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Trade and the Spread of Modern Industry

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  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

  2. 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 tariffs

  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.

  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?

  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

  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?

  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

  8. Trade & Industry in Continental Europe • Landes emphasises `culture, values, initiative’ • Three constraints on economic modernisation: • Peasantry, control and dominance of agriculture • Organisation of manufacturing, restraints on trade • Natural barriers and man-made boundaries • Economic nationalism versus regional development

  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

  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

  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

  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

  13. 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

  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