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01 Jan 2009

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The Industrial Revolution was invented in Britain in the eighteenth century because that was where it paid to invent it. Britain’s success in international trade led to a high-wage, cheap energy economy at home, which in turn created a demand for new technology – the famous inventions of the Industrial Revolution. These are the conclusions of Professor Robert Allen of Nuffield College, Oxford, in the 2009 Tawney lecture to the Economic History Society.

Why did the Industrial Revolution take place in eighteenth century Britain and not elsewhere in Europe or Asia? Professor Allen argues that the British Industrial Revolution was a successful response to the emergence of a global economy in the seventeenth and eighteenth centuries.

This was a two-step process. In the late sixteenth and early seventeenth centuries a European-wide market emerged. England took a commanding position in this new order as her wool textile industry out-competed the established producers in Italy and the Low Countries.

England extended her lead in the late seventeenth and eighteenth centuries by creating an intercontinental trading network including the Americas and India. Intercontinental trade expansion depended on the acquisition of colonies, mercantilist trade promotion and naval power.

The upshot of Britain’s success in the global economy was the expansion of rural manufacturing industries and rapid urbanization. The population of London, the most important port, exploded from 50,000 in 1500 to one million in 1800, and provincial and Scottish cities grew even more rapidly in the eighteenth century.

The growth of London created a shortage of wood fuels that was only relieved by the exploitation of coal, and coal gave Britain the cheapest energy in the world. Agriculture responded to the growth of cities by increasing food production and boosting labour productivity, so that farm workers were freed for manufacturing jobs.

The growth of cities and manufacturing increased the demand for labour with the result that British wages and living standards were the highest in the world. The only countries to rival Britain in this regard were the Low Countries whose economies also boomed through international trade.

British workers could purchase a diet of beef, beer and bread, while their counterparts in much of Europe and Asia subsisted on quasi-vegetarian diets of boiled grains and a few peas or lentils.

Success in international trade created Britain’s high-wage, cheap energy economy, and it was the springboard for the Industrial Revolution. High wages and cheap energy created a demand for technology that substituted capital and energy for labour.

The famous inventions of the Industrial Revolution had that character. The steam engine increased the use of capital and coal to raise labour productivity. The cotton mill used machines to raise labour productivity in spinning and weaving. New technologies of iron making substituted cheap coal for expensive charcoal and mechanized production to increase output per worker.

These technologies eventually revolutionized the world, but at the outset they were barely profitable in Britain, and their commercial success depended on increasing the use of inputs that were relatively cheap in Britain. In other countries, where wages were lower and energy more expensive, it did not pay to use technology that reduced employment and increased the consumption of fuel.

Since the technologies of the Industrial Revolution were only profitable to adopt in Britain, that was also the only country where it paid to invent them. The ideas embodied in the breakthrough technologies were simple; the difficult problem was the engineering challenge of making them work.

Responding to that challenged required research and development, which emerged as an important business practice in the eighteenth century. It was accompanied by the appearance of venture capitalists to finance the R&D and a reliance on patents to recoup the benefits of successful development. The Industrial Revolution was invented in Britain in the eighteenth century because that was where it paid to invent it.

The success of R&D programmes in eighteenth century Britain depended on another characteristic of the high wage economy. In the seventeenth and eighteenth centuries, the growth of a manufacturing, commercial economy increased the demand for literacy, numeracy and trade skills. These were acquired through privately purchased education and apprenticeships.

The high wage economy not only created a demand for these skills, but also gave parents the income to purchase them. As a result, the British population was highly skilled (by international standards), and those skills were necessary for the high-tech revolution to unfold.

The Industrial Revolution was confined to Britain for many years, because the technological breakthroughs were tailored to British conditions and could not be profitably deployed elsewhere.

But British engineers strove to improve efficiency and reduced the use of inputs that were cheap in Britain as well as those that were expensive. The consumption of coal in steam engines, for instance, was cut from 45 pounds per horse power-hour in the early eighteenth to only 2 pounds in the mid-nineteenth.

The genius of British engineering undermined the country’s technological lead by creating ‘appropriate technology’ for the world at large. By the middle of the nineteenth century, advanced technology could be profitably used in countries like France with expensive energy and India with cheap labour. Once that happened, the Industrial Revolution went worldwide.

These ideas are developed in Professor Allen’s new book The British Industrial Revolution in Global Perspective, launched at the Economic History Society conference. This is the first volume in the Society’s series New Approaches to Economic and Social History published by Cambridge University Press.


Robert C. Allen
Professor of Economic History
Nuffield College, Oxford

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