EC120 week 09, topic 8, slide 1
Trade and the Spread of Modern Industry
Topics:
• Trade at the dawn of the Industrial Revolution
• British trade during the Industrial Revolution
• Sources of the gains from trade
• Trade and Industrialisation in Continental Europe
• Modernisation in the European Periphery
• Rest of the World: very brief overview
• Patterns of change: similarities and differences
Long-Distance Trade, mid-18th Century
• European expansion from early 16C reaches dominance by 18C
• Changing patterns within Europe: “North” displaces “South”
• Centuries-old trade within Europe continues its growth
• Sea-borne trade with East/South Asia: high value/weight goods in exchange for European silver (plundered from the Americas)
• Atlantic Economy grows in importance – “triangular” trade
• National rivalries for economic power
• Trade encumbered with restrictions and tariffsEC120 week 09, topic 8, slide 2
EC120 week 09, topic 8, slide 3
British Trade in the Industrial Revolution
• Focus on Britain, c1700−1860Were exports an “engine of growth”?
• Exports– Manufactures and semi-manufactures,
increasingly important service sector
– Large re-export trade (supported by Mercantilist restrictions)
• Imports (grew faster than exports)– Mainly raw materials (esp. cotton) and `groceries’ (e.g.
sugar, tea, coffee, spices); bulk foodstuffs (e.g. wheat, meat) from mid/late 19th century.
EC120 week 09, topic 8, slide 4
Interpretation and explanation (1)
• Trade and industrialisation enabled population growth
• Controversies:
– Was industrialisation driven by `demand’ or `supply’?Demand for exports from abroad, orSupply of exports from Britain (or both)
– What were the sources of the gains from trade?
EC120 week 09, topic 8, slide 5
Interpretation and explanation (2)Demand versus supply as causes of industrialisation
• Exogenous increase in exports -> increased demand
• Technological advance -> lower costs -> increased supply
• Dominant current view: supply was more important than demand
• But don’t forget the `Industrious Revolution’– Increased domestic market demand and hence
industry
EC120 week 09, topic 8, slide 6
Sources of the gains from trade (1)
• Exploitation: Britain benefited from mercantilist policies and naval power
• “Williams Thesis”: profits of slavery funded industry
– Cotton textile industry relied on cheap raw cotton
– Slave labour enabled low-cost production
– But just how big were the profits?
EC120 week 09, topic 8, slide 7
Sources of the gains from trade (2)
• Comparative advantage: gains from trade if countries differ in the relative costs of producing different goods
– International trade is a positive sum game: all benefit
– Heckscher-Ohlin theory: focus on factor endowments
• Dynamic gains from trade
– Economies of scale: greater production, lower unit cost
EC120 week 09, topic 8, slide 8
Trade & Industry in Continental Europe
• Landes emphasises `culture, values, initiative’• Three constraints on economic modernisation:
1. Peasantry, control and dominance of agriculture
2. Organisation of manufacturing, restraints on trade
3. Natural barriers and man-made boundaries• Economic nationalism versus regional
development
EC120 week 09, topic 8, slide 9
Early industrialisers 1: Belgium
Belgium (independent in 1830):
• Long industrial tradition
• Access to natural resources, especially coal
• Location favoured commerce & finance
• Industrial development similar to parts of Britain
• Its experience emphasises role of region in economic development
EC120 week 09, topic 8, slide 10
Early industrialisers 2: France
• Sustained economic growth began in 18th century
• Low rate of population growth
• Limited endowments of coal and iron ore
• Low rate of urbanization
• High standard of scientific knowledge and invention
• Strong, interventionist state institutions
EC120 week 09, topic 8, slide 11
Early industrialisers 3: Germany
• Political fragmentation until after 1815• Unification via expanding customs unions• Promotion of modern technology & scientific
education• Dominated large scale heavy industry from 1870s• Finance: development of universal banks from mid-
19C
EC120 week 09, topic 8, slide 12
Modernisation in the European Periphery
• Iberian Peninsula: reactionary states resist reform
• Italy: modernising north, more backward south
• South East Europe: limited natural resources
• Eastern Europe: repressive “new serfdom”
• Russia: repressive landed autocracy
• Scandinavia: small, well-educated populations
Rest of the World: very brief overview
• American (USA) exceptionalism – An economic offshoot of Europe, huge size, abundant
resources– Rapid population growth, agricultural dominance in
ante-bellum era, comes to industrial dominance in late 19C
• Latin and South America– Continued dominance of imperial Spain and Portugal– Agriculture remains dominant for trade with Europe
• Middle East and Asia – Ottoman Empire: resisted its long, slow decline– India: participated in trade, dominated by Britain– China: resisted foreign incursions; internal discord– Japan: an Asian exception, imitated Europe after 1868
EC120 week 09, topic 8, slide 13
EC120 week 09, topic 8, slide 14
Patterns of Change: Similarities & Differences
• Alexander Gerschenkron: “relative backwardness”
– Pattern of industrialization depends on when it occurs
• Sidney Pollard: “differential of contemporaneousness”
– Impact of `events’ depends on stage of development