INTRODUCTION

Nutrition has begun to figure as a dynamic force in history. A well-nourished population in a developed economy, good harvests and unsurpassed procreation expanded the market and triggered the industrial – even industrious – revolution (Komlos 1990; de Vries 2008). The Englishman's taste for meat provoked high wages, driving investment in labour-saving technology that generated industrialisation (Allen 2009a: 47–8). The potato boosted population growth, fuelling urbanisation (Nunn and Qian 2011). Improved nutrition led to cognitive gains and better human capital needed for economic growth (Floud et al. 2011: 22–4). Indeed, Fogel has argued that increased food availability and improvements in human thermodynamic efficiency (in turning food into work effort) accounted for about 20–30% of British economic growth since 1790 (Fogel 1994). Eventually, post-1870, better maternal nutrition led to falling infant mortality and demographic transition (Millward and Bell 2001). Good food made us grow taller and heavier, so that we are now healthier, work harder and live longer: a technophysio evolution (Fogel and Costa 1997; Fogel 2004). In the very big picture, it was the act of cooking food that made us human (Wrangham 2009).

Path breaking research projects – in energy cost accounting, anthropometrics, regional dietaries and health – provide a fresh lens through which to gaze upon economic development across the United Kingdom. Finding out about diet, its changes and adequacy, and its links to health, casts new light on: the food puzzle, whereby incomes went up but food consumption did not in the years 1770–1850 (Clark et al. 1995); the agricultural revolution; free trade; industriousness and consumption choices; the standard of living debate; time use and labour productivity; the value of open countryside; gender discrimination; urban disamenities; and market integration. It opens up new areas to be explored, around hunger, human growth, longevity, cognition, demography, inter-generational transmission of health inequality and more. How long people live, how many children they bear, how hard they can work, how much they consume, all shape the economy.

INTRODUCTION

The two centuries since the French Revolution have been characterised by pivotal changes in the power relations between nations, the financing of wars, and the actual practices of warfare. European nations had already amassed great empires prior to that, but the real culmination of their political and economic aspirations occurred in the nineteenth century, in particular for Great Britain. The nineteenth century also featured the rapid advance of industrialisation, mostly in the West, which helped West European powers to acquire great military forces of unparalleled proportions. The naval supremacy of the West was proven beyond doubt during the opening of the Chinese and Japanese markets from the 1840s to the 1860s, and Great Britain played a leading role in these efforts, especially the Opium Wars. The age of total war that began in the modern sense with the French Revolution and Napoleon pushed European states to adopt more and more efficient fiscal systems in the nineteenth and twentieth centuries, essentially copying British practices, and enabled some of them to dedicate more than half of their GDP to the war effort during the World Wars. Whereas in the pre-nineteenth-century world military spending was typically the dominant item within state budgets, even thrusting the most eager rulers and nations towards default, the industrialised nations developed more efficient budgeting systems to cope with the threat and execution of wars.

The most successful fiscal model for European states to follow was the so-called British Model, which entailed developing an elaborate fiscal and financial system to support economic, political and military expansion, including the use of public debt to finance military endeavours. Subsequently, and with the emergence of modest welfare state priorities by the early twentieth century, the representative share of military spending both in terms of budgets and the economy as a whole started to decline very slowly (with the exception of the periods of the World Wars and the early Cold War); this was also the case for Great Britain.

INTRODUCTION

In the economic history of the modern world, Britain occupies a place comparable to the role of Palestine in the history of religion. In many ways, it was the first economy to modernise, to industrialise, and to ride a wave of gadgets and innovation that swept away the shackles of poverty that had chained much of the population of all pre-industrial economies. By 1700 it was no longer as poor as it had been at the time of William the Conqueror, but progress had been slow and growth had taken place by fits and starts, punctuated by reversals and famines. Economic growth as a more or less steady trend, driven increasingly by innovation, raising living standards to levels not imagined in anyone's wildest dreams, has become (almost) a worldwide phenomenon. It all started in eighteenth-century Britain, the economic trail blazer of the industrialised world.

The economic history of Britain after 1700, as Deirdre McCloskey (1981: 118) has memorably written, was not the age of cotton, nor the age or steam, nor the age of iron, but the age of improvement. It was a period which unashamedly thought of itself as such, as Briggs' eponymous book noted. Briggs (1959: 2–3) notes that the ‘word “improvement” itself, which now sounds sober, respectable and emotionally threadbare, was capable then of stimulating daring flights of imagination’. Briggs' book referred, of course, to the age of the industrial revolution and the first decades of the railroads, but the belief in the possibility and desirability of ‘progress’ and ‘improvement’ predated the industrial revolution by many decades. The industrial revolution, from one point of view, was the implementation of a set of beliefs that had slowly been ripening among the British intellectual elite in the century and a half before the onset. Progress and Improvement were ‘in the air’ – what has been called the Industrial Enlightenment (Mokyr 2002) was just one manifestation of it. It went in parallel with a ‘medical enlightenment’ (Porter 1982) and an ‘agricultural enlightenment’ (Dickson 2005: 288; Mokyr 2009a: 186–8).

INTRODUCTION

This chapter is concerned with material conditions, and, in particular, changes in the size distribution of income and changes in inequality and poverty over time. Money has no intrinsic value, but it does provide the means to access goods, services and activities that do have value. In consequence, the chapter uses income as a proxy for these, though well-being is not adequately captured in this way. Most people would agree that their standard of living is determined by more than the amount of income they have, or by how much money they receive relative to others. As Sen (1987: 1) points out, ‘You could be well off, without being well. You could be well, without being able to lead the life you wanted. You could have got the life you wanted, without being happy.’ Indeed, as we shall see at the end of this chapter, for the period for which data is available, there is discord between judgements based on the analysis of the available indicators of subjective well-being and evidence relating to the material progress of living standards.

The enumeration of poverty is often simply the outcome of a further small step in the analysis of changes in income inequality, as there is a view that the right way to define a poverty line is relative to a chosen percentile in the distribution of equivalised household income (a measure of income that takes account of differences in a household's size and composition). Piachaud (1988) and Glennerster et al. (2004) strongly advocate the use of such relative poverty measures. Current British official and quasi-official measures of poverty or deprivation also reflect this position and employ a measure based on the number or proportion of individuals who have less than 60% of equivalised median income.

From an historical perspective, however, it is clear that what it means to be ‘poor’, and what it means to be in ‘poverty’, have evolved as categorical terms as the nation has become more affluent. The World Bank tends to use ‘absolute’ or ‘bare subsistence’ poverty measures, such as their ‘a dollar a day’ standard, for international comparisons.

INTRODUCTION: LONG-RUN TRENDS

This chapter provides a brief introduction to the history of Britain's engagement with the international economy between 1870 and 2010. It begins by discussing long-run trends in the integration of the British economy with the rest of the world. Economic historians are typically interested in four types of flows between economies: trade in goods and services; flows of capital; migration flows; and flows of ideas and technology. The last flow is probably the most important one for countries hoping to catch up to the international technological frontier. While this was not the right way to characterise the British economy in 1870, it probably was at various points after the Second World War. Unfortunately, such flows are also the most difficult to quantify, and so I follow the bulk of the literature in concentrating on trade, capital flows and migration.

When measuring the extent to which commodity, capital or labour markets are integrated at various points in time, researchers have adopted several approaches. The most straightforward is simply to measure the extent of trade, or capital flows, or labour flows, and see how these vary over time. In order for intertemporal comparisons to be meaningful, it is common to express the flows as a percentage of GDP, or relative to the total population, as appropriate. Another approach is to focus on the costs of transacting internationally, which will be reflected in price gaps for a homogeneous commodity, or financial asset, or type of labour, between two markets. Falling international price gaps are a sign that markets are becoming better integrated over time, rising price gaps a sign of disintegration.

It is possible that prices could converge internationally for reasons having nothing to do with trade, while trade can increase for reasons other than the integration of international markets. If, however, price gaps converge at a time of falling transport costs, trade liberalisation, and/or rising volumes of trade, then it seems safe to conclude that integration is taking place.

INTRODUCTION

Across much of Europe, by 1650 economic issues had become what they have since remained, a prominent ‘reason of state’. If for centuries laws, taxes, privileges and proclamations had framed and affected economic life, in Britain and elsewhere, many more concerted efforts were now made to apply political power to attack poverty and encourage prosperity. Initially, Britain's dysfunctional constitution limited what could be done. But gradually at first, rapidly after 1688, a new political order was constructed that overcame some key limitations, centring on a significantly heightened role for parliament and a frequently effective ‘fiscalmilitary state’. It might be expected that ideas to enhance economic life could now be effectively implemented. Yet bold statutes and loud exhortations often encountered indifference, evasion and resistance. In contrast, numerous more modest proposals to use political power for economic ends, mainly local or personal, collectively proved highly significant. A state that raised money and waged war pretty successfully was far less good at implementing economic policies; but parliament's supreme legislative power was vigorously used by many thousands of small and scattered propertied interests, a use that continued unbroken beyond 1870.

Attempts by central government from the 1740s to reinvigorate imperial economic regulation, both within Britain and across the Atlantic, largely failed, categorically so with American independence in 1776. It was now clear to many key figures, both within the government and outside, that grand plans for the economy needed dousing with a cold shower of realism. Over the next half century there was a major rethinking of where the government should and should not look to act, allied to major administrative reforms. After 1815 such ideas chimed with taxpayers’ shouts for ‘cheap government’, as well as the increasing influence of classical economics. Yet those changes sought to address not just past failures but new and evolving problems, from revolutions in some industries, to the infant trade cycle, urban squalor, unbalanced labour markets, hazardous work, white-collar crime and currency shortages – in short, the unforeseeable problems of the first industrial revolution.

INTRODUCTION

Mid-Victorian Britain was a wonder: the workshop of the world, the hegemon behind the Pax Britannica, the manager of the international monetary system. The average Briton lived in a city, earned a living as an industrial or service sector employee, and would see her children enjoy living standards that marked a decisive break with the past in terms of health, education, consumption and leisure. Britain had come a long way from its early modern position as a peripheral, backward country. This chapter explores the evolution of the economy from 1700 to 1870, during which it passed through the decisive phase of the industrial revolution. The first section sketches a macroeconomic outline of developments in the period. This is followed by an effort to set these achievements in a comparative perspective, emphasising what was distinctive about Britain's experience. A third section further exploits international data to evaluate several hypotheses about the causes of the industrial revolution that have featured in recent debates. The final section offers a summary and conclusions.

1700–1870: A MACROECONOMIC OVERVIEW

Gross domestic product (GDP) measures a country's annual production of goods and services. Expressed in per capita terms, it is an indicator of the economy's productivity and its ability to meet the needs of its people. Figure 1.1 plots two estimates of inflation-adjusted (‘real’) British GDP per person. The first is based on the estimates of Crafts and Harley (1992); the second is a new annual series calculated by Broadberry et al. (2011a). Both show a dramatic increase over the period under study. Output per person more than doubled between 1700 and 1870, reaching 2.4 times its initial level. A sharp acceleration is evident around 1830, when the growth rate jumped from 0.3% to 1.1% per annum.

Only by today's standards might this sort of growth be judged slow; historically it was unprecedented.

INTRODUCTION

The British economy c.1700 was mired in a world of high transport costs. It is true that one could travel by coach between London and important cities in the southeast already in 1700 and that coal was being shipped on coastal vessels from Tyne to London, but for much of the economy high transport costs were a major constraint on economic activity and travel. In the 170 years that followed, transport improved greatly. Road transport evolved from packhorses and small wagons to large wagons and stagecoaches running continuously between London and major cities. Eventually steam-powered rail wagons and coaches would displace both horse-drawn wagons and stagecoaches resulting in a fundamental change in freight transport and travel. Similarly, large barges and vessels powered by steam eventually displaced smaller vessels on rivers and in the coastal trade. Along with technological change there was tremendous investment in transport infrastructure most notably in the canal and rail network.

By 1870 Britain had experienced what historians have called a transport revolution (Bagwell 1974). The most clear indicator was the dramatic increase in travel speeds and decline in freight rates. As this chapter will document, railway freight charges per ton mile in 1870 expressed in real terms (i.e. adjusting for inflation) were equal to one-twentieth the freight charge per ton mile for horsedrawn wagons in 1700. Journey travel times by railway were one-tenth the travel time of coaches in 1700. Although such calculations emphasise the importance of railways, they are not the entire story. There were significant reductions in road transport freight charges and journey times before the railways and of primary importance to industry and mining there were large reductions in transport costs associated with the shift from roads to canals. There were also major improvements in coastal travel speeds with the coming of the steamship. Long-distance shipping also witnessed dramatic reductions in freight charges especially along the North Atlantic routes.

INTRODUCTION

As we explain in the corresponding chapter in Volume I, it is important for economic historians to be familiar with the broad contours of the economic ideas of those who lived through the periods they are studying. This chapter deals with a period when both the economics profession (a term that hardly makes sense before 1870) and its relationship to the rest of British society altered considerably (for a broader perspective, see Backhouse 2002). Perceptions of the nature and status of economic knowledge changed in academia, in government and among the public at large. Economic ideas cannot be understood apart from the institutions and structures in which those ideas are generated and employed. During the early twentieth century economics became an academic subject, and for most of the century academic economists determined what counted as legitimate economic argument and policy. This position was challenged in the closing third of the century, and differences between arguments advanced by academics, journalists, civil servants, think tanks and economists employed in business became more pronounced.

The appointment of William Stanley Jevons at Owens College, Manchester, in 1863 marked the real beginning of the process by which economics became a university discipline in Britain. Marshall's Cambridge Economics Tripos was established some forty years later, and during the intervening period the formal study of economics was sporadic and localised. Nonetheless, from the 1870s the University Extension movement broadened the base for the teaching of economics, while establishing the idea that the subject was one that had to be studied systematically. Discussion in a public sphere made up of an evolving network of academics, policy-makers and journalists now took place in the context of more specialised debates among economists, which were accessible only to those who had a more systematic schooling in the subject.

Jevons was the first in Britain to publish a book devoted to the new marginalist approach to economic theory; but his major initial academic impact was on a group of students and tutors in Oxford, who during the 1880s formed the centre of British economics.

These two volumes of The Cambridge Economic History of Modern Britain follow their predecessors, published in 1981, 1994 and 2003, in bringing together experts in economic history from across the world to reflect on our current understanding of British economic history since 1700 and to describe and explain the most recent views of important historical controversies. As in those earlier volumes, the intention is to provide a text which is comprehensible to an intelligent lay audience, both at universities and more widely, but which does not avoid the sometimes difficult task of explaining economic theory and statistical methodologies as they have been used to assist in historical interpretation.

In the preface to the edition of 2003, these words appeared: ‘… change is always with us, a lesson which needs to be learned by each generation. It should be learned particularly by those eminent economic commentators who, at each stage of the business cycle, confidently predict that that stage, whether of boom or bust, will go on forever.’ As this new edition is written, in the midst of the worst ‘bust’ since the 1930s, those words possibly give grounds for some optimism. Historians usually reject any notion that one can ‘learn from history’, but it is a matter of observation – as described in these volumes – that economies, including the British economy, are resilient, that invention and innovation continue and that economic growth resumes after periods of decline.

We also trust that recent economic events will raise the profile of historical analysis. The Queen is reputed to have asked a group of economists at the London School of Economics: ‘Why did no one see this coming?’ As she implied, economic theorists failed to predict, forestall or even – after the event – very clearly explain the factors that contributed to the global economic meltdown and subsequent recession.