6. After the Revolution
We’ve reached the point in this blog where most of the conditions for the industrial revolution are in place in Britain. It is, in other words, around the year 1760.
There’s been a modest population boom, and a long, steady increase in agricultural productivity has driven many people off the land to look for other work. Many have moved to London, which may now be the largest European city since the heyday of Rome. Two centuries of colonialism have brought exotic new goods to Europe: tea and spices from East Asia; fine textiles from India; cotton, sugar and tobacco from the Americas. This has created new, expensive consumption habits, and opened up bigger markets at home and abroad waiting to be supplied. The rise of global trade has also put wealth in the hands of a bigger class of urban entrepreneurs and merchants, who want to invest this wealth back into creating more wealth rather than fighting wars. This is the birth of capital, vital to turning ideas into money-making ventures. Together with the scientific breakthroughs of the enlightenment, a wider global spread of ideas and a relatively stable and liberal political environment, Britain in 1760 had all the ingredients for a rapid economic expansion.
But just because these conditions were in place, it didn’t mean the industrial revolution was bound to happen. It certainly wasn’t a given that it would happen so quickly, and change the world so irreversibly. There is a certain magic to the industrial revolution, a little like the magic that helped life on earth evolve from the right mix of sunlight, water and organic matter.
I can’t explain all of this magic, especially the flashes of it in the minds of the brilliant inventors of 18th century Britain, but I can chart what happened and what changes it caused. The chart below, which tracks real GDP per capita in Britain since 1700*, shows the most significant consequence of the industrial revolution: it made us rich.
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The industrial revolution began primarily in one industry: textiles, the business of turning cotton and wool into clothes and fabrics. England had a long history with wool, and it had a growing cottage textiles industry concentrated in the North West. By the early 1700s, there were thousands of people employed in cottage industries, refining cotton into textiles from their own homes, working primarily by hand with a few tools. They were trying to emulate the fine fabrics that were coming across from Bengal in India, for which there was increasing demand. This artisanal stage of manufacturing — known as “proto-industrialisation” in economics — was important, but not in itself revolutionary. It was manufacturing, but it was not mass production; each person could only produce what they could under the force of their own hands and feet, which is a pretty firm limit on productivity.
This is what changed in the industrial revolution — businesses began using machines so that each worker could produce more. A frenzy of new technologies — from the Spinning Jenny to the Spinning Mule to the Power Loom — increased productivity by dramatic amounts. These inventions moved workers out of their cottage workshops and into large mills, to make use of this new machinery. Cotton mills were originally driven by water, but James Watt’s vastly improved steam engine, coupled with an increased supply of coal soon meant many of the new factories went steam-powered.
This initial burst of super-productive industry made the first industrialists rich (although the same was not true for the workers — more on that in future). Many of these riches went back into more factories and machines, and so the revolution spread to other industries. The new steam engines needed coal, which meant building more mines. The textiles needed to be dyed in different colours, which spawned new chemicals industries. The factories needed bricks and builders (as did the new urban houses for all the workers), which drove a construction boom. The ever-growing quantities of textiles, coal and cotton needed transporting around, which meant more canals and bigger ocean-going ships. All of the machinery needed more iron, and of higher quality. Once the industrial revolution began, it created a cycle of higher productivity, more demand and scope for new products and technologies which has never really stopped since 1760.
We can see this dramatic growth in the data. The chart below shows how the textiles, coal and iron industries grew from 1760 onwards; each industry is indexed so their size in 1760 equals 100**. Textiles output (red) expanded 12 times over from 1760 to 1870. Coal output (green) grew 23 times over, and iron (purple) by 86 times. This is extraordinary, unprecedented growth.
Many of these new manufactured products were exported, and the trade data tells a similar story of mind-boggling growth. Britain’s exports of all manufactured goods increased eight-fold between the 1780s and 1850s. By 1870, a little over a century after the industrial revolution began, Britain accounted for 45% of all exports of manufactured goods in the world. Today, that number is around 3%.
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There are many, many ways in which the industrial revolution changed Britain and changed the world. I plan to cover some of these — such as the shift to cities and the very slow trickle down to improved living standards — in coming editions of this blog. But there are two seemingly obvious changes brought about by the rise of industry that are worth dwelling on here.
One is the advent of mass production. Before the industrial revolution, almost every product in the world was handmade individually. After it, a single product could be replicated an almost infinite number of times. This scalability is a vital concept in economic growth. It means a single technology, idea or design can be replicated at an immense scale, and generate enormous profits. If everyone in the world wants a Dyson vacuum cleaner, or an Oasis album, they can have it, each copy exactly the same. In some ways, mass production eliminates the creativity of the artisan, but it generally rewards the best ideas to an overwhelming degree.
The difference between products that can be mass produced and those that cannot is enormous, even in today’s economy. One of the under-appreciated features of the internet is that it allows us to mass produce some services. A successful piece of software, app or artwork can now be replicated for everyone at almost zero extra cost, which can lead to enormous profits. A hairdresser today, by contrast, can probably still produce as many haircuts each hour as their Victorian forebear. This scalability has also led to a winner-takes-all dynamic in some markets, which helps to explain why companies such as Amazon, Facebook and Google have been so dramatically successful during a period where the economy overall has faltered. This mass production, which first happened in the Lancashire cotton mills, is a powerful and often controversial economic force.
The other key change is the creation of supply chains. Before the industrial revolution, most things people consumed were either raw produce of the land, or manufactured using a few raw materials. The industrial revolution created longer chains of production, where raw materials were refined into new products, which were then used as inputs in other industries. Think of the inputs needed to build a steam engine or a train — they could not easily all be produced in one workshop. Products such as coal and iron became commoditised on a grand scale, while factories became part of supply chains which relied on each other.
People, factories and places could also become specialised in certain production processes, as Adam Smith described in his famous pin factory example. Rather than needing to make every input on site, it became possible for businesses to buy in more inputs and specialise in parts of the process that worked. This then increased the potential of global trade, as different countries could benefit from comparative advantage and specialise in parts of the production process they were relatively good at, while buying in other products from overseas. It’s fair to say that there has been increased interest in international trade and the complex international supply chains that come with it in recent times. We can trace most of this complexity back to the industrial revolution.
The images and the characters of the industrial revolution, from Brunel’s engineering miracles to Dickens’ tales of grim, over-crowded cities, are ingrained in our minds. But we generally take for granted the changes it brought to the economy, and to our everyday lives. The ability to mass produce goods, for workers to produce far more with machines than with their own hands, was genuinely revolutionary, and marked a decisive break with all of human history before it. For better and for worse, the industrialists of Georgian Lancashire changed the way we live forever.
*This chart takes the Real GDP per capita figure for Great Britain from Table A.21 of the Bank of England “Millennium of Macro” dataset.
** The data here is sourced from table A.4 of the Bank of England “Millennium of Macro” dataset. In particular, the agricultural data is drawn from Broadberry, Stephen, Bruce M.S. Campbell, Alexander Klein, Mark Overton and Bas van Leeuwen (2015), British Economic Growth, 1270–1870, Cambridge: Cambridge University Press http://www.cambridge.org/gb/academic/subjects/history/economic-history/british-economic-growth-12701870?format=PB