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The industrial revolution

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  1. The industrial revolution

  2. The English industrial revolution : a radical turn in human history ? • Industrial revolution termed from the word used for political revolutions, mostly (then) the French one. Traditionally : IR is characterized as : • Rapid, brutal, economic (from malthusian world to permanent growth) and social change (urbanization reached 50% in 1851 in England). • Centered on manufacturing industries Today’s debate about • Rupture or continuity ? (rapid or slow change ?) • Innovation or work intensification ?

  3. Rupture or continuity ? • Traditional quantitative view (Deane & Cole) was: • No sustained growth in GDP per capita before 1760 (malthusian trap) • IR: a sudden and permanent rise in TFP allows a rise in population without decrease in income. • Great divergence with non-european economies • New view (Crafts). • The traditional views did as if other industries were as successful as the cotton and iron ones, the only studied in detail. • Growth concentrated in cotton and iron and steel. But these sectors represent only 25% of industrial workers in 1840 (at the end of the IR). Cotton alone : only 8% (but 50% of steam power). • In 1851, the majority of industrial workers are in workshops, not in factories; blacksmith are more numerous than all other workers in metal industries; shoemakers more numerous than miners (274000 vs 219000). • Even in textiles, cotton is the major innovative industry, but wool remains dominant up to the 1820s. Wool, silk, flax also develop in the 18th c.

  4. Distribution of textile production (by value of raw materials used, millions £)                        cotton     wool      flax          silk around 1700       1,14        40              6,3          0,5         1772       4,2          85            12,5         0,95          1800      41,8         98            15,2         1,2 • New GDP calculations: • Compared to Feinstein : 1801-1830 growth rate reduced from 2.7% to 1.9% per year; TFP from 1.3 to 0.35. • Compared to Deane & Cole or Hoffman, 1.81%/an for 1780-1800 instead of 3.43%, but 1.05 for 1760-1780 instead of 0.49 : smoother growth : no IR. • Growth accounting • Growth = either capital accumulation or efficiency; • Capital deepening much discussed (below); • Human capital as a substitute (complement ?) • Crafts suggests the Solow residual to be a minor problem (especially with the augmented model). Others find it dominant.

  5. Crafts, 1995

  6. Critiques of growth accounting / new view (Hoppit, Berg & Hudson) • Change differs from growth: macro view does not help to understand what happened. Rapidradical changes : • In labor organization within and outside factories; • Women and child labor replaced male labor in growing industries (textiles, metalware, potteries); • This led to wide male unemployment, or underemployment in traditional industries (building, leather); • Regional specialization strongly affected; • Variety of industries: mechanized without growth (paper, soap, candles), or growing without mechanization (coal, construction); • Interaction among industries: cotton could not develop without others (industrial system). • Radical innovations affect growth late, but change society (electricity, computers, same for cotton and iron). • Quality changes in products are badly measured.

  7. Index number problems: • Weighting of cotton industry difficult. Has major impact because of the rapid growth in its productivity (graph). Different authors use weights from 4 to 20% of industrial value added around 1800. • Neglects many small manufacturing industries and the services; • Neglects women and child labor which was not measured in contemporary statistics • Forgotten hypotheses: the growth models used suppose perfect mobility, full-employment, perfect competition, neutral technological progress, constant returns to scale, etc. Structural change and reallocation of factors can decrease productivity in the short term (what is short term ?), making major changes invisible in growth measures. • Problems with sources: • Excise and customs records as basic sources. • Evasion, corruption of officials may vary through time and industries. • Non-excised industries. Activities which left no quantitative traces.

  8. Total factor productivity, England, 1600-1870 (Clark)

  9. Some conclusions on the debate • The weight of the cotton industry is the major issue in the calculation of industrial growth, because of its size and growth. • In most industries, the rise in productivity reduces the relative price of the product; it affects global TFP only if its share in production is large, or if the price elasticity of the demand for its product is high enough for the production to rise a lot; more so if foreign demand is also high and elastic. • Measures of agricultural and service productivity are even more fragile. Both output and employment are largely based on population figures. • Given the limitations in sources (bad in England), Crafts’ calculations are quite good. • But do they say much about the I.R. ? Or more a necessary exercise in consistency ?

  10. A solution ? two views of the IR (Temin) • Simplifies the debate in « technological » and « macroeconomic » views • Broad technological and entrepreneurial change in all activities (Landes, Ashton, Berg, Hudson, etc). • Vs Crafts-Harley’s view of growth concentrated in a few industries (coal, iron, and cotton). • Deducting their (weighted) growth rates from the one for the total economy leaves nothing (table). • But : no data available allows an actual measure of growth in these industries.

  11. Temin, p. 65

  12. Comparative advantage theory • Rapid productivity growth in agriculture, cotton and iron, and slow growth in most other industries should make Britain specialize in the first group. Actually true around 1750 (exports of wheat); not afterwards. • Uses a Ricardian model: only one factor, labor. Permits ranking all goods as more or less exportable, the frontier between actual exports and imports being determined through general equilibrium constraints.

  13. Test of the model using trade data • Table 2 shows a steady increase in the share of cotton (not iron) in exports; the absence of agriculture; the importance (although decreasing) of other manufactures. • This is not intra-industry trade, since imports of manufactures differ from exports, and exports of most industries grew at similar paces. • This suggests productivity grew in many industries; IR was more than a cotton revolution. • Confirmed by the decline of British terms of trade.

  14. Some limitations • Other explanations are not much discussed: • decline in the prices of tropical products (thanks to transport cost and colonization) makes them natural foreign specialization, and explains an increase in « other manufacturing » exports. • Decreasing returns in British agriculture (finished supply of land) makes imports more necessary when population and income increase. • Productivity growth in manufactures outside Britain is supposed to be zero. Problem if differs among industries • Protection. Part of these limitations are discussed in the answer by Harley & Crafts, 2000: CGE model of the period: the apex of sophisticated techniques on fragile data.

  15. The Classical paradox of the IR : gdp/c growth and wages stagnation • Increasing output per capita despite growing population = the great success of the IR. • But huge contemporary literature insisting on increasingly intensive work and decreasing wages and standard of living among the poor (exploitation). • Ricardo, Marx, J. Hicks... and R. Allen argue that: • Technology decreases the price of fixed assets; • So capital was transferred from circulating capital (wages and raw materials) to fixed assets; this produced a transfer from wages to profits because of reduced demand for labor and then increased unemployment. • This was observed in textiles (in spinning in the18th c., in weaving in the early 19th). • And associated with a loss in the human capital of former skilled workers.

  16. Testing for this requires measuring real wages among industries; which is difficult : • IR = transformation of the definition of wage (long includes assistants’ wages, tools), of the skills required, of industries, of people employed (men vs women and children); enormous differences of wage among workers (gender, age, skills as determinant); • Major changes in the price of some goods (eg textiles, heating) entering in the poor’s consumption. • Large differences between regions (wages increase in northern England during IR: where the coal is located). • Endogenous technology (invention of self acting mule in order to employ skilled men whose work was done by women using standard mules (or, earlier, the jenny). Other technologies developed in order to employ women and children, with much lower wages. • Today’s consensus: • decreasing weekly wages in 18th c., slight increase up to 1850. • Worse if unemployment taken into account. • Then do not compensate for urban disamenities (housing, health) • Confirmed by declining heights among the poor.

  17. Feinstein vs Lindert estimates for weekly real earnings (discrepancies mostly from price index)

  18. Engel’s pause (Allen)

  19. Historical profit rates

  20. Historical factor shares

  21. Institutional dimensions of labor’s repression: the enclosures, Speenhamland, ID • Enclosures • A huge literature stimulated by K. Marx emphasizes the role of the enclosure movement in throwing poor peasants from the countryside in the late 17th and early 18th c. (large proportion of lands in England affected). • Actually, enclosure bills enacted by Parliament when demanded by local elites (landlords + support from farmers). • Enclosures allowed substantial increase in productivity both by reallocating land to more productive uses (commons), changing incentives (improved property rights), increasing returns per acre (agricultural revolution) and decreasing the agricultural workforce.

  22. Speenhamland • Poor laws organizing local (parochial) support for the poor have been much more important and enforced in England (since the late Middle Ages) than in other countries. The study of their economic and social impact has been highly controversial. • System deemed inefficient by Classical economists because of implicit high marginal taxation of the poor’s marginal income. • Abolished in the 1834 in favor of workhouses (see Dickens) • Polanyi (1945): liberalization of the labor market (as opposed to local communities of earlier periods). • In fact, even from a purely economic point of view, the poor laws were not so costly since actual practice allowed for some incentives to work (paying children’s allowances independently from the father’s income), restricted or organized migrations when necessary. • Actually not suppressed by local landholders (who paid for it) but by manufacturers (who needed migrants towards their factories). Conclusion : like enclosures a century earlier, accelerated the creation of a national market for labor, and maybe decreased hourly wages and intensified labor.

  23. Industrious revolution (de Vries) • Synthesis proposed in order to integrate in a common framework various stylized facts: • Stagnation of real wages • Increase in consumption (“material life history” : probate inventories…) of a substantial fraction of the population. • Stagnation in schooling • Increase in population • Increase in women and children work, with negative impact on urban schooling • Cultural change on the demand side (« slaves to their own wants » Steuart; Mandeville on moral values). • Hypothesis • All these changes are part of a single, major shift: the industrious revolution, which lasted from 1700 to 1850. • They can be understood in a framework of a representative family optimizing behavior.

  24. Main argument : the increase in the intensity of labor by the family is voluntary (a labor-supply change) ; decided at the family level (family as a firm; organization and power can vary through time, class and space. They are affected by the integration to the labor market). • It results from the desired substitution of marketed goods to family production, itself related to a decrease in their relative prices (and maybe to changes in preferences). • Impact on human capital accumulation (through the mothers) negative until schools develop and their return becomes high enough compared to child work. • Later on, the search for increased health, education and home comfort would lead to a new rupture (and return to male bread-winner dominated families) after 1850 (until the 1970s).

  25. Some quantification of the industrious revolution G. Clark • Starts from a paradox : • Daily agricultural wage higher in the 15th c. (after the Black Plague) than in 1850 (graph). • Following Engels’ law (share of food decreases in income), share of food in consumption and then in production should be lower in 1500 (although a substantial share is imported in 1850); • One solution is for non-agricultural population to be of similar size at both dates (those producing non-food items) (discussed last week – remember urban population much lower in 1500 : 20% vs 50%). • Other solution : less days of work per year in 1500 (so more workers needed to feed the population). « paradise lost ». Method : reconciling various estimates at the family level.

  26. Comparisons of yearly and daily wages in the same job (from micro data) provide an estimate of the number of days worked (table 2).But yearly wages include payments in kinds which are not always recorded. Numbers small and maybe not representative. • Using family budgets allows measuring the contribution of women and children to overall income. But it depends of many hypotheses (wage, proportion of those working, and their changes through time) (table 4).

  27. Clark, industrious revolution

  28. Conclusions • Intensification in terms on number of days worked (as early as 17th c ?) • Intensification in terms of work practices (factory) • Intensification in children’s work, mostly resulting from urbanization; • No change in women’s work, or decrease in farms.

  29. measuring time at work • Voth (2001) uses judiciary records; • Testimonies provide narratives of a day’s activities: work start and end, meal time; • They also provide actual activity at a precise point in time; • Both methods (used in sociology today) provide an estimate in hours/day. • Estimation of probability of work a given day : table 1. Same with religious or civic days off.

  30. Results • Changes though time: « saint Monday » disappears; same for other days off. But hours per day stable. • Resists various robustness checks… • But : agricultural labour decreases. • Conclusion validates industrious revolution (graph). • But : Results depend on supposing zero hours on days off, but 30% of normal pay for sundays. Equalling both, and considering some days off can occur on sundays (e.g. Christmas) brings back hours per year to 2900. Some representativity bias also possible.

  31. Voth

  32. One path to growth ?

  33. Questions : • To what extent were these changes special to England ? • Did neighboring European countries follow Britain, remain backward or develop in parallel but different fashion ? what was specific to England ? • Innovation ? • The emergence of factories and mass production ? • Agriculture. • In which dimensions was Europe so special ? • Europe vs China Answer • Some changes are common to all of NW Europe (with variable English advance) : Proto-industrialization, innovation, urbanization. • Complementarities with England led to different development paths in western Europe; • Divergence with China was late and partly accidental.

  34. Innovation : a European process • Machines • Up to 18th c., most sophisticated machines are consumption goods, not production goods (Vaucanson’s automates, Pascal or Bernoulli’s calculating machines, clocks). • Even the new production machines industry develops throughout Europe : Senot screw threading machine (1795) corresponds to those by Maudslay (1797) or Wilkinson (1798). Paper-producing machines developed by Robert (1798) in France. Even the hydraulic hammers for iron are developed independently in 1840 by Bourdon and Nasmyth. • Steamboats developed by Hulls in the US, Jouffroy d’Abbans in France, Fulton in Britain; steam-powered coaches by Cugnot (1770) and Trevithick (1796). Next generation change for boats : propellers (Sauvage, 1837) replace waterwheels. • Chemicals • Artificial soda (Leblanc, 1790), used for soap and glass production, wool grease-trimming and bleaching • Chlorine discovered (1774) and applied to bleaching in 1777 by Berthollet (textiles but also soon paper), and as disinfectant.

  35. Macroinventions vs microinventions (Mokyr, Crafts) • Micro up-grades more related to « capabilities » (skilled labour, cost of labour, etc). • Macro inventions more to genius and accident; cotton technology as example. Have more global impact on growth, but only through micro-ones. Easy to imitate ? • Crafts (1995) : Britain's advantage in micro-invention comes from a better integrated market; a population concentrated in urban areas, more literate and skilled (about 10% of population goes through apprenticeship in late 18th c England, in principle a 7 years learning much above European norms, see Wallis). Maybe also from a higher financial development and lower direct taxes. • Conclusion : invention widely spread, but British advantage in development.

  36. Forms of industrial development • Three major types of industrial organizations: • Village or urban workshops selling the food or consumption goods they produce to local consumers (nailer, shoemaker, cobbler, cutler, blacksmith, goldsmith, butcher, baker, etc). No major innovation. • Factories (manufactures or usines), requiring locally concentrated energy, production goods and labour. Mostly used for glass-work, brewery, tannery before 1800. Develop for textiles and metallurgy in late 18th c. England (but also France : Oberkampf in Jouy). Specific to Western Europe' industrial revolution. • Rural workshops coordinated through the « putting out system » (especially important in textiles) or proto-industry.

  37. Proto-industrialization / putting-out system • Considered by Mendels (1972) and others as the true origin of western Europe's modernization (early 17th c - late 19th c). • Urban organization of rural labor : urban merchants • provide the raw material and machines, asks for precise products (= externalization) • Distribute the product between stages of production, some rural, some urban (finishing). • Sell the products in a wide area, leading to international and regional specialization. • Important as soon as the late middle ages in textiles, iron, cutlery, etc. Allows to escape the strict rules of urban craft guilds. • Economic advantages : less risk and investment (no factory to build, no fixed wages) for the merchants; welcome off-season work for peasants or their family. • Costs : transportation and coordination costs; competition with agricultural work (delays). Little control of the workforce (so piecework). Quality problems. No control of innovation. • Develops skills.

  38. Change towards factories • With time and the development of markets, the costs increase relative to the advantages; • rural labor little responsive to wages (income effect vs price effect) ; • increasing price of machines makes sparse use costly; and increases principal-agent problems (use for other merchants, destruction). • The increase in machine use imposes some standardization (gears, screws, etc) (previously hand-made by each craftsman). • Entrepreneurs develop urban factories if urban wages not too high. They gain more independence towards merchants if they can produce on a large enough scale. This specialization leads to innovation.

  39. But that change is not necessary for all industries: • Standardization possible without factories (standard sizes for shoes and gloves invented around 1835 in Grenoble and Chateaurenaud, extended to all clothes by the founder of « La belle jardinière » and a success thanks to Thimonnier’s 1845 sewing machine) and the resulting development of ready to wear clothes produced in a decentralized way. • Technology not the leading cause : many inventions adaptable to both factory and decentralized organization. • Various historians consider factories were used in order to intensify work rather than use new technologies. • Early historians of proto-industrialization suggested that increase in rural living standards led to an increase in the rural population, then to migration towards cities and proletarization, so the transition to factories. • In fact that sequence was not systematic at all; urban wages were attractive but disamenities of large cities were also huge; mid-size towns had their chance.

  40. Two industrial paths ? • “British style” industrialization dominates in cotton and iron productions; • Big urban factories. • Unskilled labor added to skilled labor in manufacturing; • Huge productivity gains; mostly passed to consumers and profits; • Huge increases in quantities produced. • Higher share of industry in the workforce • Higher urban share NB : That “modern” path includes Belgium, northern France, small parts of Germany. See map of early railroads.

  41. Crafts JIH 1989

  42. An alternative industrialization path: flexible technologies and clusters • Sabel & Zeitlin or Piore suggest that “flexible specialization” (use of multi-purpose technologies thanks to skilled labour) may be an alternative to mass production (single purpose machines + unskilled labour to produce standard goods). • They argue that the smithian “ever-increasing specialization” can dominate the marxian “capital accumulation and substitution to labour” as the best way to productivity growth, at least in some industries. • They emphasize that Smith recognized the extent of the market as a major limitation to specialization and growth (so efforts against protection and transportation costs, and even in favor of redistributive policies); but neglected technical rigidity as an obstacle to long term growth, and the importance of human capital. • Then the question is whether flexible specialization can avoid technological lock-in and corporatist restrictions to innovation without destroying human capital (as the factories did).