UNIT-2
ECONOMIC DEVELOPMENT OF UK, USA, RUSSIA AND JAPAN
World prior to the Industrial revolution (Background):
The course of evolution of our manufacturing system started with the guild system which then passed on to the Putting-Out system which then finally led us to the Factory system.
In the guild system, People from the same sector in the same city would come up together to form an association to protect their businesses. But after the demands increased, the guild system declined which led people to the Putting-Out system.
In the Putting-out system, all the raw material and final goods were owned by the merchant. The merchant would provide raw material to the worker and the worker would turn it into final goods at his home or backyard only. The final good was finally sold in the market by the merchants.
Factory system- The invention of machines led businesses to the race of mass production which gradually ruled out the putting-out system. The production location shifted from homes to specified factories. The workers travelled from home to work in the factories. Workers became one of the factors of production, and all the factors of production were now owned by the capitalists.
The Industrial Revolution
The industrial revolution started in the second half of the 18th century. This led to an enormous development in the economic setup which we call as the economic revolution. This basically started in Europe, England in particular. It is the revolution in the method of production which was mainly based on technological innovations. The mechanized production was backed by the development in the communication, transport and power sources. Hence, this revolution increased the potential of the manufacturing sector manifold, as a result of which there was an economic revolution as well. The Industrial revolution not only evolved our production and economic system, but our social and political system as well. Hence, this led the world to the economic revolution.
Why Industrial revolution in England (causes)?
After the decline of Feudalism in Western Europe, including England, the people there began to search for new methods to earn more money. This search for monetary gains gave birth to Capitalism.
At the same time, it was a time when new cities and towns were developing simultaneously and villagers were migrating to these new cities and towns for new opportunities. People’s lifestyle was going through a drastic change and demand for manufactured goods was on a rise.
Geographically, England is an island country which protected it from foreign threats to a large extent and helped it maintain peace. The sea ports, due to its location, helped it trade with external regions via marine routes which increased their profits. This led to a global economy.
Large mineral resources, like iron and coal, also assured availability of raw materials.
Psychologically, the society was adopting democratic principles due to the impacts of renaissance where people now focused more upon the reasons and facts.
Finally, British imperialism and rule over other countries ensured enough money supply to invest into new innovations and technologies for the industrial revolution.
Components:
Steam Power-Invention of steam engines by James watts in 1769 gave boost to production because manpower based manufacturing and hydropower were not so efficient. These engines were used into textile sectors which increased imports of raw materials like cotton many times. Steam engines were later also used to run Trains which connected the world in a whole different manner.
Transport and communication- Railways connected the interior parts of colonies, from where raw materials were to be extracted, to the ports. Coal and cotton, etc. were easily transported to ports via rail networks which later were delivered to England. The delivered materials were then converted into finished goods. Roads were also modified so as to smoothen the transportation of goods from region to another.
Agriculture revolution- Prior to the great economic development due the industrial revolution, the agricultural revolution took place where cash crops were given priority. The new farm machinery tools like plough and mechanical system to drill seeds reduced the labor requirements for the farm fields. Hence, there was ample of labor available to support the new economy based on industries.
Textile sector- Textile was the major reason behind such a boost in economic development at the time. In the 1700s the European countries made huge profits from the colonies, especially India. British businessman started importing raw cotton from Indian subcontinent to convert it into finished goods to meet the booming demand back in Britain. When the traditional machines could stand with the demand, innovations for new technology took place. Machines like power loom increased the production capabilities, improved quality of produce and reduced the cost of production at the same time. This made such technology based machinery more popular in England and as a result the entire economy underwent enormous development. Cotton gin was another innovation that solved the problem of shortage of cotton fiber as it could separate cotton threads at much faster rate than the traditional method could.
Iron production- The steam power and machinery led to more demand of Iron. England had huge deposits of Iron at the time and the development of blast furnaces along with availability of iron ore helped the country to produce such machinery in huge quantities.
As a result of all these components the world, led by England, underwent a huge economic revolution.
Spread of the Industrial revolution.
Machine use was spreading to other parts of European but at a much slower pace after 1815. The napoleonic wars ended in 1815, but Europe was much agitated at the moment. Due to demand for democracy, unification wars and interstate wars; the economic development could not take place in the rest of the Europe. But by the last quarter of the 19th century, many countries worked to bring in industries in their nations so as to evolve their economies.
Germany was another leading nation with respect to economic prosperity. After Germany’s unification, it’s industries developed manifolds. As a result Germany and Britain became arc-rivals as a result of which the Great War took place. After 1870, Germany became a major hub of chemical industries.
Outside Europe, the major player was the US. But even the USA could not work much for economic prosperity at least up until 1870. The USA, for almost the first 3/4th of the 19th century, underwent major turmoil due to prevalent mercantilism and civil war. It was only after 1870 that the USA began to focus on indigenous industries.
It can thus be concluded that it was the number of favorable conditions that led Europe in general and England in general, to lead the world economy in the 19th century.
Social impacts and prospects of the industrial revolution.
The impact was significant and Britain emerged as the dominant economy of the world. The share of agriculture in the economy declined drastically and the manufacturing sector was on a constant rise. But the impact on people was a little different. More people migrated to cities and problems like crowding, living conditions, sanitation, health became more prevalent.
The urban area was now basically divided into two parts. One, where rich and capitalists lived with luxury life, but they were less in number. Others were poor and lived in crowded conditions. Due to this division, the rich exploited the workers and nothing was done for the social security and development of the workers.
The great economic development in Europe proved that the concept of lassiez faire (that the less the government involvement in the economy is better for business) is defective and government’s intervention is necessary so as to protect workers’ rights. This increased demand for rights and hence, democratic system of government was in popular demand in the country back then. Gradually trade unions were legalised to regulate the economic structure of the industrial system in a more systematic way.
Environmental pollution was also on an increase. This led to many health problems across the developed Europe and parts of the USA of the time.
Economic impacts and prospects of the industrial revolution.
Low per Capita Income- Though the economy of the time was on a rise, exploitation was still persistent. People were given the right share of their income. Per capita income remained low.
High Population Growth Rate- Rate of population growth was increasing. Demand for jobs, as a result, was also increasing. High inflow of labour reduced their average income.
Finance capitalism- In the late 19th century, the control and direction of large areas of industry came into the hands of financiers. This period has been defined as "finance capitalism," characterized by the subordination of the process of production to the accumulation of money profits in a financial system.
From mercantilism to capitalism- Mercantilism was a regressive system prevalent in Europe. It was a force that was resisting European economy from developing. Adam Smith highlighted these demerits and gradually capitalism took place in the country.
Led by textiles- Major industry of the time was the textile sector. The reason behind this was the development of particular machinery for this sector and easy availability of cotton as a raw material.
Urbanization- Agriculture was on a decline and industries were on a rise. New cities were being developed and migration into cities was more than ever. These factors changed the entire demography of the Western Europe during that time.
England’s overall manufacturing sector grew at an average annual rate of 2.2% during the 19th century and employment in manufacturing grew at an annual average rate of 0.8%. Overall, employment in manufacturing had increased by 30% between 1870 and 1915. This, of course, only measures the increase in the input of labour and not the quality of labour. Although education and skill levels increased in the UK at the end of the nineteenth century but UK was still falling far behind the USA and Germany.
In the 1870s, capital per worker in UK manufacturing was approximately 10% higher than in the USA and 30% higher than in Germany. But by 1900 the position changed and US manufacturing was 90% more capital intensive than British manufacturing and German manufacturing had caught up with the UK. This suggests that Britain’s poor relative investment performance led to its dominance to a decline.
The structure of production in UK manufacturing affected its growth and development. England’s small businesses in manufacturing were inefficient and relatively unproductive compared to larger multi-plant enterprises that were more prevalent in the USA and Germany.
England was good enough to develop new ideas and technologies but it could not adopt the gradual development of their own inventions. This is both a technological and an entrepreneurial failure. (Cotton industry failed to adopt ring spinning and automatic looms). The advent of steel and chemical industries, which enjoy economies of scale, led to the creation of large corporations. The British maintained the status quo with small to medium size family Page 4 of 4 manufacturing industries.
During the last quarter of the 19th century, England had 43% of world manufactured exports. But by 1913, England's share of world manufactured exports had fallen to 32%. This can be explained by a lack of price competiveness and the difficulty of entering or remaining in overseas markets which were increasingly developing their economies behind tariff barriers. The failure to invest and adopt new technologies harmed competitiveness, which in turn reduced exports, which would have deterred new investment.
References:
World History by Norman Lowe
Spectrum’s A brief history of modern India.
