Lecture 7. The Dawn of the Industrial Revolution
Recommended reading : 【Economic History】 Economic History Table of Contents
1. When did Europe pull ahead?
2. The Netherlands: the birthplace of the first modern economy
3. The British Industrial Revolution
1. When did Europe pull ahead?
⑴ The California School argument : represented by Kenneth Pomeranz
① Europe did not surpass China or India until the late 18th century.
② The Industrial Revolution occurred because Europe overcame late-18th-century land constraints through contingent, “lucky” factors.
○ The “luck” of being located close to coal-consuming regions.
○ Importing land-intensive food and agricultural raw materials from the Americas.
○ (Note) This rests on an underlying Malthusian explanation that, basically, there was no technological progress.
⑵ Empirical findings : inflation must be considered, and the gap in economic level had already been widening before the Industrial Revolution.
① Around 1550, the silver wage (nominal wage / silver price) in England was higher than in China and India.
○ Along with textiles and spices, silver was a major tradable good, so the law of one price was established.
② Around 1550, the grain wage (nominal wage / grain price) in England was similar to that in China and India.
○ Grain is a representative non-tradable good, so the law of one price is not established.
○ After 1700, England’s grain wage rises markedly.
③ If these data are incorporated into the real-wage deflator, one can say that England’s real wage was higher than that of China and India.
⑶ Backed by the Maddison Project based at the University of Groningen, recent estimates are being revised.
① The “Great Divergence” between Europe and Asia began long before the Industrial Revolution.
② Around 1500 : China’s income level was similar to England’s, but far below Italy and the Netherlands.
③ Around 1600 : China was similar to Europe’s periphery (Sweden and Spain). After that, China’s income level declined further.
④ Explanation 1. Europe managed the balance between diminishing returns and technological progress much better.
⑤ Explanation 2. Europe’s custom of late marriage, which reduced fertility, had an important impact.
2. The Netherlands: the birthplace of the first modern economy
⑴ Factor 1. A culture of thrift : status was not a right acquired by birth, but linked to effort.
⑵ Factor 2. A spirit of tolerance
① It became a safe haven for talented immigrants who had been driven out elsewhere.
② Today, Wall Street or Silicon Valley plays a similar role.
⑶ Other features of the Netherlands
① Monarchical control : unlike England, there was no constitutional control system; it largely served nearby monarchs.
② The division of labor was quite advanced, and the non-agricultural sector was large.
③ Liberty, intellectual property institutions, and well-functioning markets.
3. The British Industrial Revolution : it triggered the Industrial Revolution.
⑴ Characteristics of Britain
① The Glorious Revolution (1688–1689) established a constitutional monarchy.
② Parliament controlled the monarch’s taxation and the arbitrary granting of privileges.
⑵ The British Industrial Revolution (1770–1830) was not based on scientific discoveries.
① From the 17th century, knowledge about the laws of nature was acquired, but it had little influence on production technology.
② The steam engine, emblematic of 18th-century invention, is an exception to this rule.
⑶ The content and significance of the new national-income estimates for the Industrial Revolution period by Crafts and Harley
Table. 1. New and old estimates of TFP growth and national output growth in Britain (Unit : annual percent)]
① Old estimates : results of the pioneering work by W. A. Cole and P. Dean.
② New estimates : results of revisionist economic historians such as N. F. R. Crafts and K. Harley.
○ Total factor productivity (TFP) growth was at almost the same level as the figures for medieval and early modern agriculture.
③ Revision 1. Rather than a radical, sudden transformation of economic life, there was an industrial transition.
○ Emphasizes that there was not much difference between Britain’s pre-industrial growth and its TFP growth in the early phase of the Industrial Revolution.
○ The estimated per-capita growth rate for 1780–1830—once regarded as the period of industrial “breakthrough”—falls to about one-third of the previous estimate.
○ Total factor productivity growth was at almost the same level as the figures for medieval and early modern agriculture.
④ Revision 2. Focusing only on Britain obscures the fact that a Europe-wide intellectual enlightenment was underway.
⑤ Why the old and new estimates differ
○ Earlier estimates placed too much weight on fast-growing industries relative to “old” industries within total industrial output.
○ The size of the industrial sector within the overall economy was overstated.
⑷ Principle 1. The Industrial Enlightenment thesis
① Named and argued by Joel Mokyr, who studied the market economy and the “market for ideas.”
② Schumpeter also argued that Britain experienced the Industrial Revolution because British society was enlightened.
③ Europe, during the 19th century, developed an emerging scientific culture: rational inquiry into the laws of nature.
○ The Industrial Enlightenment transformed the economy in the late 19th century and dominated production technologies for most of the 20th century.
○ The period from 1945 to the mid-1970s is often called capitalism’s “Golden Age”; empirical work suggests that it ended because the scientific and technological revolutions of the late 19th to early 20th centuries had been fully exploited by 1945–mid-1970s.
④ Conclusion : even if it had not been Britain, the Industrial Revolution would have occurred in another European country.
⑤ Critique : the fact that the Industrial Revolution happened only in Britain stems from differences between British empiricism and Continental rationalism.
○ British empiricism : advocated by Bacon; believed that technological progress could be achieved through empirical research.
○ Continental rationalism : represented by Descartes’ Discourse on the Method (“I think, therefore I am”).
○ Because technology can be transmitted through learning-by-doing, British empiricism is superior to rationalism.
⑸ Principle 2. The Industrious Revolution thesis
① Named and argued by Berkeley economic historian Jan de Vries.
② Claims that an industrious revolution—a fundamental change in consumer behavior—triggered the Industrial Revolution.
○ Labor industriousness : broadly, most family members began participating in the labor market.
○ Even if per-capita income fell under Malthusian forces, the family’s total wages increased.
○ Income gains from increased labor supply erupted into new desires for novel goods.
③ Significance
○ Traditional view : economic levels rose as consumers adapted to new products created by technological innovation.
○ Corrects the producer-centered bias.
④ Limits
○ A balanced interpretation of demand and supply is necessary.
○ A reasonable explanation is needed for why most family members came to participate in the labor market.
Posted: 2020.07.11 10:07