The British Industrial Revolution in Global Perspective

"Bob Allen and Joel Mokyr published books practically simultaneously in 2009. In those books they were arguing with one another. I didn’t actually see this deathless moment, but the story goes that there was a meeting of—I think—the European Historical Economics Society , at which both of them gave keynote lectures. And, at the end, they hugged one another on the stage. That was a symbolic moment in this very public and courtly jousting between Allen and Mokyr around the time these two books were published. So I’d like to talk about them both side by side. And I urge people to read the two books side by side. Let’s start with Allen. It’s very different from the preceding two books that we’ve been talking about. It’s much more quantitative. There’s much less emphasis on individual stories; culture is very much missing. There is not very much about politics or institutions. So a lot of the things that Landes and Jones have emphasised are not in the book. I mentioned that the historiography of the Industrial Revolution went through this quantum leap from the 1970s onwards and, in particular, there was stunning progress in the quantitative reconstruction of how past economies grew. As a result, England (or Britain) has the best reconstructed macroeconomic history of any place on the planet, whether it’s wages, prices, or estimates of per capita GDP . This book by Allen emphasises those quantitative indicators. But he goes further, and argues that a particular combination of relative wages and prices actually caused the Industrial Revolution. Having established the timing with which things began to change, and the levels of prices and wages, Allen argued that we could now be sure what was really happening in Britain during this period, and we could use those facts not just to describe the Industrial Revolution but to explain it. “England (or Britain) has the best reconstructed macroeconomic history of any place on the planet, whether its wages, prices, or estimates of per capita GDP” In this book, he put forward what one might call ‘Allen’s three-step plan for explaining the Industrial Revolution’. First of all, 18th-century England had, by European standards, very high wages and very cheap coal. Having those relative factor prices is Step One. Step Two is based on the idea that making ‘macro-inventions’—door-opening breakthroughs—commercially viable has very high fixed costs. These costs will only be incurred if it’s going to be really profitable. Big profits from macro-inventions, Allen argues, required favourable relative factor prices: high wages to motivate employers to invest in machines to replace expensive workers; and low coal prices to motivate them to invest in steam engines using cheap fuel. Step Three is the international comparison. Allen compared England and France, and argued that adopting the key inventions of the Industrial Revolution was profitable at English relative factor prices but not at French ones. French workers were so cheap and French coal so expensive that you might as well go on using human labour instead of coal-fired machines—and that’s what the French did, while England industrialised. If you think about it, this argument implies that there’s nothing special about English institutions or culture or policy, it’s just these unique cost conditions that made the Industrial Revolution take place first in England. After that, the rest is history. This is very different from the accounts that had been given previously about why the Industrial Revolution happened in Britain, which focused much more on what influenced the supply of inventions. Allen’s book focuses on the demand for inventions, and what kind of cost conditions made that demand so acute that it triggered the Industrial Revolution. Allen’s work addresses a question policymakers and economic historians have been interested in for a long time. If Britain was the first to industrialise in the 18th century and the richest country in the world in the 19th century, why isn’t it top dog now? If Allen is right, and Britain’s industrialisation was based on unique cost conditions, then its economic leadership was highly vulnerable. As technologies improve, it becomes profitable to introduce the spinning jenny, or the steam engine, under other cost conditions. That meant that other countries could catch up and, in any case, the USA turned out to have a much better version of the high wage, cheap energy economy. So Allen’s story accounts for the subsequent history of the British economy, not just what happened during the Industrial Revolution itself. Britain didn’t formally encourage the diffusion of innovations at all. All pre-modern governments passed laws against exporting innovations, and sometimes tried to forbid inventors themselves from going to other countries. The British government at the time had no better motivation than any other ramshackle, pre-modern government but, fortunately, was not very efficient and didn’t have a paid bureaucracy. It passed laws against exporting innovations, but the British state was pretty minimal. It was fairly good at guaranteeing property rights and contract enforcement. But it didn’t have the kind of paid, professional bureaucracy that you had in France, or Germany, or most other parts of Europe at the time, let alone the high-quality, pervasive civil service that regulated China at the time. The British government could pass all sorts of laws, but it couldn’t actually enforce many of them. So you do see British innovators and businessmen and entrepreneurs being lured away to France, Germany, Catalonia, the Czech lands, and many other European countries, by foreign rulers and rich guys offering them large amounts of money to bring their machines and set up English-style textile factories in the wilds of Bohemia. Foreign governments recognised that it wasn’t enough just to import an English machine, you also needed to import the English mechanics and operatives to make it work. So, yes, the British government imposed export bans on new technology, but they were never very effective, which is just as well. Exactly. Turning back to Allen’s book, I think its greatest strength is that he uses lots of quantitative evidence and puts forward falsifiable hypotheses. I’ve heard young economic historians say that the nice thing about Allen is that you can go in, identify what his hypothesis is, and try to falsify it. As a result, Allen’s book has stimulated a huge outpouring of research, especially on the wages side of his story. People started saying, ‘Well, you know, you were talking about men’s wages. But what about women’s wages, especially given that spinning was the first sector to be mechanised and it was women’s work? Maybe we should find out more about women’s wages.’ There were other criticisms, suggesting that maybe the data Allen had collected for England were actually contractors’ fees rather than wages, and that historians needed to go in and look at the documents more carefully and find out exactly what these numbers mean—which is always a good question to ask, as an economic historian. Another really nice bit of research that was stimulated by Allen was the idea that maybe we need to take into account the productivity of labour as well as its cost, to look at unit labour costs as the thing that matters. There was a nice study that pointed out that French wages were, indeed, lower than English wages, but French workers were less productive, because they consumed fewer calories, they were shorter, and their BMI was lower. Because they were smaller and less well-fed, French workers weren’t as strong and couldn’t produce as much. So maybe unit labour costs between England and France weren’t that different. “The 1970s and 80s…were a key period during which economic history in general and Industrial Revolution research in particular experienced a quantum leap” Then there’s the question, if wages were higher in England, why ? Allen suggested that it was related to England being very successful in long-distance trade in the 16th and 17th centuries. But that raises the question whether there was something special about England which caused it to be so successful in trade, long before the Industrial Revolution. Maybe what we should be looking at are these fundamental things that fed into making England a high-wage economy. So, there were all of these questions that were opened up by the fact that Allen wrote this very strong book that had lots of falsifiable hypotheses in it. All sorts of new research has been stimulated by that book. As a result, some of the arguments in it have been rejected. But that’s good. Allen’s book has moved the whole Industrial Revolution debate forward because he put forward clear and vigorous hypotheses that could be tested by other researchers. Allen emphasised the demand for innovations. He tried to explain why businessmen in England wanted to install new machines, and his answer was that they wanted to replace expensive labour and use cheap energy. But that left out of his account the whole question of the supply of innovations. Where do innovations come from? There’s always some demand, but what kind of conditions give rise to the supply?"