The British Industrial Revolution

The British Industrial Revolution

Thilo R. Huning

Historical Perspectives on Economic Growth

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The British Industrial Revolution

Questions of this lecture

I What was the British Industrial Revolution?

I What were key events in the British Industrial Revolution?
I What were the long-run consequences for Britain?

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The British Industrial Revolution

The Hockey Stick again

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The British Industrial Revolution

What was the Industrial Revolution?

I Actually there is more than one Industrial Revolution

I The First (British) Industrial Revolution (ca. 1730–1800):
Coal, Iron, Railways
I The Second Industrial Revolution (1850–1913): Electricity,
Steel, Chemistry

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Maddison’s GDP from 1700 to 1800 (UK: around 0.2 % p.a.)

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Maddison’s GDP from 1800 to 1900 (UK: around 0.8% p.a.)

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So why so Revolutionary?

Even though GDP p.c. rose only by max 0.25% p.a., there are
remarkable changes in the economy
I There is no ‘Malthusian catastrophe’
I GDP/capita grows despite large population gains
I The amount of energy p.c. explodes

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Energy Consumption from Wrigley (2013)

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Population in the UK 1500–2000

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Demographic Transition of England and Wales

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Growth!
The growth rate of 0.25% p.a. 1700-1800 look small from today’s
perspective
I Compared to the growth rates in other historical episodes or
today
I The East Asian tigers (Japan, ...) grew faster due to technology
convergence
I European states after 1950 grew faster due to reconstruction
growth
I 19th century Western Europe grew faster because of a huge
change in world’s market integration
⇒ They were anyway unprecedented given the simultaneous rise
in population!

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Why British?

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The Expansion of British World Trade

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The Gains from Trade

I World trade before the Industrial Revolution was an exchange
of luxury items
I All of a sudden, increases in the efficiency of British textile
industry paid to import raw materials (cotton!) to the UK, and
export finished textiles
I Together with the existing colonies and British presence
around the world, huge value-added by UK industries
I At the time, these industries had favorable externalities for
Britain
I Investment in transport network
I More urbanization
I Rise in demand for education
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What happened through the British Industrial Revolution?

I The central invention was the

steam engine of 1712. Invented as
a machine to pump water out of
mines, it turned out to be a general
purpose technology
I That turns fossil fuel into
mechanical labor to be used for
I Spinning and Weaving, once the
‘Spinning Jenny’ becomes the
‘Spinning Mule’
I Transport (Railroads, Steam
boats)

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Central Innovations in the British Textile Industry

Figure 3: Spinning
Figure 1: Spinning Mule:
Jenny: Samuel Crompton,
James Hargreaves, Figure 2: Water frame:
1779
1767 Richard Arkwright,
1769

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Why was the Steam Engine invented in Britain?

I Allen (2009) argues that the
Newcomen’s steam engine was a
macro invention, which due to its
inefficiency (<1%!) only paid in
very coal/labor abundant areas, such
as Britain, and near coal deposits
I When British entrepreneurs and
innovators made it better, and more
efficient, developing
micro inventions, the machine
could also be used where coal was
more scarce
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Macro and micro inventions after Allen (2009)

Assume we have two factors: Labor (L) and Energy (E)

I Macro inventions safe one production factor: Ł ↓. The steam
engine for example safes labor, being substituted by coal E ↑.
I This is fine where labor is scarce and energy is abundant!
I Micro inventions are neutral: L ↓, E ↓, but L/E remains the
same
I This will eventually lead to the adoption of the steam engine
elsewhere

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Macro and Micro inventions: An Example

I Consider UK’s factor prizes: It takes 100 hours of labor to
mine a ton of coal
I In France, it takes 250 hours of labor to mine a ton of coal
I When does a steam engine break-even?
I UK: Any machine that turns less than 10 kg coal into one hour
of labor
I France: Any machine that turns less than 4 kg coal into one
hour of labor
I This means that this technology is biased! A steam engine that
turns 8 kg of coal into an hour of labor is completely useless in
France
I Come in micro inventions: Innovations in design divide factor
consumption by four, with constant output
I The steam engine (2 kg of coal per hour of labor) can be used
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Reading for Today

Please read Ch. 1 “The Industrial Revolution” from Crafts (2018)

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Total Factor Productivity

I A way of measuring efficiency is Total Factor Productivity

(TFP)
I Suppose you have 100 annual data points for the UK, each of
them with data on
I The GDP Y
I A measure of the capital stock K
I A measure of the labor stock L
I A measure of the land stock S 1
I So Y = KLS? If GDP growth over these 100 data points is
perfectly explained by an increase in the factor endowment,
then there cannot be an efficiency growth

1
N in Crafts (2018) 21/ 25
The British Industrial Revolution

Total Factor Productivity (contd.)

I But: Factors can be substituted, e.g. when the society moves

from agriculture to industry! Therefore: Y = K α Lβ S γ ?
I If however, there is a growth than cannot be explained by
more factors, this must be efficiency gains. Let’s add one more
factor A, so Y = AK α Lβ S γ

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Conclusion

I While the British Industrial Revolution until 1800 did not

reach our modern growth rates, the economic changes were
remarkable
I A general purpose technology to replace human labor by
mechanical engineering and fossil fuel existed
I This propelled an otherwise marginal factor, coal, to the
central production factor for the next 200 years

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Concepts of this lecture

I Steam Engine
I General Purpose Technology
I Micro invention
I Macro invention
I Total Factor Productivity

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References I

Allen, R.C. (2009). The British Industrial Revolution in Global

Perspective. New Approaches to Economic and Social History.
Cambridge University Press.
Crafts, Nicholas (2018). Forging Ahead, Falling Behind and
Fighting Back: British Economic Growth from the Industrial
Revolution to the Financial Crisis. Cambridge University Press.
Wrigley, E. A (2013). “Energy and the English Industrial
Revolution”. In: Philosophical Transactions of the Royal Society
A: Mathematical, Physical and Engineering Sciences 371.1986,
p. 20110568.

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