Gregory Clark Ecn 110A, Fall 2003

Chapter 10: Political Institutions and Economic Development in England, 1600-1860

Introduction In the modern world there is a clear association between political institutions and

economic performance. High income economies tend to be well functioning democracies, low

income societies badly functioning democracies or autocracies. This has induced many to think

of democracy as the engine of growth. In particular it has been argued that the Glorious

Revolution of 1688-9 in England created the later Industrial Revolution of 1760-1860. The most

widely circulated version of this argument is a 1989 paper by Douglas North and Barry

Weingast.1

Here I argue that not only was the strengthening of Parliamentary Authority in 1689

unimportant in fostering faster economic growth in Britain, Parliamentary Authority actually

resulted in squandered resources and ill conceived methods of public finance. If anything

English democracy increased impediments to economic growth through its ultimately most

powerful source, increasing the efficiency of the economy.

The argument proceeds through three main claims.2

1 This article has been cited more than 200 times. 2 Clark (1996) has another claim for the unimportance of the Glorious Revolution, which is that investors seem not to have cared about political struggles all the way from 1600 to 1750. Neither rates of return on capital, nor land prices changed in any way as a result of the Glorious Revolution.

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(1) The English economy grew robustly (by pre-industrial standards) in the years of

supposed political turmoil, 1600 to 1689, and grew more slowly in the century after the Glorious

Revolution. This was because the turmoil and political problems were much less than has been

supposed.

(2) The result of the reform of government in 1689 was eventually a substantial increase in

government spending as a share of GDP. Almost all spending by the national government was in

military expenditures in support of British imperial ambitions of little economic value. Further

the increased credibility of the government allowed it to finance much of this military

expenditure through loans. This probably substantially reduced the private capital stock in

Industrial Revolution England, reducing economic growth.

(3) Creation of new knowledge was the key element of the Industrial Revolution. Yet none

of the political changes associated with the Glorious Revolution made any contribution to this.

Innovation was not given any greater reward by the property rights system unmodified by the

Glorious Revolution.

Instead, it is argued we must look before 1689 for the roots of the Industrial Revolution,

in the unusually rapid growth of the politically unreformed English economy in the years 1600-

89.

The Political Background

In the Glorious Revolution a corrupt, autocratic monarchy which financed itself by a

variety of extortionary means was replaced by a political system where the Parliament,

admittedly with a very limited franchise, controlled the monarch. This political system was

remarkably stable. After 1689 there were no coups, and few attempted coups, but instead an

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unbroken line of governments elected by a popular franchise. When James II was deposed the

throne passed first to William of Orange and James’s daughter Mary, and then to Mary’s sister

Anne. When Anne died childless in 1714 (despite giving birth to 18 children), James II’s son

was laying claim to the throne from exile in France. Yet the Parliament was able to install in his

place an obscure German princeling who never learned to speak English well without any serious

threat to its control.

In the late sixteenth century the impending death of the childless Elizabeth I created great

political uncertainty. Since at least 1578 (when Elizabeth reached the age of 45) it was clear that

she would die childless, and that the Tudor dynasty would come to an end. At the end of her

reign there were five serious contenders for the throne, none of whom the aging Elizabeth seems

to have had the slightest affection for. James VI of Scotland was the successor by the laws of

primogenitor, but he was king of the traditional enemy of England, Elizabeth had executed his

mother in 1586, and Henry VIII by Parliamentary Acts and in his will had barred the house of

Stuart from the succession. Lady Arbella Stuart was descended from the same line as James, but

had the advantage of being English. Under the terms of Henry VIII’s will the crown should have

passed to the House of Suffolk, and to the descendants of Catherine Grey. But the marriage of

her mother to the Duke of Suffolk was of doubtful validity, as was her own marriage. The last

major claimant was Philip II of Spain, and if he should step aside his daughter the Infanta. The

claims of the Infanta were pushed by the Catholic minority. Elizabeth herself increased the

uncertainty of the succession by having an act passed imposing severe penalties on anyone

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making claims as to the royal succession except for the succession affirmed by Parliament, but

then preventing Parliament from selecting a successor.3

After the death of Elizabeth I childless in 1603 the crown passed peaceably to the

Scottish House of Stuart. But the Stuart kings had from early on an unhappy relationship with

the English Parliament. Between 1603 and 1688 there was an interminable struggle between the

Crown and the English Parliament over the respective powers of each, fueled in the years after

1660 by the Catholic sympathies of the monarchy and the Protestantism of the people. Unlike

many other European countries, the English Parliament traditionally controlled taxation, and it

used this power to try and rein in the monarch. The monarch had the revenue of the royal estate

at his or her disposal. But the stinginess of Parliament had been a problem even under Elizabeth

I, so that after 1589 these estates were depleted by sales to meet war and other expenses. As a

result the monarchy in the seventeenth century was always short of funds and had to resort to

various illegal and semi-legal exactions and confiscations to raise revenue.4

The crown had some success with these measures in the early seventeenth century

It deliberately allowed obsolete regulations introduced in the mid sixteenth century limiting the

economic activity of groups to remain in force, then encouraged professional informers to inform

against the transgressors, who were fined. So systematic was this revenue collecting device that

in some cases private individuals were given the monopoly of the right to inform under particular

statutes, and the power to treat with transgressors for payment of fines. The crown similarly sold

3 “The Succession Struggle in late Elizabethan England,” in Joel Hurstfield, Freedom, Corruption and Government in Elizabethan England (London, 1973), gives the details of the succession debate. Peter Wentworth, an MP who spoke in the commons on the succession, and published a pamphlet was sent to the Tower in 1593 as a result and died there four years later (p. 107). 4 See Robert Ashton, The English Civil War: Conservatism and Revolution, 1603-1649 (London, 1978), Christopher Hill, The Century of Revolution, 1603-1714 (Edinburgh, 1961), J. R. Jones, Country and Court: England, 1658-1714 (Cambridge, Mass., 1978).

5

monopoly privileges for new and for existing products. The crown also resorted to forced loans,

to revival of feudal privileges, such as “purveyance”, the right of the crown to buy supplies at

prices below the market level, and to various other semi legal and unpredictable exactions in its

scramble for money. Even when Parliament did consent to levy taxes the assessment of incomes

of wealth were often wildly unrealistic and were heavily influenced by political connections.

Thus the tax burden on the richest was very light, some magnates being omitted from the tax lists

altogether. The middle income groups being less influential bore more than a proportionate

burden.5

Thus though the total burden of taxes was light in the early seventeenth century, the

collection was inefficient, unpredictable, and subject to political influence and corruption. A

measure of the level of corruption in the governing classes is given by the admission by Francis

Bacon, the famous philosopher and the chief justice of the land, when he was accused of

corruption in 1621 that he had taken substantial “gifts” from those whose cases he was ruling

upon (he denied any venal intent).6

The conflict between King and parliament resulted in open warfare in the years 1639-40

(against Scottish dissenters), and in 1642-46,1648, and 1651 when rival Royalist and

Parliamentary armies vied for control of the country. One author describes these years as "one of

the most damaging periods in the history of England." Armies marched across the countryside

destroying crops and requisitioning food. There was property damage from sieges, raids and

5 Christopher Clay, Economic Expansion and Social Change: England, 1500-1700. Volume II. (Cambridge, 1984), pp. 256-7. In 1616 James I began also to raise revenue by selling peerages. 6See “Political Corruption in Modern England: the Historian’s Problem,” in Hurstfield, Freedom, Corruption, and Government, pp. 145-7.

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from the strengthening of fortifications in many towns, including Birmingham, Colchester,

Gloucester, Worcester, and York.7

Then from 1649 to 1660 the country was subject to a Puritan control that was uncertain

and vacillating, and gradually dissolved internally. The property of the king and his supporters

formed a major source of revenue in the years 1649-1653. Meanwhile Parliament debated all

kinds of radical proposals which would have affected property rights - there were proposals for

further sales or Royalists lands, and for the abolition of tithe rights. As the control of the

Puritans unraveled by 1659 the army was having to support itself by quartering itself on the

population, and open plunder by the army seemed but a short step distant.

The restoration of the Monarchy in 1660 led to further uncertainty as some, but not all

confiscated property was restored to its original owners. The monarchy was restored in the

person of Charles II in 1660, and the conflict between crown and Parliament was seemingly

resolved. But soon the old strains were appearing. Charles had Catholic sympathies in a

Protestant country where religion was an important political issue. In 1670 Charles II entered

into a secret treaty with France wherein the French committed themselves to subsidizing Charles

and in return Charles agreed to collaborate with the French in a war on Holland, and to declare

himself a Catholic at a suitable moment. As the 1670s proceeded it became clear that Charles

was going to be succeeded by his openly Catholic brother James, the Duke of York. In 1679

there was a rebellion by Protestant dissenters in Scotland, and Parliament passed a Bill excluding

James from the succession. In 1682 a coup was planned by disaffected Royal advisors, and in

1683 a plot to murder Charles II and James was uncovered.

7Anthony Baker, A Battlefield Atlas of the English Civil War (London, 1986), p. 8. Stephen Porter, “Property Destruction in the English Civil Wars,” History Today, XXXVI (1986), 36-41.

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James II became king in 1685. James was a Catholic in a largely Protestant country at a

time when Catholicism was feared as representing a danger to the English state. Thus the

succession of James I in 1685 created great uncertainty. There was immediately an avowed

Protestant rebellion in the west of the country led by Charles’ illegitimate son the Duke of

Monmouth. This was defeated but the policies of James, particularly his introduction of Catholic

officers into the army and his raising of an Irish army of dubious loyalty to the English

Parliament, resulted in widespread fear and disaffection. When James II had a son and heir in

1688 , William of Orange, a claimant to the throne in his own right and the husband of James’s

daughter Mary from a previous marriage, invaded in collusion with English allies. James found

little support and fled, and in 1689 the Parliament declared he had abdicated and installed

William and Mary as monarchs. Under the new constitutional order Parliament had much more

control over the actions of the monarchy. Indeed in 1700 William was so discouraged by

parliamentary control that he left for Holland and threatened to abdicate. This new constitutional

order is the foundation of the modern British state, which is the direct descendant of this

“Glorious Revolution.”

The success of the Revolution was not immediately obvious, for its outcome became part

of the great power struggle that was engaging Europe in the late seventeenth century. William

had come to England to claim the throne in part because the Dutch needed to preserve England

as an ally in their struggle to stay free from French hegemony. Thus from 1688 to 1695 the new

regime was engaged in a War against France on the continent, and internal wars against the

partisans of James in Ireland and Scotland who were supported by the French. Only in 1697

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when William and Louis XIV made a peace treaty wherein Louis recognized William as king of

England did it become clear that the new political settlement was secure.8

The Jacobite cause did not die immediately, though most historians give little importance

to it after 1695, and it was the popular rallying point for various groups of disaffected from the

1690s until the 1740s. In 1715 and in 1745-6 there were Jacobite rebellions in Scotland. In the

latter case the rebels got as far south as Derby, and there was a brief panic in London.

Output and Living Standards

Let us begin with real living standards of workers since these are easier to measure than

the total output of the economy. Table 1 shows nominal and real wages for building craftsmen

(carpenters, bricklayers, mason, plumbers etc.), building laborers and helpers, and farm day

laborers by decade from 1600-9 to 1860-9. In the decades 1600-9 to 1680-9 there are

quantitatively and statistically significant upwards trends in real wages for each of these three

class of workers. Estimating the trend in real wages with the expression

Ln(Wt) = a + bln(YEARt) + et

for the years 1600-1689 for building craftsmen, building laborers, and farm laborers we get the

estimates for the growth rate, b, shown in table 2. There is a quantitatively and statistically

significant growth in all these measures of real wages for the decades 1600-9 to 1680-9. Further

in the next interval, 1680-9 to 1760-9, immediately after the supposed improvements of the

Glorious Revolution, the growth rate of all these measures of real wages falls significantly. Only

in the Industrial Revolution era, 1760-9 to 1860-9 does the growth rate of real wages return to its

levels of the seventeenth century.

8See Daniel Szechi, The Jacobites: Britain and Europe, 1688-1788 (Manchester, 1994), pp. 41-58, and Jones, Country and Court, pp. 256-278.

9

It is somewhat more difficult to estimate GDP in these years because of the difficulties of

estimating income to capital owners, and the difficulty of estimating prices for all goods. Table

3 shows the other estimated elements of nominal income by decade from 1660 on: land rents,

house and shop rents, income from ownership of mines, quarries etc., local taxes on property

occupiers, and national indirect taxes. Table 4 shows the implied nominal income of the English

economy. Finally table 5 shows the cost of living price index for workers, compared to a price

index for domestic economic output, and the implied real GDP per person. Figure 3 shows this

estimated GDP series.

The rate of growth of GDP per person in each period was estimated as with wages from

the regression

Ln(GDPt/Nt) = a + bln(YEARt) + et .

The results for the growth rate, b, are also shown in table 2. Thus though the growth rate of GDP

per person was very slow from 1600-9 to 1680-9, at 0.21% per year, this estimation suggests that

there was quantitatively and statistically significant growth in real GDP per person in the bad old

days before the Glorious Revolution. Growth of GDP per person did continue in the years 1680-

9 to 1760-9, though the estimate is that the rate was slower (though this is not a statistically

significant difference). As figure 3 shows the trend in 1600-89 was such that had it been

projected forward to 1860-9 it would have correctly predicted GDP in these years at the end of

the Industrial Revolution.

The final row of table 2 shows the estimated growth rate of population in each of these

three periods. As can be seen the growth rates of population were nearly identical in 1600-89 as

in 1680-1769. Thus the lack of any improvement in GDP growth after 1689 cannot be explained

by faster population growth after the Glorious Revolution.

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The TFP of the economy is even harder to measure than GDP per person in the years

after 1760. In principle TFP growth by period is just the average output growth minus the

average rate of growth of inputs, land, labor and capital, weighted by their shares in total factor

payments. TFP growth can also be estimated as the rate of growth of average input costs minus

the rate of growth of average output prices. Since we have measures of wages, land rents and

returns on capital that is the procedure adopted here. Table 5 shows TFP estimated in this way,

with 1860-9 set at 100. Table 2 shows growth rates of TFP calculated as above by period.

Again we see significantly faster growth in the decades 1600-9 to 1680-9 than in the decades

1680-9 to 1760-9. Also we see that if productivity growth is projected on from 1600-89 then we

would arrive at not much less than the level of productivity actually experienced in 1860-9.

Thus at the aggregate level the message is clear. England in 1600-89 saw a period of

growth in productivity and incomes unusual for a pre-industrial economy with a growing

population. This was followed after the political revolution of 1688-9 by a near century of

relative stagnation, before the resumption of growth with the Industrial Revolution period, which

based on the TFP data would be in the 1780s.

The most likely reason for this disconnect is that historians have had an exaggerated view

of the degree of disruption to the economy that the political struggle, including the Civil War,

actually produced. If we refer to figures 1-5 we can see clearly that neither the 1640s, the Civil

War decade, nor the 1650s, the Interregnum, were associated with declines in real wages, output,

or TFP. Indeed real day wages for building workers and farm workers rose in both of these

decades. National output is estimated assuming a full 300 day work year throughout, so if the

Civil War caused declines in employment, or a diversion of resources to fortifying towns and

fighting, then this would not show up in the output and productivity data. We do not have good

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measures of how much of GDP was diverted to fighting war in the Civil War years, but it was

probably much smaller than average military expenditures per year following the Glorious

Revolution. Another loss of GDP which my measures will not capture came from destruction of

houses, either in the process of fortifying towns or as reprisals against partisans of the other side.

But my impression is that this destruction was modest relative to the national housing stock. In

England Civil war was relatively Civil with people outside the direct venues of conflict generally

seeing little cost. A study of parish finances in Cratfield in Suffolk, an area strongly sympathetic

to Parliament, finds that in the early years of the Civil War the parish was making payments in

response to demands from both the King and Parliament, but payments of modest size. Men

were levied to serve in the Parliamentary armies, but those who served were the landless poor,

not the substantial villagers who funded them.

The Glorious Revolution and Government Spending

The Glorious Revolution may have had no perceptible effect on growth, but it was

associated with an increase in the government’s ability to raise resources through taxation, and

through borrowing. Since these resources were almost all spent on military adventures, it was

thus important to the rise of Britain as a military power in Europe. Having calculated GDP for

England from 1600 on, I can also calculate taxation and government spending as a share of GDP.

Local taxes are estimated from the records of a sample of parishes on the amounts raised or

expended from local rates. The resulting figures by decade from 1660-9 on are shown in figure 6.

From 1660 to 1689 taxation of all forms, local and national, was extremely light, being only

about 5-6% of GDP. Before the Civil War all taxation as a share of GDP was undoubtedly

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smaller even than this. After 1689 taxes as a share of GDP did not increase immediately, but in

the 18th century under pressure of the long struggle with France for predominance in Europe,

they climbed steadily. By 1800 and the Napoleonic war local and national taxes were absorbing

a full 20% of GDP. Government expenditures in the eighteenth century were typically greater

than tax revenue, as is also shown in figure 6, the difference being made up by the accumulation

of a huge government debt. By the 1820s this debt averaged 2.14 times GDP, its servicing

requiring thus 6-7 of GDP annually. The debt as a share of GDP did not mount even more

precipitately for three reasons: GDP itself grew rapidly from the 1760s, initially mainly because

population was growing, income per person grew after the 1820s, and finally there was inflation

in the general price level in the Napoleonic Wars, while the debt was in nominal terms.

These developments did nothing towards advancing productivity growth within the

economy. Almost all the money taxed or borrowed went in military adventures of dubious value.

The sums invested in securing the American colonies from the French and then in fighting the

colonists ultimately successful revolt were of course a total loss. Indeed apart from the arguable

case of the Napoleonic Wars the colonies and trade routes secured by earlier expenditure, and

this I am just speculating on, never repayed the costs of winning them. Britain would have been

better off with the old regime. The celebrated successes of the Glorious Revolution in British

public finance – especially the public’s confidence in the government which allowed it to float

large amounts of public debt at very low interest rates – were at best of no value to the economy.

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The Glorious Revolution and Innovation

We know that the rapid growth of modern economies, since the very beginnings of the

Industrial Revolution in England has been largely driven by advances in the productivity of the

economy produced by technological innovation. If the Glorious Revolution was going to be

linked to the Industrial Revolution then it has to have altered conditions in the economy in such

as way as to increase the supply of innovation, either by creating greater property rights in

innovation, or by increasing the incentives for general investment of people in education and

training within the economy.

One common perception among economists, starting from at least North and Thomas

(1973) is that the slow rate of technological advance before 1800 was caused by an absence of

property rights in innovations. Thus

Consider how the model economy would behave in the absence of property rights. In this case, innovators would be unable to earn the profits that encourage them to undertake research in the first place, so that no research would take place. With no research, no new ideas would be created, technology would be constant, and there would be no per capita growth in the economy. Broadly speaking, just such a situation prevailed in the world prior to the Industrial Revolution (Jones 2002, p. 121).

We certainly see as in figure 6 that an upsurge in numbers of patents accompanied the

Industrial Revolution. It is also true that the very early societies we know of in detail seem to

have lacked the legal notion that you could own property in ideas or innovations. Thus in both

the Roman and Greek worlds when an author published a book there was no legal or practical

way to stop the pirating of the text. Copies could be freely made by anyone who acquired a

version of the manuscript (on papyrus rolls), and the copier could amend and alter the text at will.

14

It was not uncommon for a text to be reissued under the name of a new “author.”9 It was

common to condemn such pirating of works or ideas as immoral. But writings and inventions

were just not viewed as commodities with a market value.10

While the ancients may have lacked them, there were systems of intellectual property

rights in place, however, long before the Industrial Revolution in England, or the Glorious

Revolution for that matter. The earliest established foundations of a modern patent system were

found in the thirteenth century in Venice. By the 15th century in Venice true patents in the

modern sense were regularly being awarded. Thus in 1416 the Council of Venice gave a 50 year

patent to Franciscus Petri from Rhodes, who was thus a foreigner, for a new type of fulling mill.

By 1474 the Venetian patent law had been codified. There is evidence for Florence also in the

fifteenth century of the awarding of patents. The Venetian innovation granting property rights in

knowledge, which was very important to the famous Venetian glass industry, spread to Belgium,

the Netherlands, England, Germany, France and Austria in the sixteenth century as a

consequence of the movement of Italian glass workers to these other countries. Thus by the

sixteenth century all the major European countries, at least on an ad hoc basis, granted property

rights in knowledge to innovators. They did this in order to attract skilled craftsmen with

superior techniques to their lands. The spread of formal patent systems thus predates the

Industrial Revolution by at least 350 years, and the Glorious Revolution by about 250 years.

The claims of North and his associates for the superiority of the property rights

protections afforded by the patent system in eighteenth century England thus stem from the way

in which the system operated after the Glorious Revolution of 1688-9 established the supremacy

9 This problem continued into at least the seventeenth century in England, where publishers quite freely pirated the works of authors. 10 See Long (1991), pp. 853-7.

15

of Parliament over the King. Under the patent system introduced in the reign of Elizabeth I

(1568-1603) the system was supervised by government ministers. Political interference led to

the creation of spurious monopolies for techniques already developed, or the denial of legitimate

claims. After the Glorious Revolution Parliament sought to avoid this by devolving the

supervision of patents to the courts. Generally the courts would allow any patent to be registered,

as long a no other party objected. No other major European country had a formal patent system

as in England before 1791.

But there is every reason to believe that these very modest formal reforms of what was

essentially the same patent system in England from 1603 to 1852 had no effect on the course of

the economy. For a start the key institution innovation took place a good 80 years before the

Industrial Revolution. Even putting this aside there is strong evidence that returns to innovators

were still very small in England in the 1760s and later. The textile industry for example was in

the vanguard of technological change in the Industrial Revolution period. Figure 7 shows TFP in

the production of cotton cloth, taking cotton as a basic input. From 1770 to 1869 TFP rose about

22 fold. Perhaps two thirds of the productivity growth experienced by the English economy

from 1760 to 1869 can be attributed directly to the innovations in textiles. Yet the gains of the

textile innovators were modest in the extreme. The value of the cotton textile innovations alone

by the 1860s, for example, was about £115 million in extra output per year. But a trivially small

share of this value of extra output ever flowed to the innovators. Table 6, for example, shows the

major innovators in cotton textiles and the gains accruing to the innovators through the patent

system or other means. Patents mostly provided poor protection, the major gains to innovators

coming through appeals post hoc to public beneficence through Parliament. The gains to

innovators from these appeals seem to have been as dependent on their social status as the

16

significance of their innovation. Thus the Reverend Cartwright, an Oxford graduate, whose

power loom was never a commercial success, was granted £10,000 by Parliament in 1809 even

though as then power weaving introduced in 1785 was still not a particularly huge saving on

costs compared to hand weaving. In contrast Samuel Crompton, the artisan whose Mule had

huge effects on the spinning industry immediately, got only £5,000 from Parliament in 1811.

Thus the patent system showed none of the alleged separation from political interference.

Another way Parliament could intrude was that it could, on grounds of the public good,

extend patents beyond the statutory 17 years to adequately reward those who made significant

innovations. James Watt was the beneficiary of such a grant. But such grants depended again on

social and political protection just as much as in the old days. Watt indeed used the extension of

his patent to block further development of steam engines, and also successfully lobbied to have

Parliament deny a patent extension to one of his competitors.

The profit rates of major firms in the industry also provide good evidence that most of the

innovation in the textile industry was quickly leaking from the innovators to other producers with

no rewards to the innovators. Knick Harley has reconstructed the profit rates being made by

some of the more successful cotton spinning and weaving firms in the early Industrial Revolution

period (Harley (1997)). The cotton spinners Samuel Greg and Partners earned an average profit

from 1796 to 1819 of 11.7% per year, just the normal commercial return for a risky venture such

as manufacturing. Given the rapid improvements in cotton spinning productivity going on in the

industry in these years it suggests that whatever innovations were being introduced were

spreading from one firm to another very quickly. Otherwise leading firms such as Samuel Greg

would have made large profits compared to their competitors. Similarly the firm of William

Grey and Partners made less than 2% per year from 1801 to 1810, a negative economic profit

17

rate. The innovations in the cotton spinning industry seem to have mainly caused prices to fall,

leaving little excess profits for the firms that were innovating. Thus a third firm, Richard

Hornby and partners, in the years 1777 to 1809 was in a sector of the industry, hand loom

weaving, which had not yet been transformed by any technological advance. Yet its average

profit rate was 11.4%, as high as Samuel Greg in the innovating part of the industry. The

conclusion is that the host of innovations in cotton textiles do not seem to have particularly

rewarded the innovators. Only a few such as Arkwright and the Peels became noticeably

wealthy. Of the 379 people dieing in 1860-9 in Britain who left estates of £0.5 million or more,

only 17 were in the textile industry, even though as noted from 1760-9 to 1860-9 this one sector

generated the majority of productivity growth in the economy (Rubinstein, 1981). The Industrial

Revolution economy was spectacularly bad at rewarding innovation. This is why Britain has few

foundations to rival the great private philanthropies and universities of the U.S.A. Its innovators

captured little of the rewards.

Thus there is no evidence that it was institutional changes providing better rewards for

innovators in the Industrial Revolution era that unleashed mankind’s creative potential. Further

there is evidence of underlying developments in the levels if literacy of the English population

which were proceeding independent of any political developments, and which may better help

explain the eventual gains in productivity growth. Thus figure 7 shows the estimated literacy

rates of the male and female English population from 1580 on. The seventeenth century saw

significant gains for both groups.

18

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North, Douglass C. 1981. Structure and Change in Economic History. New York: Norton.

North, Douglass C. 1993. “-----------------“ American Economic Review.

North, Douglass and R. P. Thomas. 1973. The Rise of the Western World. Cambridge:

Cambridge University Press.

North, Douglass and Barry Weingast. 1989. "Constitutions and Commitment: Evolution of

Institutions Governing Public Choice in Seventeenth Century England," Journal of Economic

History 49, pp. 803-832.

20

O’Brien, Patrick K. 2002. “The Institutions of Fiscal Military States: Great Britain and its

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History from Family Reconstruction: 1580-1837. Cambridge; New York: Cambridge University

Press.

21

Table 1: Nominal and Real Wages, 1600-1869

Decade

Craftsmen Day Wage

(d.)

Laborers

Day Wage

(d.)

Farm Day

Laborers

(d.)

Cost of Living (1860-9 = 100)

Craftsmen

Real Wage

(1860-9 = 100)

Helpers

Real Wage (1860-9 =

100)

Farm Real

Wage (1860-9 =

100)

1600-9 11.9 9.0 7.7 49.1 46.1 53.7 61.8 1610-9 12.9 9.8 8.1 55.6 44.1 51.9 57.4 1620-9 13.5 10.1 8.5 55.2 46.7 53.9 61.0 1630-9 14.7 11.5 9.5 62.7 44.7 53.8 60.2 1640-9 16.5 11.9 10.4 63.9 49.2 55.0 64.4 1650-9 17.6 13.7 11.4 64.9 51.7 61.8 69.4 1660-9 18.7 13.2 11.1 64.3 55.4 60.5 68.3 1670-9 18.8 14.3 11.7 62.6 57.2 67.3 73.8 1680-9 20.2 14.2 11.1 60.4 63.7 69.3 72.9 1690-9 21.0 14.9 11.5 66.4 60.2 66.1 68.5 1700-9 21.4 15.1 11.2 61.1 66.7 72.7 72.8 1710-9 22.4 14.5 11.0 65.3 65.3 65.3 66.8 1720-9 21.8 14.5 11.1 64.9 64.0 65.6 67.7 1730-9 21.9 14.7 11.7 60.0 69.6 72.0 77.3 1740-9 22.3 14.8 11.5 61.6 69.0 70.5 74.3 1750-9 22.5 15.2 12.0 65.4 65.4 68.1 72.8 1760-9 23.6 16.2 12.4 69.5 64.5 68.6 70.5 1770-9 24.6 17.4 13.6 76.8 61.0 66.5 70.3 1780-9 25.8 17.2 15.1 78.6 62.6 64.3 76.3 1790-9 29.6 20.1 17.3 89.9 62.8 65.7 76.1 1800-9 38.5 25.8 21.7 122.3 60.0 62.0 70.2 1810-9 47.3 33.4 24.9 136.9 65.9 71.7 72.0 1820-9 45.5 30.4 22.4 111.2 77.9 80.5 79.8 1830-9 45.4 31.3 22.3 103.1 83.9 89.3 85.7 1840-9 45.9 31.5 22.8 99.4 87.8 93.1 90.9 1850-9 47.0 31.0 23.5 96.1 93.1 94.9 97.0 1860-9 52.5 34.0 25.2 100.0 100.0 100.0 100.0

22

Table 2: Growth Rates of Wages, Income and Productivity Before and After the Glorious

Revolution

Measure

Growth Rate, 1600-9

to 1680-9 (%)

Growth Rate, 1680-9

to 1760-9 (%)

Growth Rate, 1760-9

to 1860-9 (%)

Craftsmens’ Wages

0.427** (.065)

0.072 (.054)

0.521** (.078)

Helpers’ Wages

0.363** (.056)

0.013 (.054)

0.482** (.079)

Farm Wages

0.298** (.051)

0.039 (.064)

0.357** (.058)

Real GDP/N

0.210** (.053)

0.145** (.050)

0.367** (.030)

N

0.256** (.060)

0.248** (.030)

1.219** (.053)

TFP

0.220** (.036)

0.103** (.037)

0.422** (.026)

Notes: Significant at the 1% level.

23

Table 3: Property Incomes and Indirect Taxes

Decade

Land and

Farmhouse rental values

(£. M)

Houses,

Shops etc. Rental values

(£. M)

Mines, Canals,

Railways etc.

(£. M)

All Property

Income

(£. M)

Local Rates

(£. M)

Indirect Taxes

(£. M)

1600-9 9.9 1.2 0.0 11.1 0.0 0.2 1610-9 11.2 2.1 0.0 13.3 0.0 0.2 1620-9 11.3 2.4 0.0 13.7 0.0 0.3 1630-9 12.5 2.4 0.0 14.9 0.0 0.4 1640-9 13.4 2.6 0.0 16.1 0.1 0.4 1650-9 13.7 2.8 0.0 16.7 0.2 0.5 1660-9 14.6 3.3 0.0 18.1 0.2 0.5 1670-9 14.1 3.5 0.0 17.8 0.2 1.0 1680-9 14.3 3.0 0.0 17.7 0.3 1.0 1690-9 13.7 2.8 0.0 16.9 0.4 1.6 1700-9 13.3 3.5 0.2 17.4 0.5 2.5 1710-9 14.3 3.6 0.2 18.8 0.7 3.1 1720-9 15.4 4.4 0.2 20.8 0.8 3.6 1730-9 14.8 4.2 0.2 20.0 0.7 3.7 1740-9 13.7 4.1 0.3 19.1 1.0 3.6 1750-9 17.4 6.0 0.4 24.9 1.0 4.4 1760-9 17.7 6.7 0.6 26.3 1.4 6.0 1770-9 20.3 7.5 0.8 30.5 1.8 6.6 1780-9 20.3 7.4 1.1 31.2 2.4 8.4 1790-9 25.0 10.5 1.5 40.7 3.6 11.5 1800-9 35.6 16.1 2.3 59.2 5.3 23.2 1810-9 43.9 23.0 3.2 78.0 7.9 30.6 1820-9 38.3 26.2 3.2 75.2 7.5 31.0 1830-9 37.4 30.4 4.0 78.8 7.0 27.5 1840-9 39.4 37.0 7.1 90.5 7.0 27.9 1850-9 39.8 43.4 11.4 102.2 7.5 30.2 1860-9 43.5 60.2 19.3 132.5 9.5 32.2

Notes: Numbers in italics are those estimated indirectly, or not at all. All rental incomes from

1842 on are from the Property Tax returns. Land and house rents are from the Charity

Commission reports. “Houses” here include public houses, shops, and other commercial

24

property. The rents of commercial properties are assumed to be the same relative to houses for

the years before 1842. Rental incomes from coal mining, canals and turnpikes was approximated

for the years before 1842 from the sources listed.

Sources: Stamp, British Incomes, pp. 49-51, 220-1. Population from Wrigley et al, English

Population adjusted to England and Wales. Clark, “Farmland Rental Values.” Mining rents

estimated from Flinn, History, pp. 26, 292-3, 303-4, 324-5, and Church, History, pp. 3, 53-4, 58-

9, 530-1. Canal rents are estimated from Ginarlis and Pollard, “Roads” assuming the same rate

of return throughout as for the 1840s. Turnpike bond payments are from Albert, Turnpike, pp.

68, 194 and Pawson, Transport, pp. 155-6, 214, 224-6.

25

Table 4: Nominal National Income, 1600-1869

Decade

Wages and

Salaries

(£. M)

Property

Income plus taxes on

occupiers

(£. M)

Indirect Taxes

(£. M)

Nominal

GDP

(£. m)

Nominal GDP adjusted for

missing capital income (£. M)

1600-9 19.3 11.1 0.2 30.6 33.5 1610-9 22.3 13.3 0.2 35.8 39.2 1620-9 24.8 13.7 0.3 38.9 42.5 1630-9 28.8 14.9 0.4 44.1 48.2 1640-9 32.8 16.1 0.5 49.3 53.9 1650-9 37.3 16.7 0.7 54.5 59.6 1660-9 37.3 18.1 0.7 55.9 61.1 1670-9 38.2 17.8 1.2 56.9 62.2 1680-9 38.0 17.7 1.3 56.6 62.0 1690-9 39.5 16.9 2.1 58.0 63.5 1700-9 40.6 17.4 3.0 60.6 66.2 1710-9 42.4 18.8 3.8 64.2 70.3 1720-9 43.6 20.8 4.4 68.0 74.4 1730-9 44.3 20.0 4.5 68.0 74.4 1740-9 47.0 19.1 4.7 69.8 76.4 1750-9 49.8 24.9 5.5 79.1 86.5 1760-9 55.6 26.3 7.3 87.8 96.1 1770-9 62.5 30.5 8.4 99.5 108.9 1780-9 71.5 31.2 10.8 111.1 121.5 1790-9 90.8 40.7 15.2 143.0 156.4 1800-9 130.3 59.2 28.5 212.7 232.7 1810-9 182.5 78.0 38.5 291.0 318.3 1820-9 198.8 75.2 38.5 305.0 333.6 1830-9 234.6 78.8 34.5 341.0 373.0 1840-9 286.8 90.5 34.9 405.1 443.2 1850-9 328.6 102.2 37.7 461.0 504.2 1860-9 414.0 132.5 41.7 578.7 633.0

Note:

Sources: Tax receipts are from Mitchell, Abstract, pp. 386-8, 392-3, 410. The other sources are

as for tables 1 and 2.

26

Table 5: Real GDP per person and TFP, 1600-1869

Decade

GDP Deflator

(1860-9 = 100)

Cost of Living

(1860-9 = 100)

Real GDP per

Capita (1860-9 = 100)

TFP

(1860-9 = 100)

1600-9 42.5 49.1 59.8 58.3 1610-9 48.2 55.6 57.4 56.0 1620-9 48.3 55.2 58.6 58.1 1630-9 54.4 62.7 56.8 57.1 1640-9 56.4 63.9 58.9 59.4 1650-9 57.7 64.9 61.5 62.1 1660-9 58.4 64.3 62.7 62.4 1670-9 56.8 62.6 67.1 65.7 1680-9 55.0 60.4 69.7 68.0 1690-9 60.6 66.4 65.0 63.8 1700-9 56.0 61.1 71.7 68.7 1710-9 59.9 65.3 68.9 67.3 1720-9 59.7 64.9 71.6 68.5 1730-9 56.0 60.0 77.5 72.7 1740-9 57.5 61.6 73.3 70.4 1750-9 60.8 65.4 75.9 71.5 1760-9 65.0 69.5 74.0 70.5 1770-9 71.6 76.8 72.5 70.1 1780-9 73.0 78.6 73.0 71.8 1790-9 82.2 89.9 76.6 75.5 1800-9 110.2 122.3 77.0 77.6 1810-9 125.1 136.9 81.5 83.2 1820-9 106.6 111.2 86.3 88.1 1830-9 97.6 103.1 91.1 94.0 1840-9 92.5 99.4 95.6 97.3 1850-9 90.0 96.1 99.4 99.9 1860-9 100.0 100.0 100.0 100.0

27

Table 6: The Rewards to Textile Innovators in the Industrial Revolution

Innovator

Device

Year

Patent?

Result

John Kay Flying

Shuttle 1733 Yes Impoverished by litigation trying to enforce

patent. House destroyed by machine breakers 1753. Died in poverty in France c. 1764

Richard Arkwright

Water Frame Carding Frame

1769 Yes Patents invalidated by courts 1785. Most of £0.5 m. fortune at death in 1792 made post 1781 when patents in dispute.

James Hargreaves

Spinning Jenny

1769 No – patent denied

Forced to flee by machine breakers in 1768. Died in obscurity in workhouse in 1777.

Samuel Crompton

Mule 1779 No – gave device to

Bolton industry for

£70.

Given grants of £500 by manufacturers subscription in the 1790s, and in 1811 of £5,000 by Parliament. Died subsisting on an a Parliamentary annuity of £63 in 1827.

Reverend Edmund Cartwright

Power Loom

1785 Yes. Machine commercial failure during life of patent. Early Manchester factory destroyed by machine breakers. Granted £10,000 by Parliament in 1809.

Eli Whitney (USA)

Cotton Gin 1793 Yes Forced out of business by infringers by 1797. Congress refused to renew patent in 1807. Made a fortune in the subsidized mass production of muskets, but never again patented his innovations.

Richard Roberts

Self-Acting Mule

1830 Yes. Patent revenues £7,000 by 1839. Development costs of £12,000. Parliament extended patent by 7 years. Died in poverty in 1864. Daughter granted pension of £300 by Parliament.

28

Figure 1: Building Workers’ Real Wages, 1600-1869

Notes: “PBH” indicated the earlier building workers’ real wage series of Phelps Brown and

Hopkins.

29

Figure 2: Farm and Building Workers’ Real Wages, 1600-1869

30

Figure 3: Real Output per Person, 1600-1869

31

Figure 4: TFP Levels by Decade

32

Figure 5: The Glorious Revolution and Government Expenditure

33

Figure 6: Patents per Year, England, 1660-1851

34

Figure 7: Cotton Spinning and Weaving Productivity, 1770-1869

Note: The squares show the decadal average productivities. The years 1862-5 were omitted

because of the disruption of the cotton famine.

Sources: Cotton cloth prices, Harley (1997). Labor costs, Clark (2003b). Return on capital,

Clark (1998).

35

Figure 7: Literacy in England, 1580-1920

Sources: 1750s-1920s, Schofield (1973), men and women who can sign marriage resisters. The

north, 1630s-1740s, Houston (1982), witnesses who can sign court depositions. Norwich

Diocese, 1580s-1690s, Cressy (1977), witnesses who can sign ecclesiastical court declarations.