EC120 week 09, topic 8, slide 0 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

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 EC120 week 09, topic 8, slide 1

EC120 week 09, topic 8, slide 2 British Trade in the Industrial Revolution Focus on Britain, c1700−1860 Were 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.

EC120 week 09, topic 8, slide 3 Interpretation and explanation (1) Trade and industrialisation enabled population growth Controversies: –Was industrialisation driven by `demand’ or `supply’? Demand for exports from abroad, or Supply of exports from Britain (or both) –What were the sources of the gains from trade?

EC120 week 09, topic 8, slide 4 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

EC120 week 09, topic 8, slide 5 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?

EC120 week 09, topic 8, slide 6 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

EC120 week 09, topic 8, slide 7 Trade & Industry in Continental Europe Landes emphasises `culture, values, initiative’ Three constraints on economic modernisation: 1.Peasantry, control and dominance of agriculture 2.Organisation of manufacturing, restraints on trade 3.Natural barriers and man-made boundaries Economic nationalism versus regional development

EC120 week 09, topic 8, slide 8 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

EC120 week 09, topic 8, slide 9 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

EC120 week 09, topic 8, slide 10 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

EC120 week 09, topic 8, slide 11 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

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 EC120 week 09, topic 8, slide 12

EC120 week 09, topic 8, slide 13 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