The debate over British industrial decline

The rise and decline of Britain. Britain ƒ Aspects of British industrial success. success ƒ Industrial organization. ƒ Industrial districts. ƒ Intern...
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The rise and decline of Britain. Britain ƒ Aspects of British industrial success. success ƒ Industrial organization. ƒ Industrial districts.

ƒ International trade. ƒ The British Empire.

ƒ Free trade.

ƒ The debate over British industrial decline. ƒ Did B Britain it i decline? d li ? ƒ Theories of decline. ƒ Culture. ƒ Technological trajectories and timing. 1

I d t i l organization Industrial i ti in i Britain. B it i When an industry has thus chosen a locality for itself, itself it is likely to stay there long: so great are the advantages which people following the same skilled trade get from near neighbourhood to one another. The mysteries of the trade become no mysteries; but are as it were in the air, and children learn many of them unconsciously. Good work is rightly appreciated, inventions and improvements in machinery, in processes and the general organization of the business have their merits promptly discussed: if one man starts a new idea, it is taken up by others and combined with suggestions of their own; and thus it becomes the source of further new ideas ideas. And presently subsidiary trades grow up in the neighbourhood, supplying it with implements and materials, organizing its traffic, and in many ways conducing to the economy of its material. — Marshall, Principles of Economics, IV.x.3.

Alfred Alf d Marshall, M h ll 1842-1924

Industrial districts. External economies. 2

Lancashire. Lancashire Original advantages. advantages

ƒ Poverty. y ƒ Pastoral farming lends itself to small-scale enterprise.

ƒ Indigenous textile tradition. ƒ Woolens under Yorkshire influence and linens under Irish influence.

ƒ Climate. ƒ Cotton “hydroscopic hydroscopic.” ƒ An east wind reduces output and quality by 10 per cent. An Industrial Landscape in 1833: S i Swainson, Birley Bi l and d Co., C near Preston, Lancashire, England.

ƒ Water and coal. ƒ Lack of institutional constraint. ƒ Manchester a new town. ƒ Grows from 7th largest g in 1775 to 3rd largest in 1801. 3

Lancashire. Lancashire External economies. economies

ƒ Transportation. ƒ Port of Liverpool develops with Manchester. ƒ Canals,, turnpikes, p , and railways. y ƒ World’s first passenger railway.

ƒ Later, telegraph and telephone turn Manchester into communications center.

ƒ Markets. ƒ Cotton exchanges create thick market for worldwide imports. ƒ Power loom and mule adapted to wide variety of cotton types and quality. ƒ Worldwide network of commissioning agents agents. The Manchester Cotton Exchange. 4

Lancashire. Lancashire External economies. economies

ƒ Vertical specialization. specialization Low barriers to entry. Tens of thousands of establishments. Specialization by type of yarn or cloth. cloth One firm may lease space in several mills and one mill may contain several firms. ƒ “Flexible Flexible specialization specialization.”

ƒ ƒ ƒ ƒ

ƒ Subsidiary industries. An Industrial Landscape in 1833: S i Swainson, Birley Bi l and d Co., C near Preston, Lancashire, England.

ƒ Textile machinery industry. ƒ Banking and finance. finance ƒ Transportation and communication.

5

Lancashire. Lancashire International trade trade.

Sales worldwide,, but especially to subtropical areas of India, China, Latin America.

Percent value of cotton exports 1820

1850

1896

Europe

65.5

34.3

18.9

America

26.1

29.1

18.5

USA

7.2

8.9

3.6

Latin

17 8 17.8

18 0 18.0

15 0 15.0

Levant

2.5

9.2

7.9

Asia

5.2

24.3

43.4

India

18.5

26.6

China

3.6

8.5

17 1.7

53 5.3

Af ica Africa

06 0.6

6

The British Empire. Empire ƒ Beginnings in Mercantilist trading monopolies. ƒ East India Company (1600).

ƒ Trading companies take on political and military functions. ƒ Creating trading institutions and preserving openness of markets.

ƒ British government takes over f functions i off trading di companies. i ƒ East India Company nationalized 1773. ƒ Monopoly p y abolished 1813. 7

Britain and Free Trade. Trade ƒ Smith’s Smith s Wealth of Nations attacks mercantilism. ƒ The Corn Laws. ƒ Import controls after Napoleonic wars wars. ƒ Ricardo discovers comparative advantage. ƒ Anti-Corn-Law Anti Corn Law League founded in Manchester, 1836. ƒ Corn Laws repealed, 1846. ƒ Reflects shift of economic power from agriculture to manufacture. David Ricardo (1772-1823). Image g courtesyy of the Warren J. Samuels Portrait Collection at Duke University.

ƒ Anglo-French commercial treaty (1860) virtually eliminates tariffs. tariffs 8

Britain and Free Trade. Trade

9

The decline of Britain. Britain

The Crystal Palace site of Palace, the Great Exhibition of 1851, which showcased British technology to the world.

ƒ Relative or absolute decline? ƒ Timing of decline. 10

The decline of Britain. Britain GDP per capita in 1990 dollars. dollars 25000 20000 Germany

15000

UK USA

10000 5000 0 1820

1870

1900

1913

1950

1973

1992

Source: Angus Maddison, Monitoring the World Economy, 1820-1992. OECD, 1995, p. 23-24. 11

The decline of Britain. Britain ƒ B Britain it i retains t i lead l d in i traditional industries. ƒ Textiles Textiles, textile equipment, shipbuilding, cable.

A Bessemer steel converter converter. Kelham Island Museum, Sheffield, England.

ƒ Britain cedes lead to US and Germany in new areas. ƒ Organic chemicals, electrical products, steel steel. 12

Th decline The d li off Britain: B it i h hypotheses. th ƒ Culture. C lt ƒ Sons of nouveau riche capitalists studyy classics at Oxford and Cambridge. ƒ Culture of the gentleman: antitechnology and anti anti-business business.

ƒ Educational system. ƒ Britain relies on on-the-job j training. g ƒ No system of technical education.

ƒ Costs of empire. ƒ Civil service drains off talent. 13

Th decline The d li off Britain: B it i h hypotheses. th ƒ Institutional inertia. ƒ The “disadvantages” of an economic head start. The ring spinning frame.

ƒ Technological trajectories. ƒ The case of the ring spindle. 14

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