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5.1: Industrial Revolution: Did Victorian Britain "fail"? -…
5.1: Industrial Revolution: Did Victorian Britain "fail"?
Britain's early mover advantages
Industrialisation gap with the rest of Europe was already present in the 18th century, and kept widening in the first half of the 19th century
Nevertheless, Britain's lead started to erode after 1860, and vanished altogether in some sectors to the USA and Germany by 1914
Was Georgian Britain exceptional? Did Victorian Britain fail?
First Mover Advantages
Head start in infrastructure improvement (eg railroads)
Early regional concentration allowing for economies of scale (cotton in Lancashire)
Access to cheap raw materials throughout the empire
Biggest commercial fleet
Early access to export markets, especially in infrastructure products for industrialising economies. English products were a marker of modernity
Positive trade faciliated labour shift to manufacturing and services, which had higher productivity
Head start in absorbing new techniques led to falling production costs
Napoleonic wars curtailed flow of information abroad, reinforced technological leadership, disrupting potential competitors
Britain used its first mover advantage until the 1870s in the original industrial revolution sectors
Lead expressed not just in the volume of production, but in the huge share of export markets. (manufactured goods esp textiles, industrial machinery, investment capital)
Second Industrial Revolution
Industrial Revolution spread to other countries over the 19th century (Germany, USA, Belgium, France, Austria, Italy, Japan, Russia)
New entrants were strong in the "second Industrial revolution" sectors, where Britain often lagged
Included chemicals, dyes, fertilisers, pharmaceuticals, automobiles, non-ferrous metals, light industry, electricity, oil
Germany and the USA were pulling ahead in certain "old" industries like steel
"the weary titan staggers under the too vast orb of its fate" - Joseph Chamberlain, colonial sectretary
Dynamic of German and American success was already causing much anxiety in British discource at the turn of the 20th century. But Germany only took over the UK in terms of GDP pc after WW2 - but USA pulled ahead in 1913
Britain lagged in productivity growth until 1990s, only 0.85 productivity growth p.a. around 1870s
Historians present a narrative of Victorian failure and declinism - but subject to revisionism
Failure of Victorian Britain
Narrative established since the turn of the 20th century
Behavioural and sociological problems - a tired elite wanting only to relax, marry into aristocracy and not innovate. Basking in complacency in the sunset of economic hegemony (DS Landes 1969)
Entrepreneurial failure
Second Generation effect - landowner aspirations and affectations
Complacence in dominating old, mature industries - antiquated equipment
Small firm size - amateurish management - overspecialisation. Big factory came late
Labour issues
Craft skill rather than mass production - resistance to innovation
Lack of formal training/education compared to German professionals
"Climacteric" in general purpose technologies
Older technologies reaching point of diminshing returns/obsolecensce
Frictions/inertia in introducing new technology (capital, workforce training)
Misdirected finance
Emphasis on foreign investment (unprofitable empire) and rentier behaviour instead of domestic investment in industry
"gentlemanly capitalism" and "single capacity" finance vs universal banking
Structural foreign competitive advantages
Superior resource endowments - land and labour in USA and Russia
New transportation technology disproportionately benefitted land-abundant countries: reduced production costs for industry, facilitating exports to industrial european countries
Better matching of labour to production. Unskilled immigrant labour in the Americas especially suitable for low-craftsmanship mass production
Political and regulatory contrasts. Free trade vs protectionism, Britain was free trade advocate but other countries put up tariffs to protect their own industries. Imperial overstretch and colonies were a drain on the British economy
Was convergence inevitabe?
Only a certain amount of productivity gains available after moving from agriculture to industry
A country pulling away and then being caught up is a natural path in economic convergence, inevitable. Shifts away from agriculture to manufacturing and services
New transport technology in land-abundant countries created an increased global resource base
More mature global consumer markets led to higher global demand. Import substitution and export-led industrialisation easier than for Britain in the 18th century
Globalised finance - abundance of British investment capital, especially for railroads
Sophisticated payments network helping export-led Industrialisation
Larger comparative technological leaps on each new technological breakthrough - could adopt new superior technologies either way
(Abramovitz) technology leader has a greater proportion of obsolescent equipment. Country which lags in productivity can make larger relative leaps at each new breakthrough, as obsolecence is cleared out
Diminishing return as gap shrinks - productivity growth -> rise in aggregate output -> broader horizon for scale-dependent technological progress. Need to qualify this by the social capability of a country to accept innovation
Progress was often co-operative and national borders were permeable to innovation and inventiveness
International scientific journals and fairs, mobility of academics, international entrepreneurship even of sensitive technologies, precedents in "republic of letters"
Did finance fail industry?
Before WW1, around 1/3 of net national wealth was held overseas
Britain was 41% of international investment
Long era of deflation and depression between 1870 and 1900
European economies finally recovered after 1900 and started growing again vigorously
"victorian failure" often partly attributed to financial myopia. City's emphasis was on rentier needs rather than financing British industry. Too much capital diverted abroad
Financial companies became larger, but financial world remained highly pluralistic and specialised
British banks' "single capacity" model, separate commercial and investment banks, or German universal banks, which offered wider range of services
Commercial and financial system more integrated than ever, social indices at best levels ever