Pre-industrial England was a period that laid the foundation for the industrial revolution. It’s too vast with numerous changes that may seem to contradict itself if confined to a single definition. In the early beginnings of the period, the ratio of population to land was low, with small rural communities heavily engaged in agriculture. Markets were imperfect, along with simple/sluggish technology mostly because, the pre-industrial man was unaccustomed to innovation or simply did not see the need for cost reducing innovations. The method of production was mostly labor intensive with little capital equipment if any at all.
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The description thus far is fitting for the period 1450-1650. During this period population growth fluctuated widely, mostly because of famines and diseases. It is worthy to note that the family was the foundation of the home economy and in aggregation the essence of the pre-industrialized economy. The family structure was the source of knowledge, wealth and in many cases legitimacy (particularly in the case of women).
During this age, England was a pyramid of status. Ownership of land was the materialization of status and the quickest way to political leverage. This set in motion the incentive for development: the desire to acquire more land through the plouging back of profits into the purchase of land. It was during this time that the concept of RENT was developed. Though the industrial revolution started in Britain, during the period 1450-1650 England was behind its continental counterparts in almost every economic respect. Though population growth fluctuated, it had an upward trend; unfortunately the primitive economy was unable to absorb this surplus labor. Consequently, pre-industrial Britain was plagued with unemployment and underemployment.
As if the latter was not bad enough, high mortality rates forced a young population to work and an overwhelming climate of beggars and vagabonds emerged. One interesting way the economy sought to absorb the excess labor was through the immigrations of this surplus to cities e.g. London.
Europe had long been competing among itself for new markets and raw materials. This led to the beginning of colonialization and the discovery of new lands. Britain had long been and persisted to be an exporter of mostly raw materials. Before boats and new trading routes were invented and discovered, trading was problematic and capital accumulation was down right impossible. The medium of exchange was poorly defined and barter proved to be complex because of the double coincidence of wants.
In the mid 15th century, there was an evident shift in the export of raw materials to manufactured goods, mostly the export of cloth. (refer to Fig 1 p 50) Very quickly cloth export accounted for 2/3 of all exports, most of which were destined for colonial territories and Low Countries. In light of this positive change, England was still largely a primary product producer, as such; they had a high import dependency on continental Europe.
Through immigration, England was able to import new skills and techniques and in some cases capital. While England began to harness the power of this intake, there was a discovery of gold in South America. This made capital accumulation a little less difficult and further fueled trade.
Though industrial jobs were seasonal because productive activities were predominantly dependant on the seasonality of crops, glimpses of urbanization could be seen. Artisans and craftsmen were the first manufacturers who often worked with just an apprentice; their capital formation was small, nevertheless, growing. The location of industries were dependent on the labor supply and occupations of all nature started to emerge and change continually as taste, ‘fads’ and fashion change.
In the book, ‘the economy of England 1450-1750 by D.C. Coleman: England was described as having habit of “…borrowing and improving, rather than inventing…” Though homegrown inventions occurred, this habit was embedded in the English national trait. In light of this ‘copy cat’ approach of the English, from the 17th to 18th century, English patents had increased drastically. Patents in this case are used as a proxy to represent the quantity of inventions/innovations. See fig. 2 p 154.
“In brief, English industry in the century from 1650 to 1750 can exhibit a variety of innovations, some of a radical nature in that they are represented injections of capital equipment which had the effect of raising productivity. Some involved a new use of power-driven machinery or opened up new possibilities therein, for example, in silk-throwing or cotton-spinning, some saw a replacement of one important input in the production process by another, for example, coal for charcoal, steam and atmospheric pressure for horse- or man power.” The quote above taken from the economy of England 1450-1750 by D.C. Coleman, adequately sums up the importance and impact of the innovations taken place in England at the time.
Pre-industrial England (Analysis)
Why was the pre-industrial age the way it was? Or, how did it transform into the industrial revolution? I will seek to explain or find some bearings to answer these hard questions. My analysis will be confined to a few fundamental elements of capitalism: property rights, capital accumulation, profit motive, institutions, and level of technology and government intervention.
It is known that low labor productivity, poor education, high fertility and mortality rates along with the dominance of physical over human capital plagued the pre-industrial period. The reverse is true when compared to modern societies, which is characterized by low fertility rates and extreme emphasize on human capital. What accounted for the spurts in population growth that forced the surplus labor to immigrate to the cities?
With little education and sluggish technology there was roughly an average level of human capital. Earnings and benefit from investing in human capital were both low, and the typical agricultural laborer earned their maximum income at age 20.. Thus, parents would choose quantity as opposed to quality in child bearing; this sheds some light on the reasons population boom. High mortality rates also forced parents to reproduce at a high rate and began to prepare an army of labor that flourished during the industrial revolution.
The number of patents issued (used as a proxy for capital accumulation) signals the rate of capital accumulation and developments in technology. Of course, these changes pale in comparison to modern standards but it laid a foundation that was essential to the industrial revolution. Reference was made in the overview regarding Britain’s culture of borrowing and improving, this also sought to cement the foundation of technological changes during this period.
The pre-industrial man’s desire for status and political accomplishment along with the desire to be favored by the crown, propelled the pre-industrial age. Granted, at a slow rate. This was mostly done through the conquering of new lands and meager changes (compared to modern standards) to productive activities. Imperfect markets were able to a limited extent however, to fuel the industrial man’s profit motives. Nevertheless, this remains one of the few underlying elements of capitalism that never wavered or seems to fade.
The pre-industrial age was preserved through the family structure, and the family structure was preserved through the ownership of lands. All the essential elements of capitalism were in existence and growing in every respect during this primitive age. True, it has evolved since, but that is not a demerit, rather, the reason why it’s able to survive all these years.
At the heart of this period, the crown/state/government played a most vital role in industrial planning. Colonies were set up, trade agreements were made, and many accomplishments were made in the name of the ‘crown’. The crown was very much involved in Britain’s development. The state’s role and power had changed remarkably over the years, but we include it as an essential element of capitalism to illustrate the crucial role of government in ‘jump starting’ an economy.
Industrialization (750-1830)
The industrial revolution was basically a fundamental change in the structure of Britain’s economy. It was the reallocation of resources away from agriculture. Britain being the first nation to become industrialized in the mid 18th century experienced rapid growth. These high growth rates would involve changes in every aspect of the economy.
Britain rich iron, coal and reliable source of waterpower were essential to the industrial revolution. Colonies around the world supplied Britain with raw materials e.g. cotton and wheat and served as a market place for manufactured cloth. These colonies helped to stimulate the textile and iron industries, the wealth then generated by these two industries is what drove the industrial revolution.
The steam engine was the greatest innovation of the industrial revolution because it became an instrument for applying basic innovations in many industries and transport. In the 1800s industries such as cotton spinning and iron was dependent on the steam engine. Landowning and farming wealth flowed to investment for improving land and transport while commercial wealth flowed to industry.
Institutions created incentives and encourage innovation for entrepreneurs. The acceleration of industrial development was facilitated by the emergence of institutions such as financial systems, legal systems, and social institutions. Since the economy was growing at a steady pace, financial systems were needed to support this profound change: the established of the banking system in the 1690s. The banking system began to mobilize savings more widely after the 1750s.
The bank of England, the London private bank and the country bankers made up the banking system. The problem with capital accumulation in the 18th century was one of establishing a tube by which capital could flow from the groups who were making the savings to those who really needed the credit. During the industrial revolution laws were enforced which required all land to be fenced at the expense of the owners. This caused many families to borrow from banks.
Women and children made up 75% of the workers, this was because they were easily manipulated into accepting low wages which kept the cost of production low and profits high. Children were preferred since they had smaller hands; which was often needed to fit into parts of the machines. The laissez faire approach of the government allowed capitalism to flourish. There was little or no government regulations imposed upon factory policies. In the industrial ages the state’s role was basically to institutionalize social and economic forces and to provide security at home and abroad in which market forces would operate.
Since they worked 18hrs per day they spent no real time together as a family, hence the industrial revolution contributed to the break down of the family unit. The living conditions were horrible because the cities became over crowded. Families lived in factory houses. These houses had no more than three to four rooms, more than one family then had to occupy a room. Other families who couldn’t afford the rent of the factory houses lived in slums with little sanitation, as a result mortality rates were high (infant mortality rates were 50%)
The legal system endorsed property rights and extended the concept of “property” to such assets as shares, bills of exchange, bank notes and patents. There was a pyramid concerned with land use. At the top there were the landowners, they comprised of temporal lords, gentlemen and freeholders (better sort and lesser). The lesser freeholders were the ones who owned and tilled their own land. They formed the middle class, the employing class who were the backbone of the agricultural economy. The others rented their land to the second group who where the land cultivators. These land cultivators formed a mixed group; which included small freeholders, owner-cultivators, the family-worked farm, the small holders and squatters. The third group, which was the base of the pyramid were the farm laborers; the proletariats.
In the 18th century government began to intervene by implementing factory act, which aimed at securing the welfare of children.
Industrial revolution Analysis
This analysis will be based on the fundamental elements of capitalism: property rights, capital accumulation, profit motive, institutions, and level of technology and government intervention. It will answer why and how these elements changed/ developed during the industrial ages.
Unlike the pre-industrial age capital accumulation wasn’t as difficult. The emergence of foreign trade and the banking system made capital accumulation easier. Now the question is how and why these systems did emerge? Capital was accumulated through property ownership but also with the expansion of trade, that is: as trade increased, more money was demanded which was later provided for by gold and silver.
The foundation of the bank of England in 1694 was part of a deal made between the government, (desperately short of finance in wartime) and the leading merchants and financers. Capital goods industries began to emerge mainly because of worldwide industrialization and the increased accumulation of capital through investment. This development led to mass production, and was responsible for the increase in British iron output during the 1830-1840 and continued to increase until the 1880s which also led to an increase in the employment of coalminers. The expansion of these industries changed most of the social problems that were present in the initial phase of industrialization: it gave unskilled workers better paid jobs, and improved working conditions which increased dramatically in the 1850s.
The profit motive has been the driving force towards industrial capitalism. It encourages firms to operate more efficiently thus, promoting competition among rival firms. It served as the catalyst for production, distribution and consumption.
Why did the level of technology change? Because of changing demand and the enlarged size of the markets promoted the development of new methods of production, often through innovation and adaptation of already existing technology.
POST INDUSTRIALISATION
The post industrialized period, is defined in this paper as that span of time in which Britain’s economy began to make the transition between what can be termed as Industrial Capitalism to Financial Capitalism. This simply means a decline in Britain’s manufacturing industry and growth of the financial sector.
Why the manufacturing industry declined? To address this we need to consider many factors: the first important factor to is seen as the change in the power of the people – that is the labor laws reforms and the electoral laws reforms.
During the early and mid years of the industrialized period there was little power for the working class, they had no right to vote unless they owned property. They had no voice in the workplace, no way of expressing their displeasure and swift and harsh actions were taken against those who refused to obey the law.. Coming to the end of the industrial period and into the post, there were a number of reforms and acts introduced to change this fundamental problem within Britain.
Firstly in 1871 trade unions were made legal, and they were allowed to strike. However it was not until 1875 that the legal act, Conspiracy and Protection of Property Act, was implemented to allow workers to peacefully strike at their place of work. But after terms of revolts in the working populace, into being came the Labor government party, and during their term (1906) they brought into being the Trade Disputes Act, which declared that unions could not be sued for damages done during a strike. In this respect, the power of the working class grew tremendously as compared to the earlier years of industrialization. But these Labor laws were not the only important reforms being made during this period to address the power of the people; in fact they went synonymously with the reforms being made to the electoral system.
In the mid 18th century, The Great Reform Act (1832) gave vote to only male householders who held a certain amount of property. In time it was evident that this act was generally met with an outcry from the working population who paid taxes. This displeasure of the populace led to a Second Reform Act (1867) which allowed many of the working class men living in towns to cast a vote. However this system was still at fault because voting was done in the open and men were forced to stoop to pressures of their employers and landowners, that is- to vote in their interest.
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So upon recognition by the aforementioned, the labor government party introduce The Secret Ballot which allowed men to vote in seclusion, away from the pressures of their employers and land owners. But the second reform act was still deemed inadequate because it still failed to capture a decent proportion of the population, so came The Third Reform Act, in 1884.
This new act now gave voting rights to adult male householders in Britain- which encompasses those living in the country areas. But with the exclusion of women, the system was still insufficient. After many women’s rights movement there was a new act passed called the People Act of 1918 which gave voting rights to all men over the age of 21 and all women over the age of 30. This single act propelled the size of the electorate from 7.7 million to 21.8 million! This was not the end however, soon after the Equal Franchise Act of 1928 gave voting rights to all women over the age of 21 on the same terms the men had. And then finally, a new Representation of the People Act gave voting rights to everyone over the age of eighteen.
The changes in the electoral and labor laws caused the emergence of a new phenomenon in Britain. The wants and demands of the people were now stronger and more politicians were more eager to meet them. Given the new found power of the populace, workers were now entitled to a larger share of the Gross Domestic Product (in future will be addressed as GDP).
The general standard of living was now a principle that could no longer be ignored; the happiness of the entire Britain’s populace was now the centre focus of all politicians and no longer only the sole happiness of the entrepreneurs. As such some manufacturers found it unprofitable to keep on running when they can no longer access cheap labor, and governments found it necessary to implement many social safety nets to keep its populace happy.
As stated before, addressing why the manufacturing industry declined we need to look at many factors, so far the populace’s power has been addressed. The next important issue that needs attention is that of world trade.
The British economy at the beginning of the industrialized period was well noted for some of the greatest inventions in the world. They were at one point in time even addressed as the workshop of the world. This advantage Britain had over the world market stemmed from their great inventions, namely; the stream engine, the railway train, the coke burning blast furnace, the power loom, the spinning jenny and the water frame. In time, the increasing globalization that took place in the latter years of the industrialized period caused her to lose this advantage.
Aero planes and motorcars were made by the French, German and American inventors, thus, the comparative advantage Britain held significantly declined in the later years of its industrialized period.
In the early years of industrialization Britain had rich coal and iron ore near the surface, but by the mid 19th century all the cheaply accumulated coal and iron were gone. Although there were deeper reserves, the advantage of the resource endowment significantly decreased. That being said, the British population growth began to significantly slow down in the late 19th century at that critical time when the American population began to grow rapidly.
The power of British rivals increased rapidly, via their population growth and innovations as such Britain’s power in the world market was proportionately reduced and their manufacturing industries were left behind. .
Britain was deemed as lucky to procure investors within its economy to help propel it during its industrial ages. Heading steep into the 20th century it was evident that an agglomeration of capital was invested in foreign industries, since the British investors saw it as more profitable to establish business overseas. It was a good investment for the British entrepreneurs but it also helped develop industries abroad, those industries to rival that of Britain’s.
The invention of the railway and the telegraph system in the mid 19th century encouraged banks to expand and establish branches distances away from the main offices. Many people lost money when they invested into small banks, so government regulations were introduced to make it easier for larger banking groups to be formed. There was security in any particularly large bank.
In mid 19th century The Bank Charter Act was introduced in order to reassure customers that their dollar invested in the bank was equivalent to gold sovereigns. This particular regulation had an enormous effect on bankers everywhere, the bigger banks became even more secure than the smaller ones, and as such mergers became ultimately inevitable.
The Midland bank was a small bank founded in 1836 by Charles Greach. But by the late 20th century there were 200 branches of the Midland Bank stationed in London alone. It was clear; mergers were now a common thing within Britain’s financial industry. Britain’s financial sector continued to grow until it became a landmark within it one of the largest and richest cities in the world – London. Britain had developed other major financial institutions such as the London Stock Exchange and The Commodity Market. This city had become known as the center of the world’s finances.
Britain’s current account deficit at the time would have led to a crisis but the foreign investments Britain had secured were more than enough to cancel out the trade deficit. It is common knowledge that Britain had fought two world wars and surprisingly enough these foreign investments helped finance the wars.
Britain had run up massive debt during the First World War, particularly with the United States of America, she had claimed to borrow an estimate of £959 million. This was not the end however; even with the great lost in wealth (approximately a quarter of Britain’s wealth was lost) there was an introduction of liberal economic policies, which pushed Britain’s economy further down with slow growth rates and high unemployment.
The national debt had increased 11 times what it used to be. Britain also had a streak of bad debts as she could not have expected repayment from loans given to Russia because of the communist takeover, nor could she expect the loans she lent to France because of the war damages France had incurred.
To manage her empire Britain decided to implement her Ten Year Rule, it stated that she did not expect to fight another war for at least ten years. As such there were major defense budget cuts to make up for the debt owed. This impact as would be expected further restricted Britain’s foreign policies. So the impact of the First World War significantly influenced and restricted Britain’s empire.
Continuing into the early 20th century, Britain felt the wraith of the American economy In the 1930s Britain experienced unemployment of 22.8%, but then a decrease to 13.9% in 1936 to 10% in 1938. But also, “Traditional industries such as textiles and coal mining were severely affected by the depression. So it was evident that there was even further decline in the manufacturing sector during this period. There was also deflation in the economy at the 1930s as prices for food and rent fell by approximately 15%.
Into the Second World War Britain plummeted, and it emerged in greater financial upheaval. It lost about an average of 12% of its productive capacity. By the 1940s British exports were in a decline by 35% as compared to 1935. Britain had almost exhausted its gold and dollar reserves on ammunitions, raw materials and some industrial equipment. Britain had even borrowed a further $31.4 billion dollars from the United States, as it was estimated near bankruptcy.
So after the Second World War, Britain had lost support from the United States lend lease program, which was said to be the life support of Britain at that time. Now with its huge lost in wealth the two world wars began to take its toll on Britain. So after supporting Britain in the wars, countries demanded their independence, and decolonization started with India’s independence in 1947. Britain was also losing its old markets as commonwealth agreements were made to only do regional trade with local and regional entities. It is here Britain took a strong structural change from the manufacturing industry towards the services industry, in this regard many industrialized parts of Britain was left in a steady state.
There were then packages with the intent of nationalization, as government tried to take hold of the economy. Devaluation of the pound was made, Britain’s economy still experienced low growth rates, and the new Labor government was unable to solve the problem.
In came the famous Margaret Thatcher who implemented many economic reforms, leading to deregulation and privatization of major industries. Competition policy was the forefront of her ideology which replaced that of industrial policy. This resulted in high unemployment rates, but subsequently led to significant increases in growth rates.
The British economy continued to experience rapid growth straight into the 1990s, with the exception for the recession experienced in the early quarters of the 1990s. Advances in technology continued to help the British economy and the conservatives kept rule until 1997, when they were taken over by Tony Blair’s labor party.
Blair introduced policies to reduce unemployment, gave power to the Bank of England to set interest rates and then introduced the minimum wage in Britain. But the Blair government decided to stick with the spending plans of the conservatives, and the economy kept on moving.
Heading into the 21st century, the labor party increased taxes and borrowing, utilizing the money for public services. The growth rates in this era were kept constant, but the pound value fluctuated. The Britain kingdom was fairly well off, during the 21st century until it experienced the 2008 great recession, which was deemed as the worst recession since the Second World War.
POST INDUSTRIALIZATION ANALYSIS
As stated in the beginning, this period is defined as that in which Britain’s economy made a transition from a manufacturing based system to a financial based system. The aim of our paper is to understand how capitalism changed (transitioned) from the previous periods into this one. We have noted that this change in Britain’s economy was not the result of one particular factor; it was the agglomeration of many important fragments. It had begun with the simultaneous changes in the populace, capital accumulation and world trade. But it was more so propelled by the impacts of the two world wars and the many changes that stemmed from them.
As compared to the previous two periods it was realized that the people of Britain had no say in any decisions being made for the country unless they had some significant amount of capital. Due to many constitutional reforms by the state this defining phenomenon of the populace had changed. The force behind these reforms came from pressures behind new founded labor institutions such as the trade unions. The need of these institutions, however, had originally stemmed from the pressure the industrialized period placed on its laborers.
The world trade had laid upon Britain an enchantment of the profit motive. But guided by policy systems and development of financial institutions the profit motive inhibited growth in Britain’s domestic investment. This restriction led to a gradual decrease in Britain’s comparative advantage in the industrial world market. But although the profit motive had caused Britain to eventually export more than they import, it had changed Britain’s national accounting figures. So the profit motive had transformed Britain’s economy as it became more dependent on increases in invisible trade and not so much on the production and exports of goods.
Capital accumulation and the profit motive however were not the sole signatories to the reforms in Britain, it’s necessary to make mention of the impact of technology on the system. At the beginning of the industrial period Britain had the advantage because they had the best technology in the world. But this did not stay as such, since given time, the major inventions in the world were not British. Some argue this was because technology booms are random and usually are only directly affected by significant investments in research and development.
Britain had fought two world wars and it had emerged victorious but not without its economical burdens. After the first world war Britain had to restrict is international polices as it incurred major national debt. But after the Second World War, Britain was hanging on to America to keep functioning. It had lost nations due to demand for decolonization, and it lost world markets due to new trade restrictions from Caribbean countries.
The promotion of deregulation, privatization, and competition polices let to a recovery of the economy. Monetary policies were transformed- allowing the Bank of England to set interest rates. These changes promoted massive growth of the British economy and the recovery of the system. It is also during this time frame that the government made decisions that define post industrialization today. The government set their famous safety nets in this period. They set: minimum wages, increase taxes and increase their public services. These safety nets are what vastly distinguish this period from previous ones, in the two previous ages there was no concern for the well being of the British populace as compared to the post industrial age.
Britain’s Development via Industrialization
A Critical Analysis
As outlined in the heart of this paper Britain had traveled through three periods each leading successfully to the next. The paper seeks to illustrate how essential the fundamental elements of capitalism are to a nation’s development. It identifies the uniqueness of capitalism and its resilience in light of contradictory forces.
There had been fierce debate over the roles of government and the effectiveness/fairness of protectionist policies in national development. Contrary to modern literature and advocates for free trade, Britain’s advantage in the industrial period (protection of infant industries) was maintained by strong protectionist measures and government’s hand at each door step of the economy, (from the 17th to 18th centuries). The philosophy/ideology of mercantilism reigned for at least a hundred years: the belief that the source of a nation’s wealth is through the barring of imports whilst boosting exports. This gave Britain’s industries an advantage of a hundred years. Sectors were able to develop, change and learn from their mistakes. Most importantly, they were able to become efficient and specialist within their fie
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