WORKSHOP OF THE WORLD? Late Victorian Britain was more of a shop with relatively few workers inside

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Date:
30 Mar 2016

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Nineteenth-century Britain is often regarded as the ‘workshop of the world’, a sobriquet that quickly calls to mind the international dominance of Britain’s manufacturing sector. But by the closing decades of the nineteenth century, Britain was at a comparative disadvantage in several manufacturing industries, such as glass and leather manufactures, to name just two. One of the main reasons for these comparative disadvantages was the relative scarcity of labour in late Victorian Britain.

These are among the findings of research to be presented at the Economic History Society’s 2016 annual conference in Cambridge. Brian Varian, a PhD student at the London School of Economics, has calculated systematic measurements of comparative advantage for the manufacturing industries of late Victorian Britain, specifically for the years 1880, 1890 and 1900.

Comparative advantage is a somewhat technical economic concept. A country realises comparative advantages in those industries for which its opportunity costs are lowest. It will produce and export the commodities of these comparative advantage industries. Likewise, it will import the commodities of comparative disadvantage industries, even if the country is the lowest-cost producer of such commodities.

One rather surprising finding of Varian’s study is that late Victorian Britain was at a pronounced comparative disadvantage in the silk textile industry. This contrasts greatly with the cotton textile industry.

As Varian notes, the pattern of Britain’s comparative advantages (disadvantages) in textiles and in manufacturing more generally can be explained by the relative scarcity of labour that prevailed in late Victorian Britain. As a consequence of this labour scarcity, Britain had high wages relative to other industrial countries, the United States notwithstanding.

The manufacturing of silk textiles was much more labour-intensive than the manufacturing of cotton textiles – in fact, nearly twice as labour-intensive. For this reason, Britain was at a comparative disadvantage in the former industry and at a comparative advantage in the latter one. In general, Britain’s comparative advantages were in the relatively labour non-intensive manufacturing industries.

Varian’s econometric analysis reveals, for example, that Britain would likely have realised a comparative advantage in the glass industry in 1880, if labour intensity in this industry was at least 30% lower. This could have possibly been achieved through the substitution of capital (machinery) for labour.

Varian’s research represents a major qualification of the very notion of Britain as workshop of the world. He concludes:

‘At least during the late Victorian era, the workshop of the world was a shop with relatively few workers inside it. It was therefore a shop more suited to some manufacturing industries than to others.’

ENDS

Brian Varian

London School of Economics

+44 (0) 7597517437

b.varian@lse.ac.uk

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