History
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HST363_4_IndCapitalism.pptxIndustrial Capitalism
Industrialization and the Economy as an Expandable Phenomenon
Topics
Review
Slavery and capital accumulation: Columbian exchange and peculiar periphery
The rise of the factory system: from 18th c. gig economy to centralized production
From mercantilism to free trade: Liberalism
Review: Old World Trading Circuits Polycentric
Where’s Europe in all this?
How did economic backwater (Europe) with lower standard of living than that of world’s economic power houses (China & India) reverse its fortunes?
Armed trading
Mercantilist policies
Europe ascendant thanks to opportunities presented by New World (a peculiar periphery)
Riches of its own (fur, timber, precious metals)
Riches to be made there (economic botany)
Intentional application of what Europeans learned from Columbian exchange
Conquest in the East
Conquest in the West
Slavery & Capitalism c. 1600-1800
The question: How did economic backwater (Europe) with lower standard of living than that of world’s economic power houses (China & India) reverse its fortunes?
India and China had a big comparative advantage (ability to manufacture better stuff at better prices):
Technical superiority in textile and other manufacturing
Dying techniques
Agriculture (seed ratios of 20:1, as opposed to 8:1 in England at its best): cheap food = cheap wages
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Slavery & Capitalism c. 1600-1800
Answer Part I:
capital and manufacturing base of modern economy dominated by “west” emerged not from “free trade” but from early modern state’s response to meeting its needs as summed up in the term mercantilism
Attempt to create comprehensive economic policy to serve fiscal interests of the state
Goal: Accumulate bullion or specie (silver & gold)
Self-Sufficiency or autarky and policies to promote it
Import as little as possible
Limit consumption
Protect/Promote domestic industry
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Slavery & Capitalism c. 1600-1800
Answer Part II
New world slavery a key part of the mercantilist system
Slavery made substantial contributions to the capital accumulation that underlay the Industrial Revolution, esp. its British variant
The Peculiar Imperial Periphery:
How sweet it is!
Sugar (and later coffee, cotton, and other things previously imported from East) could now be had from colonies)
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Sugar
The ultimate commodity and application of Biological imperialism a.k.a. known as the “Columbian Exchange.” Note the environmental consequences.
“Old World” vs. “New World” Slavery
Old
Non-racial
Not always an inherited status
Individual status
“labor” as property
Slaves had some legal protections (even if not always enforced)
families not generally split
Slaves employed in a variety of functions at all levels of household economy
New
Defined by race
Africans went from “> hardy” to “< human”
Spanish precedent on Canaries
Nearly always inherited
Collective status
“person” as property
Slaves had no legal protections
Families split at will of owner
80%-85% employed in field work
Triangle Trade: Exploiting the Peculiar Periphery
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Slavery Became Everyone’s Business
Future PM Gladstone made fortune from it
Slavery created market for other goods (e.g., breadfruit, cloth)
Slavery & Capital Accumulation
Mercantilist policies ensured that Britain and its North American colonists made money on every leg of triangle trade
Asiento (1713-1750): Brits got right to supply slaves to Spanish colonies as well as their own in the Treaty of Utrecht that ended War of the Spanish Succession
Creation of British South Sea Co.
Shipping
Monoculture food imports from other colonies, England
Slaves needed clothing, providing market for protected domestic producers
Great stimulus to shipping and financial industry
Lloyds (1688)
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Thus…
capital and manufacturing base of modern economy dominated by “west” emerged not from “free trade” but from early modern state’s response to meeting its needs as summed up in the terms “armed trading” and mercantilism
Britain’s new world “peculiar periphery” a key part of the mercantilist system.
Powered nearly exclusively by slave labor.
Slaves and slave trade provided cheap commodities and a captive market for British manufacturers to exploit (and thus develop) from behind protective tariffs.
Looking ahead, made substantial contributions to the capital accumulation that underlay the Industrial Revolution, esp. its British variant.
Indeed, early insurance and financial industry so embedded in slave trade that Lloyd’s, Aetna Insurance and other financial institutions have become the object of reparations lawsuits over the last decade.
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But…
All of this taking place within existing system of manufacturing that was still largely reliant on human, animal, wind, and water power (i.e., biological old regime).
Protectionist mercantilist policies could only stave off comparative advantage enjoyed by Asia for so long.
SO—what changed?
Industrial Revolution?
First—Europeans continued to suppress Asian production through conquest and coopting local elites.
Second—the industrial revolution story I’m sure you all know (coal powered, steam driven mechanization).
Indeed, coal fired steam power did give Europe a competitive advantage, as it did reduce production costs and allowed producers to escape reliance on annual solar energy by tapping into solar energy trapped in coal.
BUT—the key component in this that had to happen even before production could be mechanized and powered by steam was the centralization of production in factories.
Why Factories? Workers pose in front of Morraine GM plant on the day it closed
The Rise of the Factory System
What IS an industrial revolution? How does it fit in with the emergence of a modern world?
Why the West and not China or India?
Why factories?—Character and consequences of industrialization in West
Modern “isms”: Liberalism and Socialism
Why the West?
Why did West come out on top?
Traditional interpretation:
Scientific Revolution
population dynamics (late marriage = more surplus for investment)
Fewer people working harder; “industrious revolution” became industrial revolution (deVries)
Problematic given broad demographic trends
Free markets for commodities, land & labor more efficient (> capital)
As we’ve seen, not true (Mercantilism)
State protected or at least respected private property
Why did China (most likely Asian candidate) lose out (i.e., not have an industrial revolution)?
Traditional interpretation:
No Scientific Revolution
“Oriental despotism” meddled in markets, property--inefficient
“pre-industrial demographic regime” strained resources and prevented capital accumulation
Chinese population
140 million 1650
225 million 1750
400 million 1850
Why the West? West managed population size better
Malthusian Interpretation
Thomas Malthus, 1766-1834
WRONG!
No evidence linking European science to beginning of Industrial revolution or its technologies
Chinese markets highly developed in spite of regular state meddling in food market
Efficient transportation network allowed high degree of specialization
As measured by economic historians, markets more efficient than those in England, France or US
Asians, Chinese in particular, were just as adept at reading demographic signs of the times and adjusting their family size accordingly
Both Europe and Asian states running up against wall of biological old regime (ripe for a Malthusian crisis)
Why not China?
So why not China?
In one sense, too much freedom
As Chinese peasants migrated to peripheral areas, many opted out of market—become self-sufficient rather than specializing
“self-sufficient proto-industrialization”
Gender/cultural explanations
Resulted in:
Constraint on development of industrial cotton textile industry
Reduction of raw cotton supplied to textile producing centers
Reduction in rice supplied to manufacturing regions
Reduction in domestic market
Labor intensive agriculture instead of industrial revolution
Why did the West come out on top?
Case of India
Consequences of Mercantilist Policies
De-industrialization: ultimately, production of cotton cloth in India banned
Why did the West come out on top?
India
High yields/acre
Low-priced food
Relatively low wages
Comparative advantage
England
Low yields/acre
High priced food
Relatively high wages
Comparative disadvantage
Why did the West come out on top?
Success of mercantilist protectionism
First tariffs, and then ban on import of cotton cloth in 1707
Allowed domestic producers to control the home and colonial markets
But--Indian textiles still ruled the globe
The Rise of the Factory System
So why the West (UK in particular)?
Mercantilist colonial policies coupled with “peculiar periphery” of the New World ensured cheap raw materials and large captive market, stimulating production and providing capital
Chinese/Indian peasants free to make their own goods; slaves were not
Other reasons:
“Land-saving mechanisms”
High food prices (& wages) encouraged mechanization in Europe, > supply of labor
Coal = transcendence of biological old regime
Cheap capital from slave trade
Factories
Why did the West come out on top?
Advantages of “peculiar periphery”
Captive markets and cheap capital
Rise of the factory system of production
Eli Whitney’s cotton gin
application of coal fired steam power
But NOT “Free Trade”
Loss of N. American colonies
Opium Wars (1839-1842, 1856-1860): Britain forced China to allow it to trade opium at the barrel of a gun
Repeal of Corn Laws (1846), marks the first time “free trade” gets any legal recognition.
Why Factories?
To answer this, we need to examine:
The nature of preindustrial manufacturing (a.k.a. “ruralization of manufacturing,” “cottage industry,” or the “putting out” system)
The connection between this system and rural norms (persistence of subsistence mentality)
Employer attitudes toward production
An “energy crisis” of the 1760s-1770s
Resultant belief that workers needed more supervision—needed to be disciplined
The Rise of the Factory System
Factories
Essential to the application of sophisticated (and expensive) machinery
How and why did entrepreneurs/merchants decide to start centralizing production in factories?
From wool to cotton (1707)
Rapidly growing demand for cotton textiles (slaves had to be clothed, as did others; cotton fabric better than wool)
The Rise of the Factory System
Initially > consumer demand met within existing “putting out” system of manufacturing (factories rare until last third of 18th century)
Today we call this the “gig economy”: Uber, baby-sitting apps, etc.
Advantages of “putting out” system?
Cottage producer assumes > capital cost (site of manufacturing and tools); entrepreneur only out cost of raw materials if market shifts
The Rise of the Factory System
So why change?
Entrepreneurs offered cottage laborers > wages to increase production, but money, given their lives, meant less to them than their time (nothing for them to buy with it). SO, instead of working more, cottage laborers worked less.
Entrepreneurs, urban dwellers with things to purchase with > amounts of money, couldn’t understand this.
Came to the conclusion that a) workers were lazy and needed to be taught how to work (needed to be supervised), and; b) that high wages encouraged this.
Perceived crisis of existing system & moral justification of low wages
Factories as social institutions for teaching discipline
Factories created to discipline workers perceived of as lazy)
“Efficiencies” of factory production (mechanization, application of steam) not realized until after factories created to produce in traditional way.
The Rise of the Factory System
Creating a division of labor
Dividing production into a series of simple tasks
This came before machines
Shift from artisans (who made the entire piece) to “hands” (that knew only how to perform one part of the process)
Division of labor opened up employment of women and children (who were easier to discipline) and depressed wages
The Rise of the Factory System
Josiah Wedgwood (1730-1795)
"to make such machines of the Men as cannot err."
Wedgwood conditioned all to respond to factory bell; be inside before it stops ringing, or don’t work that day.
If you don’t work, you don’t eat
Length of workday dictated by employer: 12-16 hrs.
The Rise of the Factory System
Mechanization came second
Initially resisted (expensive), but became more attractive with
> in demand
Realization that machines were also tools of industrial discipline
Victory of Machines and Owners
Triumph of industrial capitalism
Not readily apparent until 19th century
Corn Laws (1815); land-owning aristocrats still had power
Growing resistance from artisans (Peterloo, Luddism, Chartism)
But by 1850 very much the emerging new world order
Political and economic victory over workers at home
Political and economic victory over competitors in Asia
First Opium War (1839-1842)
Conversion of India from cotton exporter to importer (“de-industrialization)
Keys to Happiness: “Isms” of the Modern Industrial Age
Liberalism
Ideology of the bourgeoisie
Primacy of property
Primacy of the Individual—individuals as repositories of rights
Utilitarian morality
Equality in legal sense
Free trade
Limited, representative government to protect property and enforce contract
Faith in reason & progress, education and science
Keys to Happiness: “Isms” of the Modern Industrial Age
Socialism
Ideology of the proletariat
Emerged in attempts to address the ills of industrial society
Primacy of the collective—classes as repositories of rights
Utilitarian morality
Equality in socio-economic sense
Equal trade
Faith in reason & progress, education and science
