History. Lecture 4 The industrial Revolution (2014)

Apunte Español
Universidad Universidad Pompeu Fabra (UPF)
Grado International Business Economics - 2º curso
Asignatura International Business & Economic History
Año del apunte 2014
Páginas 7
Fecha de subida 22/06/2014
Descargas 0
Subido por

Vista previa del texto

Concept  of  the  Industrial  Revolution   The  concept  of  industrial  Revolution  can  be  understood  in  two  senses:   -­‐Structural  transformation  from  an  agrarian  economy  to  an  industrial  economy,  which  is  the   change  in  the  labor  force  working  in  the  agrarian  sector  that  moved  to  the  industrial  sector.    It   is  a  long  term  phenomenon.   -­‐Industrial  transformation  experienced  by  England  in  1760-­‐1830  in  the  context  of  the  new   factor  system     It  is  called  a  revolution  because  we  escape  from  the  Malthusian  Trap:   (Recall  of  the  malthusian  trap)     +  birth  è  -­‐  income  per  person  è    People  start  dying   è  Income  per  person  come  back  to  its  natural  level.               Every  time  income  starts  to  decline,  there’s  a  technological  innovation  which  shifts  the   restrictions.    So,  the  income  starts  growing  up.                       But,  in  time  there  were  also  some  technological  innovations  that  couldn’t  avoid  the  Malthusian   Trap  (very  little  increase  in  population).  Why  did  this  time  go  different?   The  reason  of  the  great  divergence  was  the  persistence  of  technological  change  after  the  first   wave.  This  means  that  it  didn’t  peter  out1  but  it  was  followed  by  a  second  wave  of  innovations   (after  1820),  less  spectacular,  but  these  innovations  were  the  ones  that  made  production  costs   go  down,  spread  the  application  to  new  and  more  industries  and  sectors  and  eventually,   showed  up  in  the  productivity  statics.     Main  explanations  of  the  Industrial  Revolution   -­‐Changes  in  social  structure,  capital  accumulation.     Britain  was  a  highly  developed,  commercialized,  sophisticated  economy  in  which  a  large   proportion  of  the  labor  force  was  engaged  in  non-­‐agricultural  activities,  and  in  which  the   quality  of  life  as  measured  by  consumption  and  non-­‐essentials  and  life  expectancy  was  as  high   as  could  be  expected  anywhere  on  this  planet.    This  made  possibly  the  quick  transformations   the  country  had  during  the  Industrial  Revolution.  Capital  comes  back  reinvested  in  production   process  (machines,  buildings…)       -­‐Neo-­‐institutionalism:  constitution  and  property  rights.               .Legal  and  fiscal  equality   .Individual  property  rights   .Individual  freedom   .Entrepreneurship  freedom   .Freedom  of  movement:  capital,  goods  and  people     Favorable  for  the   economy  to  grow.   Reducing  the  opportunities   for  rent-­‐seeking  behavior   and  reducing  uncertainty   -­‐Scientific  revolution:     This  revolution  was  driven  by  an  expansion  of  “useful  knowledge”,  basic  knowledge  that  was   needed  to,  later,  be  converted  in  innovations.  The  scientific  developments  of  the  17th  century   mark  a  foundations  in  the  Industrial  Enlightment.  This  basic  knowledge  was  mundane  and   absolutely  pragmatic  and  experimental.     Moreover,  there  were  institutions  that  manifested  this  feeling  of  expansionary  knowledge  to   the  public  at  large,  such  as  “The  Society  of  Arts”  (improve  enterprise,  enlarge  science,  refine   art,  improve  manufacture  and  extend  our  commerce)     There  was  class  of  trained  artisans  and  mechanics  who  were  capable  of  making  new   technologies  with  that  basic  knowledge.    Britain  already  had  a  relative  large  proportion  of   people  in  non-­‐agricultural  activities  and  a  shipbuilding  industry,  mining  sector  and  a  developed   clock-­‐instrument  making  sector.                                                                                                                               1  Peter  out:  agotarse   British  society  channeled  their  creative  energies  to  those  activities  that  were  most  useful  to   future  technological  development  in  the  market.  Skills  were  transmitted  through  an   apprenticeship  system:  instruction  and  emulation  working  for  the  private  sector.   -­‐Cultural  explanations:     The  UK  Social  elite  had  an  unusual  interest  in  technical  improvement,  its  ability  and  willingness   to  absorb  and  apply  useful  ideas  generated  elsewhere   Why  England?   Bob  Allen’s  answer:   High  wages  and  cheap  energy  resources  and  capital:  UK  had  the  most  cheaper  coal  in   the  Western  Europe  because  had  natural  coal  resources.       We  want  to  substitute  people  for  machines  that  use  cheap  resources  (energy  and   capital)       Strong  incentive  to  make  machinery  innovations.     Putting  out  system:    system  used  in  the  17th  century  to  produce  manufactured  goods  in  the   country  side.    It  was  a  CHEAP  method,  linked  to  the  commercial  expansion  and  on   services/employment  in  urbanization.         PUTTING-­‐OUT  SYSTEM                                                                                                                                                                FACTORY  SYSTEM   Advantatges   • Lower  investment  in  fixed   capital.   • Lower  risk  and  more  versatility   in  front  of  demand  changes.   • Lower  wages  (by  item)   • Centralization  of  production   •  Higher  control  of  labor   (discipline  and  work  time   control)   •  Higher  control  of  quality   •  Lower  transport  and   transaction  costs     •  More  specialization  and   mechanization  opportunities.   Worker  alienation     • Entrepeneurs  control  the   amount  of  production   needed   •  Lower  control  of  labor   •  Higher  wages  (time  based)   •  Higher  transport,  vigilance  and   transaction  costs.   • • Supply  inflexibility  in  front  of   changes  in  demand.    Higher  investment  in  fixed   capital,  so  need  of  new   markets   •  More  risk     Inconvenients   The  Industrial  Revolution  supposed  the  change  from  the  Putting-­‐out  systems  to  de  Factory   System.     New  energy  sources:  COAL   There  are  two  types  of  energy:  non-­‐organic  ones  (coal),  which  energy  is  a  stock.  The  other  one   is  organic  ones,  which  were  used  in  pre-­‐industrial  economies  (wood,  charcoal,  food,  animals   that  are  energy  converters…)  ;  this  energy  is  a  flow.   The  negative  feedback  from  classical  demographic  response  in  the  Malthusian  Trap  is,   precisely,  the  transition  from  an  organic  to  an  inorganic  economy.                 Economic  growth  during  the  Industrial  Revolution     The  British  economy  experienced  little  growth  during  the  years  typically  associated  with  the   Industrial  Revolution.     The  main  reason  is  that  in  an  economy  that  is  undergoing  rapid  change  in  one  sector  but  not  in   another,  the  aggregate  change  depends  on  the  relative  size  of  each  sector  at  the  initial   moment  and  on  the  interaction  between  the  two  sectors.     The  British  economy  as  a  whole  was  changing  much  more  slowly  than  its  more  dynamic  parts.   It  took  until  1830  or  1840  for  the  economy-­‐wide  effects  of  the  industrial  revolution  to  be  felt.   However,  the  industrial  innovations  did  create  an  industrial  revolution  reflected  in  changes  in   Britain’s  economic  and  social  structure,  even  if  their  impact  on  economic  growth  little  at  the   time.                           Technological  change  and  productivity2   The  sense  in  which  technological  progress  is  supposed  to  have  led  to  economic  growth  in   through  efficiency-­‐increasing  innovation:  fewer  inputs  making  more  outputs.   If  we  talk  about  the  TOTAL  FACTOR  PRODUCTIVITY,  an  economy  that  experiences  persistant   total  factor  productivity  growth  is  likely  to  experience  per  capita  income  growth.3   Industry-­‐specific  output  and  productivity  statistics  do  not  exist.     1. If  we  use  the  patters  of  British  foreign  trade  we  can  see  that  Britain  has  a  really   comparative  advantage  (but  both  in  “new  industries”    and  the  small  and  older   industries):  if  we  take  this  advantage  into  care,  we  can  differ  that  this  was  because  of   the  technological  innovations  against  the  countries  that  didn’t  have  it.       2. However,  other  authors  sustain  that  comparative  advantage  doesn’t  mean  attaining   rapid  productivity  growth.  The  growing  reliance  on  imported  food  would  have  implied   higher  manufacturing  exports  even  in  the  absence  of  technological  progress.   Estimating,  the  total  factor  productivity  explained  10  per  cent  total  output  growth  in  1760-­‐ 1800;  in  1801-­‐1831,  this  went  up  about  18  per  cent.    The  share  of  land  maters  since  resources  was  growing  at  a  much  slower  rate  than   labor  or  capital.  The  economic  growth  was  slow  in  this  period,  but  what  little  there  was  seems   to  be  explained  by  the  residual.                           There  were  more  factors   There  was  more  efficency                                                                                                                               2 3  Factors  are  LAND,  LABOR  and  CAPITAL   Substract  a  weighted  sum  of  input  growth  from  output  growth  and  the  residual  is  productivity  growth.     We  also  have  to  say  that  large  sectors  of  the  economy,  employing  the  majority  of  the  labour   force  and  counting  for  50%  of  GDP  were  only  little  affected  by  innovation  before  the  middle  of   19th  century.       è The  changes  in  technology  and  organization  during  the  closing  decades  of  the  19th   were  insufficient  to  affect  the  economy   è After  1830  they  become  more  noticeable,  but  their  impact  on  aggregate  variables   was  gradual  and  slow.   ...