Tuesday, July 23, 2013

Explanations for the British Industrial Revolution, Revisited

It's been a while since I posted here. I thought I would get back into writing by briefly commenting on the lead article in the August 2013 Economic History Review by Jane Humphries.

Humphries takes aim at R. C. Allen's recent study of the origins of the British Industrial Revolution, which has been lauded as a very important and innovative work on this question. Allen focuses on four features that put the British economy at the technological "frontier" in the mid-to-late 18th century: higher wages than in the past, higher wages than in other countries, higher wages relative to the cost of capital, and higher wages relative to the price of coal. These four conditions in the "high wage economy" put Britain in a unique place for rapid capital-intensive investment, spurring productivity and hence growth.

The "high wage" thesis is part of what is called the "Habbakuk thesis". This argument maintains that labor is scarce (wages are high), then investors will want to find ways of saving money on labor, so they invest in machines and capital. This has the unintended effect of promoting industry and thus capitalism.

Humphries develops a three-pronged critique of Allen's claims.  All three points center around the nature of British labor markets in the time period of interest.

She first contends that wages were not that high relative to living standards. This builds off of a significant amount of research that Humphries has done recently on child labor and the plight of the poor in the Industrial Revolution. She cites a wealth of sources, essentially diaries and other direct accounts, that show that workers were indeed strapped for cash, barely "scraping by" if you will.

She then contends that family structure was considerably more stressed than what Allen assumes for his computations -- particularly regarding the caloric needs of a typical British household. Allen assumes a 2-child household when the reality was far different. This "patriarchal" assumption is a very old one and needs to be dropped in favor of a more inclusive idea of work or labor. Again, this draws on family economics and the need to incorporate unpaid women's labor into household needs and labor supply decisions and the production of value.

Finally, she contends that there was a dual labor market in Britain, which is not new, but she wishes to emphasize the labor market for women and children as having a quite dominant role. It was not just the labor market for the typical male worker that mattered. In fact, she showed how some employers specifically developed new machinery in order to allow women and children to take part in the work. Employing such workers also meant a lower wage bill -- another plus which is ignored in Allen's account.

The critique is all well and good, and like any good critique, it starts to raise more questions: how might we account for the rise of British capitalism? Is there an alternative theory that we can promote? If it's true that the high-wage story seems flawed, then what explains the rapid technological progress that took place? Perhaps something can be found in the story of the "disempowered" that Humphries mentions, who are all but forced into the factories, or at least, they take part in the capitalist labor market more out of necessity than want. Of course, such a story is known to many social and labor historians of early capitalism. But how might we bring new empirics (like Allen does) to test such claims and thus bring that perspective closer to current debates?

2 comments:

  1. Check out the "Eastern Origins of Western Civilization" by John M. Hobson. There is one important variable in explaining the British Industrial Revolution, which is China, that nobody talks about for some reason.

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  2. Hello Daniel. I was a bit discomforted by the sentence "This has the unintended effect of promoting industry and thus capitalism." For capitalism is not the same as industry. (I won't attempt to define it.)

    "... how might we account for the rise of British capitalism? Is there an alternative theory that we can promote? If it's true that the high-wage story seems flawed, then what explains the rapid technological progress that took place?"

    Perhaps a simple Keynesian explanation will do: After more than a millennium of economic stagnation, in Britain a national debt started accumulating. The sedentary savings of the aristocracy was put into circulation. It was Robin Hood-esque.

    The increase in circulating funds, plus the competition to capture those funds, is sufficient to explain the rapid technological progress that took place.

    My thoughts are here.

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