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Any general account of capitalism in India needs to be mindful of two characteristics of the region. First, Indians have been doing business with the outside world for millennia. Second, there was an extraordinary degree of regional diversity within the Indian subcontinent. Capitalism tends to enter comparative economic history in three different ways: as a mode of production in orthodox Marxism; as international trade in the world systems analysis; and as institutions in current discourses on international development. A quick glance at the map of the Indian subcontinent shows that its topography would have presented any long-distance trader living before the age of steam with a great advantage and a great disadvantage at the same time. In the 1990s, contributions on new institutional economic history emphasized the importance of social norms, and suggested that the formation of a bureaucratic state and social norms could lead to different, sometimes alternative, frameworks of regulation and in turn of capitalism.
Meat transformed North Atlantic shipping, leading to dominance of liners and changed the economics of freight rates. Management coordination of meat shipment led to concentration in shipping. Only liner companies could provide specialized ships with the regularity needed and they dominated North Atlantic shipping. The cargo capacity of cattle ships, beyond that used for animals, lowered freight rates on grain below levels that would otherwise have prevailed. The berth rate on wheat from New York to Liverpool was most affected. Consequently, this readily available freight rate can be potentially misleading as an indicator of ocean shipping developments.
The British Industrial Revolution created an industrial economy. While casual discourse conflates industrialisation and economic growth, Britain was remarkable primarily for the pronounced structural change that occurred rather than for rapid economic growth. Uniquely the British labour force became highly industrialised even prior to the move to free trade in the 1840s. On the eve of the abolition of the Corn Laws the share of agriculture in employment had already declined to levels that were not reached in France and Germany until the 1950s.
Table 4.1 reports levels of agricultural employment in other European countries at dates when, later on, they reached the British real income level of 1840. In every other case the share of agriculture was much larger. This reinforces the claim that precocious industrialisation was a key aspect of British economic development. It also means that, in Patrick O'Brien's words, Britain was ‘something of a special and less of a paradigm case’ (1986: 297). The aim of this paper is to explore how Britain became such an outlier.
An argument that has endured through the decades is that British industrialisation reflects the unusual ability of its agricultural sector to raise productivity. Looking at the period 1500–1800, Wrigley pointed out that
In a closed economy … a substantial rise in the proportion of the population living in towns is strong presumptive evidence of a significant improvement in production per head in agriculture, and may provide an indication of the scale of the change. Sufficient information is now available to justify an initial application of this line of thought to early modern England.
In 1870 Britain appeared to dominate the international economy; by 1939 things looked very different as export industries struggled in a moribund international economy. In the eighteenth century Britain had become Europe’s leading trading nation, and, during the industrial revolution, industrialisation and export growth went hand in hand to make Britain the ‘workshop of the world’. In the late nineteenth century the international economy grew rapidly – during an era of globalisation that was not rivalled until the late twentieth century. Although the dominance of British firms diminished as foreign (particularly American) firms increased their share of world export markets, British export industries continued to prosper. Furthermore, British shipping, banking and mercantile services remained at the centre of the world economy.
By 1939, Britain’s relationship with the rest of the world was altogether gloomier. The First World War had ended the era of a liberal expanding global economy. In Britain, as in other combatant nations, firms had turned their resources towards the war effort. Foreign customers found themselves ignored by their usual suppliers and looked elsewhere for alternatives. During the 1920s Britain returned to the pre-war goldbased monetary standard at an exchange rate that made British exports expensive. At the end of the 1920s, strains from the war and the imperfect return to gold contributed to the great depression in the 1930s. As depression and monetary instability spread, governments responded by circumscribing international trade to protect domestic firms and jobs and to insulate the monetary system from international pressure. In response to depression and the changed world, Britain abandoned the gold standard in 1931 and moved from a policy of free trade to one of tariff protection.
A general equilibrium arbitrated by prices arising from consumers and firms interacting in markets is a core idea in economic analysis and provides powerful insight into many historical issues. Modern computational models permit investigators to exploit the insights of general equilibrium. This article outlines the ideas of general equilibrium and of computational general equilibrium models. In the process, strengths and limitations are discussed. The discussion is given focus by using the Harley-Crafts model as its focus and explores briefly the consequences of changing the allocation principals in the agricultural sector of the model from a capitalist arrangement to a peasant arrangement.
Doug Irwin and Peter Temin offer a welcome study of the tariff and American industrialization. Although largely overlooked, the tariff significantly influences our interpretation of early American industrialization. If the tariff had no substantial effect, as Irwin and Temin argue, we view early American industrialization quite differently than if the tariff induced industrialization by diverting trade to otherwise noncompetitive firms within a customs union, as I believe. Although I welcome attention to the tariff, I feel that Irwin and Temin's argument rests on a misconception of the British cotton industry and of the nature of potential competition between American and British cloth in the absence of protection.
This study examines technical change, trade, economic structure, and growth during the British Industrial Revolution by means of computational general equilibrium (CGE) modeling. It rejects Peter Temin's contention that our “new view” of sectorally concentrated productivity growth is inconsistent with industrial export data. A CGE trade model with diminishing returns in agriculture and realistic assumptions about consumer demand shows that while technical change in cottons and iron were major spurs to exportation of those specific goods, the need for food imports also stimulated exports generally. Incorporating trade data thus enriches our “new view.”
Aggregate estimates of British growth during the classical Industrial Revolution have been reassessed in the past decade and present a significantly revision of earlier views of British growth. Growth was slower dian previously believed and industrial change more localized and with a smaller impact Agricultural improvement and die relative ease with which labour moved to urban industry seems central to the experience. Although industry's impact now seems less than previously believed, industrial cities transformed society because die cotton textile industry expanded to exploit the advantage of its new technology and labour moved to the cities. But while exports expanded the share of industry and caused urbanization, they did not raise per capita income much because competition ensured that the benefits went to consumers. Finally, die specific features of die British industrial revolution seem to provide only weak guide to die growth process elsewhere.
Although the American cotton textile industry was heavily protected, most commentators, following Frank Taussig's lead, have concluded that indigenous technological advance made large branches of the industry internationally competitive by the 1830s. The prices of equivalent fabrics in Britain and America in the late 1840s and 1850s challenge that conclusion. “Domestic” fabrics, in which American mills had supposedly become competitive, cost 20 percent more in America. Critical reexamination of other evidence—cost comparisons from the 1830s and American exports—supports the conclusion that an unprotected American industry could not have competed.
This article demonstrates that new industrial technology caused a revolutionary decline in nineteenth-century freight rates. This overturns Douglass North's well-known conclusion that organizational improvements were the dominant source of savings. While North's American freight rate series declines prior to the use of the metal steamship, British rates decline only modestly prior to 1850 and then rapidly as metal steamships come into use. Cotton freights dominate North's index and declined when cotton became more tightly packed for shipment. Metal ships and steam propulsion, however, caused a general decline in freight rates after 1850.
The railroads in the American West were constructed in a few concentrated building booms. This timing of construction resulted from the alternate creation and collapse of imperfect property rights to rights of way in partially settled areas. These “property rights” arose from strategic behavior within the railroad oligopoly. When enforcement costs of cooperative action were low, the railroads were able to create rents by avoiding construction ahead of demand. When enforcement became difficult, however, construction was the only way to capture rents on unbuilt lines so a construction boom ensued.
New indices of industrial production show that Britain's industrial growth in the last decades of the eighteenth century and the first decades of the nineteenth century was about a third slower than currently available estimates indicate. Therefore, mid-eighteenth-century industrial output was nearly twice as high as previously assumed.