ECONOMY OF INDUSTRIAL REVOLUTION

The Industrialization of Europe, occurred between 1780 and 1914, starting in Britain, and was marked by three phases, each associated with a different region and technology. The Industrial revolution refers to structural changes in the economies of certain European countries in this period, which were as follows-

  • Reduction in the contribution of the agrarian sector to the economy and an increase in industrial and commercial sector’s contribution;
  • Discovery and use of new sources of power which revolutionized production;
  • Subsequent shift to manufacturing on a large scale-in factories;
  • Technological innovations and new types of investment. 

Clive Trebilcock, delineates the three phases of industrialization- the first phase (1780s-1820s) was pioneered by Britain, the second phase (1840-1870) saw France, some areas of the German States and U.S.A. industrializing, while the third phase (late1890s-1914) saw Japan, Italy, Russia Sweden, parts of Spain, Hapsburg empire and Hungary industrialize. 

CAUSES:  Prior to the mid-18th century all European economies were marked by a large agrarian sector and craft manufacturing carried out by manual household labour, within the house, for local or regional markets. Such manufacturing required little capital and was labour intensive. By 1700, Peter .N. Stearns says Western Europe was an advanced agricultural society with an unusually large commercial sector. In the 18th century John Merriman says, it began to register three main changes which accelerated manufacturing and constitute the causal factors/preconditions for the Industrial Revolution-
  • Firstly Europe witnessed a population explosion from the 18th century peaking in the mid 19th century. Between 1800 and 1850 Europe’s population increased by 43%, with greatest increase in industrializing regions.(a) This was because mortality rates fell in this period as vaccinations for small pox etc were developed, eradicated many fatal diseases and sanitation and pure water facilities improved. (b)With this life expectancy of women also increased. (c) A period of relative peace during the 18th century also aided population growth. 
  • Secondly introduction of new agricultural methods and expansion of the agrarian base, to sustain the increase in population contributed to industrialization. (a)Potato, a calorie rich and disease resistant crop was introduced in France, Prussia and Ireland and this supported the growing populations. (b)In England and Holland, new drainage systems, led drainage of swamps and increase in land under cultivation, with nitrogen fixing crops being planted here. This increase meant an increase in agrarian output. (c)We also note the consolidation of small agricultural plots, into large farms, especially in Britain. (e.g. between 1750 and 1850 1/4th of all cultivable land was incorporated into larger farms in England). Consolidation of plots meant an increase in food supplies which supported the growing population. Consolidation some historians hold also led to ‘proto industrialization’, as it freed up agrarian labour, which then sought employment in the domestic manufacturing sector, whose output thus increases. This increase in manufactured goods, met the growing demand of the rising population. John Merriman says on the Continent, despite lesser consolidation of land, German agrarian productivity rose twice as fast as population growth between 1816-1865 and so did French productivity from 1815 on due to crop rotation. 
  • Thirdly remarkable technological changes and improvement in transport-which included the development of railroads and steam ships contributed to industrialization. A host of scientific discoveries applied to manufacture, stimulated industrialization. For example research on behaviour of gases led to understanding of steam as a source of power. This led to the development of the first steam engine by a Frenchman in Holland in 1600s; later James Watt a Briton by 1760 refined his model and pioneered the development of the engine for industrial use. Thus Britain developed the first railway line, which opened in 1820 at Stockton to haul coal. Railways contributed to the industrial revolution because it stimulate capital investment, led to greater integration of markets, cheaper transport and stimulated other sectors like coal, iron and steel. The development of steamships also halved the time of trans-Atlantic voyages and reduced transport costs. 

           Peter Stearns adds to these causes and says other conditions prevailing in Europe also contributed to industrialization. The most important cause for him were:
  • Europe’s dominance in world trade- which led to acquisition of cheap raw material and capital from colonies and development of markets across Asia, Africa and South America for European manufactures;
  • Commercialization of Europe from the 17th century on led to the development of national banking systems;
  • Presence of raw materials recourses in Europe also facilitated Industrial revolution. Large coal deposits were found in Britain, Belgium, northern France and Germany. 

       INDUSTRILIZATION IN BRITAIN, FRANCE AND GERMANY- 

BRITAIN- Britain was the first nation to experience the Industrial Revolution (between 1780s-1820) Peter N Stearns says that by late 18th century Britain was emerging as a leader in world trade and its population was starting to grow, thus expressing greater demand for goods. Due to this by the 1730s he says a period of ‘proto industrialization’ emerged in Britain, which was marked by- (a) a decline in the percentage of people employed in agriculture, (b) growth in domestic markets due to population rise and growth in international markets due to increasing international trade both of which stimulated manufacturing of goods(c) this in turn led to the emergence of small businesses started by middle class and the subsequent development of a working class and (d) New technological developments which helped mechanize and increase production of goods. This intensified till the 1760s when the stage was set for full scale industrial revolution as new entrepreneurs had begun to emerge, steam was developed as an industrial power source by now, manufacturing was expanding and so was its labour force. 

Britain’s industrial revolution began around the 1760-1770s and it was led by the cotton industry. Cotton was the first sector to industrialize as, firstly cotton fibre was easier to mechanize that wool and linen (the traditional textiles produced in Britain), secondly cotton had a large market in Asia, especially India, a British colony, it also had  a growing domestic market in Europe as it was a novel cloth and could be coloured brightly, thirdly raw cotton could to imported at low rates into Britain from its colonies in India and America and finally British workers were open to training from scratch in cotton production as it was a new textile industry. These factors and the prospect of profits to be made, led to search for technological improvement in the manufacture of cotton. From the 1730s numerous inventions were made which helped mechanize cotton manufacture and increase output. For preparing cotton for weaving- James Hargreaves in 1764 invented the spinning jenny which mechanically drew out and twisted cotton fiber into threads, by 1769 Richard Arkwright developed the first water powered spinning machine, this was improved by 1780 with steam power being used.  For the weaving process-The flying shuttle originally developed for hand weaving was mechanized, by 1785 Edmund Cartwright patented the power loom- a mechanized loom for weaving, which was in common use by 1800. New bleaching and dying techniques and roller prints instead of block prints were also developed. All these inventions revolutionized cotton production so that by 1790s cotton textile production was largely carried out in factories and  production increased from 40 million yards per year to 2,025 million yards per year between 1789 and 1850(Merriman). This increase was also indicated by increase in import of raw cotton from worth 11million pounds to 588 million pounds in the same period (Merriman). Peter Stearns says a large amount of cotton textiles were exported to India (British cotton’s largest market), Africa and Latin America. Exports were essential source of revenue- in 1840 cotton provided half the value of British exports. By 1820 India was buying half the cotton cloth exported by Britain, which led to India’s deindustrialization. Manchester and Lancashire emerged as the principal towns where such cotton was produced. The second sector after cotton textiles which began to mechanize and increase output rapidly was the metallurgy and mining sector. A breakthrough in the 18th century in learning how to produce coke from coal, revolutionized iron industry. Coke was a much more effective iron smelting agent than previously used charcoal. Coke production depended on advances in furnace design, this spurred improvement in furnaces. Henry Cort’s reverberatory furnace for refining iron was the most important technological advance as it saved fuel and increased productivity by 1500%. Another significant advance was Henry Bessemer’s invention- the Blast Furnace, in 1856 which helped remove chemical impurities from pig iron, later it also spurred the production of steel. Steam powered machines to roll metal were also developed. All this caused a major growth in the iron industry. From producing just 25,000 tons of pig iron in 1720, the industry grew to produce 2, 50,000 tons by 1804 and 4 million tons by 1860. Growth in the Iron Industry stimulated two other major sectors- (i) Coal mining and (ii) Machine Building. (i) Coal mining surged, providing fuel for smelting iron and steam engines. Coal production increased from 24 million tons in 1830, to 110 million tons by 1870 (half the worlds production). Mining also caused advances in transportation, as metal rails were laid to haul coal out of mine faster by animal/human power. By 1800, steam engines replaced animal drawn rail carts; this in turn spurred the development of the railways. Merriman says the first railway train in Britain began by hauling coal to the town of Stockton in 1820 and the first passenger train service began between Liverpool and Manchester in 1830. Trans Atlantic steam ships also emerged by 1838 as great consumers of coal. Railways and steam ships, revolutionized transport and communication drastically reducing costs and time. (ii) Machine building which was scattered till 1800 was stimulated and machines to bore and turn were designed, yet despite this, the sector remained small. Certain other industries also began to slowly mechanize as Stearns points out- For example the woolen textile industry by 1800, beer brewing- with big factories like Guinness brewery being established in Dublin and printing industry by 1830, with the invention of a steam powered printing press. Yet industrialization was not uniform or sudden, brass and small metal goods industries were scarcely touched and lags in technology even in cotton sector, led to a convulsive transformation. 

Various reasons have been propounded for the pattern of industrialization in Europe and especially why Britain was the first country to industrialize. Peter N Stearns and John Merriman points out certain unique factors that Britain had in its favour- Firstly the Enclosure Acts passed in Britain which called for consolidation of agricultural land into large farms, with capital intensive farming began much earlier in Britain than anywhere else. Consolidation led to increase in agrarian production to feed the growing population as well as created a large population of jobless farmers who were looking for work. Secondly Britain was unique, as its guilds which protected artisans disappeared by the 18th century. Guilds inhibited introduction of new technology and workers, this factor eliminated, employers were free to experiment. Thirdly Britain’s leading role intercontinental trade and its colonies provided capital, cheap raw materials and markets for British industry. Fourthly British government aided economic change as its laws favoured British manufacturers with protective tariffs on goods imported into Britain (18th century) and encouraging banking, it banned workers unions, it made it easier to found companies, passed Enclosure Laws and improved transportation networks. Finally Britain’s good coastline and navigable rivers as well as rich mineral deposits of coal and iron ore near rivers made all provided ideal conditions for the first industrial revolution to occur in Britain. 

FRANCE: France was the next nation to industrialize within Europe, followed shortly by Germany. Peter Stearns argues, that the geographical/cultural proximity to Britain and the relevance of industrialization to power in politics displayed in the Napoleonic Wars by Britain, spurred French and German industrialization. In 1815 the French economy was in shambles after the Napoleonic Wars, as its rich colonial and Mediterranean trade was disrupted by a British blockade, it was cut off from British industrial technology and its agriculture was disrupted. Thus the French developed a unique model which differed from Britain model, and Robert Tombs says was marked by three main feature- (i) Economic growth was brought about by small scale agriculture and traditional style labour intensive manufacturing  rather than through agrarian consolidation and at factories as in Britain. (ii) Slow Population growth subsequently and low demand-French population increased by only 30% between 1880-1850 as compared to Britain where population doubled now. By 1880s population growth stagnated in France. (iii)An active role played by the State in the French economy, as opposed to Britain where a policy of free trade and lassie fare was largely followed. 

Between 1815 and 1860, French economic development was supported by a (a) growing traditional agricultural sector as pointed out by Robert Tombs. Agricultural labour force increased, land under cultivation peaked in 1860, as new system of crop rotation was introduced. Thus agrarian production rose by 1.2% per annum. Rural population grew till 1840 and 60% of the total labour force remained dependent on agriculture. All this took place without a major agrarian revolution or mechanization. France unlike Britain and Germany didn't witness a mass rural exodus. Yet this large agrarian population was not solely dependent on agriculture and drew supplementary incomes from rural production-spinning flax or smelting iron, traditional rights and temporary migration to cities from the highlands as domestic servants, coal sweepers, bar keepers. 

Robert Tombs and Peter Stearns mention that industry also rapidly increased output in this period, and industrialization peaked between 1840—1870. Tombs says French industry focused on production of (i) Hand crafted luxury goods for exports to wealthy markets of Europe and America, as it realized that it couldn’t compete with the cheap mass produced textiles, metals and machines of Britain. Thus Lyon silks(France’s largest export good) and fashionable wares like furniture, clocks, jewellery, books and clothing is what France focused on, comprising half the exports in 1850. (ii) French industry also produced traditionally made consumer goods for local use- like soap, candles, sugar and paper. Yet this production was mostly carried out by traditional methods, for example- Stearns mentions that manufacturing was still carried out in small shops by manual labour, but there was an increased emphasis on standardization of products. Tombs mentions that water powered production was widespread in France , especially for charcoal smelting, yet this was not always a disadvantage as it led to production of purer steel and thus the production of fine surgical instruments and cutlery. Hand operated looms still existed allowing for finer patterns. 

Yet despite this dominance of traditional methods France did experience industrialization. Stearns mentions that by 1850, 20% of all manufacturing workers were employed in factories or coal mines. (iii) France focused on coal mining and iron industry-coal output increased thirteen fold between 1820-1870 while iron production sextupled. He says the French government bribed British entrepreneurs to set up modern metallurgical factories in France, thus French steel industry developed under James Jackson, whose grandson set up the first Bessemer converter in France in 1861. French businesses hired British skilled workers to train their work force- thus in 1830 there were 15,000 British workers in French metallurgical and textile plants. (iv)Textile industry too mechanized with new inventions like the mechanical loom and jacquard loom being introduced. (v)Railways was another very important sector that the government focused on from the 1840s. Unlike in Britain, the French government built the railways system and bared 1/3rd  of the cost(i.e. 3 billion francs). 

Post 1860s Robert Tombs mentions that the French economy hit a slump until the 1890s. This was due to loss of its coal regions of Alsace and Lorraine to the Germay, silk worm disease and wine killing insect, fall in wheat prices by 45%, cotton shortage due to the American civil war all of which damaged the economy. Tombs mentions French industrialization was marked by a convulsive growth. The economy recovered to grow again between 1896-1914 with the aluminium, electrical good, motor vehicles and aviation industry taking the lead.

UNIQUE FEATURES: The most unique feature of the French model of industrialization, apart from the focus on high quality export goods was the active role of the State in the economy; this distinguished it from Britain and Germany. Robert Tombs and Merriman point out that the government’s main method of intervention in the economy were (i) protectionist policies-protection of French manufacturers through imposing tariffs, quotas and prohibitions on foreign imports. This was done to protect small traditional producers in France from from competition by cheap machine made British goods and also because the government wanted limited risks as it feared uncontrolled enterprise could cause instability leading to bankruptcy and unemployment. (ii)Through subsidies, it assisted businesses- canals, railways, gas, sailing ships were all subsidized to protect indigenous industries from cheaper foreign manufactures. (iii)Through actively funding and building infrastructure- like road networks by 1880, waterways till 1840s, railways between 1830-80. This was for strategic defence reasons, in event of war and to stimulate market integration and business growth. 

Even thought the French model is attacked for, a large agrarian sector, slow development of a mass a market, low wages and technological development, French wealth per capita was similar to Britain’s between 1815 and 1914(Tombs). The French industrialized in a balanced manner paying attention to all sectors. Finally this transition Tombs says was less traumatic for the rural and urban populace as in 1914, 40% of the labour force was still self employed as opposed to 16% in Germany and 9% in Britain. 

GERMANY: (1840-70) German industrialization started after French industrialization, Peter Stearns says, because Germany was not politically unified, its customs union or zolverin created a united market quite late in 1830, guilds and serfdom were abolished late and absence of tariff protection for textiles hampered early industrial growth. Germany initially had to smuggle, skilled workers and technology from Britain according to Stearns, yet by the 1840s its industrialization had begun, and real growth appeared between 1850-70(economy grew at 2.5% p.a.). David Blackbourn says this was growth was due to the industrial sector that focused on heavy industries especially- railways, production of coal, iron and steel. Stearns says this new focus was because nations to industrialize after Britain, had to develop a different emphasis, to compete with industrialized nations and Blackbourn says Germany did this successfully, as it developed larger and more technologically advanced industrial concerns than Britain, due to its ‘latecomer’ advantage. 

Coal and iron and steel were the leading sectors. Coal mining output doubled in 1830s alone and expanded seven fold between 1840-70, as deep mines were sunk in the Ruhr valley. In the 1870s Germany acquired France’s coal rich regions- Alsace and Lorraine. Coal was used to produce steam power and coke to smelt iron. Iron and steel industry flourished from 1850s onward, causing advances in engineering as pressed steel, metal pipers, boilers and factory machines were produced. Alfred Krupp who employed just 60 men in 1836 emerged as the giant of the metal and mining sector by the 1870s employing 16000 workers and producing arms and ships. According to Blackbourn growth in these two sectors was due to the railways, which was an insatiable consumer of coal, steel track and locomotives. The German rail network, built largely by the state governments, expanded from 4000 miles in 1852 to 24,000 miles by 1873. This according to Blackbourn had caused two further developments-(i) stimulating capital goods industries and (ii)the construction industry-stations, bridges, signals, factories, waterworks, rail workshops etc came up. Growth of industrial towns the population also stimulated a construction boom in cities like Stuttgart. Blackbourn mentions that growing urban population led to increase in consumer demand- two consumer sectors dominated-(I)Apparel industry-shoes, clothes, hats etc  (ii) Food and drink, witnessed a major growth with 1/4th of all manufacturing labour being employed in the former and 14% in the latter in 1850s. The chemical industry was another major sector that grew in Germany with Bayer, BASF and Hoechst, producing chemical dyes for the textile industries in Europe. The electrical sector also grew with Siemens dominating. A unique feature of German industry by the 1870s was the growth of cartels of firms and their role in collective price setting. 

UNIQUE FEATURES:  German industrialization differed in pace and pattern from British and French industrialization, because it registered the (i) fastest industrial growth and focused mainly on the heavy industries unlike Britain and France. This was because of its large raw material-coal and iron deposits, unlike in France. Blackbourn draws our attention to the (ii)active role of the State in German, even though it was less than the role of the state in France but greater than in Britain. For example, German chambers of commerce were semipublic-semiprivate institutions, unlike in USA and Britain where they composed solely of businessmen. Secondly German states pursued pro-industry and commerce policies - like high taxation for peasants, new company law, freedom of movement for grater labour and capital mobility, plus setting up the zolverin and finally political unification of Germany in 1871. The political unification, inspired confidence in investors, to invest in industry and mineral exploration. Yet a large amount of industry was under privateers e.g. over half the rail network was in private hands till 1870s. (iii)Finally development of banking and commerce was another unique feature- joint stock companies raised public capital, important joint stock banks- Deustche  bank, Dresdner, Dramstadter all channeled savings into domestic industry. From the 1870s banks and industry developed close ties and this was the hallmark of German industrial capitalism. The agrarian sector and traditional manufacture still played an important role, which was lesser than in France but greater than in Britain. 49% of labour still worked in agri sector and 30% in industry. Yet by 1870s a truly capitalist industrialized economy had emerged with distinct industrial zones and division of labour emerging, which was not as clear in France for example. 

From 1873 European economies were plunged into a period of ‘Great depression’ till 1896. Yet by now, Britain, France and Germany had all industrialized, each carving a different path and determining its own pace.