engines, cotton mills and coke blast furnaces cost-effective in more and more countries and eventually spread the Industrial Revolution around the world.
The second distinction concerns the nature of invention itself, namely, Edison’s observation that ‘invention was 1% inspiration and 99% perspiration’. Invention involved both leaps of imagination or scientific discovery (inspiration) and research and development (perspiration). Usually, ‘inspiration’ is emphasized,4 but both need to be explained, and Edison’s weighting suggests that we should concentrate on research and development.
Even though a macro-invention might have had revolutionary consequences, the first models were very inefficient from a commercial point of view. They scarcely turned a profit even under the most favourable circumstances, and they did not earn enough income to cover costs in most situations.
The inefficiency of the early models of macro-inventions is the reason that their adoption was very sensitive to factor prices. R&D can be thought of as the process of designing a prototype that was efficient enough to cover its costs. Then it could be operated commercially and further knowledge gained through observation and modification (local learning). At that point, the phase of micro-improvements was reached. The great virtue of this phase was that it did not require specific finance since R&D was effectively funded through normal business operations. In time, the macro-invention might be so improved that it could be used everywhere and revolutionize the world.
If innovation had stopped with the macro-inventions of the eighteenth century, the results would have been limited. While the Newcomen steam engine, for instance, was the technological marvel of 1712, it could do little more than pump water and was grossly inefficient by later standards. It took almost a century before a steam engine could directly drive machinery and a century and a half before steam was cheaper than sail on the tea route from China to Britain. This progress was the result of a vast stream of micro-inventions. Micro-inventions differed from macro-inventions in three respects.
First, micro-inventions were not generally biased technical changes that increased the demand for inputs that were abundant and cheap in Britain. Instead, micro-inventions were likely to be neutral technical improvements.
At first, as the micro-inventions were made, Britain increased her technological lead over other countries. Moreover, countries with lower wages and more expensive energy still did not adopt the new British technology even though it was more modern, indeed, increasingly so.
A second difference between macro- and micro-inventions was in the inspiration for the inventions. While the ideas behind most macro-inventions came from outside the immediate industrial experience, the ideas for micro-inventions often originated in the study of that experience. Such ideas are called local learning.
The third difference between macro- and micro-inventions lay in business behaviour. Because macro-inventions involved radical departures from existing practice, the R&D they entailed was expensive.
Micro-inventing was often a more collective enterprise. Since learning was local, it was often cheaper than macro-inventing, so the needs for external finance and patent protection were reduced. By sharing information, inventors could learn from each other and become more efficient.
The reason that incomes continued to grow in the hundred years after Waterloo was because Britain’s pre-1815 inventions were particularly transformative, much more so than continental inventions. That is a second reason that the Industrial Revolution was British and also the reason that growth continued throughout the nineteenth century.
Cotton was the wonder industry of the Industrial Revolution.
The great achievement of the British Industrial Revolution was, in fact, the creation of the first large engineering industry that could mass-produce productivity-raising machinery.1 Machinery production was the basis of three developments that were the immediate explanations of the continuation of economic growth until the First World War. Those developments were: (1) the general mechanization of industry; (2) the railroad; and (3) steam-powered iron ships. The first raised productivity in the British economy itself; the second and third created the global economy and the international division of labour that were responsible for significant rises in living standards across Europe.
The growth and size of the cotton industry in conjunction with its dependence on machinery sustained the engineering industry by providing it with a large and growing market for equipment. The history of the cotton industry was one of relentlessly improving machine design. One of the social benefits of an invention is the door it opens to further improvements. British technology in the eighteenth century had much greater possibilities in this regard than French inventions or those made anywhere else. The British were not more rational or prescient than the French in developing coal-based technologies: The British were simply luckier in their geology. The knock-on effect was large, however: there is no reason to believe that French technology would have led to the engineering industry, the general mechanization of industrial processes, the railway, the steamship or the global economy. In other words, there was only one route to the twentieth century – and it traversed northern Britain.
- “Why the West Rules-for Now: The Patterns of History” by Ian Morris
- “Escape from Rome: The Failure of Empire and the Road to Prosperity” by Walter Scheidel
- “Enlightened Economy: An Economic History of Britain 1700-1850” by Joel Mokyr
- “The WIERDest People in the World” by Joseph Henrich
- “A Culture of Growth” by Joel Mokyr
- “Bourgeois Dignity: Why Economics Can’t Explain the Modern World” by Deirdre McCloskey
- “The Birth of Plenty: How the Prosperity of the Modern World was Created” by William J. Bernstein
- “Bourgeois Equality: How Ideas, not Capital or Institutions, Enriched the World” by Deirdre McCloskey
- “Why Europe?: The Rise of the West…” by Jack Goldstone
- “Why did Europe Conquer the World?” by Philip Hoffman
- “Inventing Freedom: How the English… Made the Modern World” by Daniel Hannan
- “The Early Modern Great Divergence” by Broadberry and Gupta
- “England’s Divergence from China’s Yangzi Delta” by Brenner and Isett