UNIT 2

Part 1: Sudrià, Carles y Gaspar Feliu, “Cap. 3. La Revolución Industrial” y

“Cap. 5. El proceso de industrialización”. En Introducción a la historia
económica mundial, 2ª ed., 71-94, 115-137. Valencia, PUV, 2014.

Part 2: Sudrià, C. and Feliu, G. (2013). "The emergence of the international

economy", in: Introduction to World Economic History, 2nd ed. pp. 139-179,

PART 1

1. Introduction

1.1 Defining the Industrial Revolution

The Industrial Revolution is the productive mutation generated by the
beginning of an irreversible process of strong growth in production and
productivity thanks to the invention and application of new machines, the use
of new, versatile and cheap energy sources, and changes in the organization
of industrial production and labor, concentrated in the factory.
It was a rapid transformation, localized in Great Britain, sustained by
agricultural growth, with innovations such as factory work and the use of
steam power.
The Industrial Revolution was not a "revolutionary" process; it only initiated the
process with a strong acceleration in some sectors that would spread to other
productive sectors and countries (industrialization), culminating at the point
where the majority of society's income does not comes from the primary
sector.

1.2 Chronology and geography

The starting point was technological innovation, which affected the textile
sector with the development of the Spinning Jane in 1765, making spinning
and weaving processes more efficient. The following year (1766), innovations
also occurred, with the creation of the steam engine by James Watt. The
steam engine allowed energy to be produced from the calorific power of coal
and the power of water transformed into steam. This energy was much more
powerful, safer, and versatile.
The IR spread throughout Northern Europe and the United States in the 19th
century, attempting to adopt textile machinery, the steam engine, and
iron-making processes. It later spread to the rest of Europe and Asia.
At the end of the 19th century, a series of improvements in energy resources
marked the beginning of the Second Industrial Revolution, which spread
throughout the world during the 20th century.

2. Productive transformations

2.1 Agricultural revolution

Is one of the main determining factors, the availability of food made it possible
to feed the vast majority of people who were not dedicated to producing food.
Causing resources to be dedicated to other productive sectors.
With technological and organizational improvements in the agricultural sector,
such as plows, crop rotations, and irrigation.

2.2 Technological revolution

The Industrial Revolution was an essentially technological revolution, which
can be explained by new technological developments in the textile, iron and
steel and transport sectors.
In the textile sector, the spinning jenny and spinning mule machines stand
out, making spinning and weaving processes more efficient.
They caused a huge production of thread and a significant drop in its price, so
Great Britain began to export it at a profit rate of 40%. England became the
world's factory. For the first time, Europeans produced more, cheaper, and
better than Asians.

The most important innovation of the IR was the steam engine. Denis Papin
built the first steam engine, and Newcomen created another to drain water
from mines. The steam engine allowed energy to be produced from the
calorific power of coal and the force of water transformed into steam; this
energy was much more powerful, safer, and versatile.
However, James Watt (1769) facilitated its use in other applications and
countries around the world with the separate condenser (which increased
speed and saved coal).
The steam engine had multiple applications, for example in means of
transportation such as steamships and railways, and in other industries.
In the case of the steel industry, the goal was to make iron production
cheaper and faster, and to reduce the need for coal, by replacing charcoal
with coal.
To obtain molten iron, coal began to be used in blast furnaces, doubling
production. Mineral coal was used because its price was lower, and charcoal
caused deforestation.
Producing steel required large quantities of coal and many hours of labor, but
improvements in the efficiency and capacity of blast furnaces led to an
increase in steel production and lower costs.
The creation of the Bessemer furnace further increased steel production by
replacing fire with air (CO2), producing between 3 and 5 tons of steel in fifteen
minutes.

2.3 Energy transition

Obtaining significant energy sources helped break the photosynthetic
constraint that limited economic growth.
Hydraulic power was important during the Industrial Revolution, allowing the
power of water to be harnessed. Although it did not provide this power to
steam engines, it saved coal.
However, the greatest source of energy was that generated by James Watt's
steam engine, which was much more efficient, cheaper, and versatile, allowing
for higher power outputs.
We also highlight gas, obtained from coal, used for lighting, as a source of
heat, and to generate electricity.
Oil and gas were the major energy sources of the Second Industrial
Revolution, but during the First Industrial Revolution, they were not of primary
importance. Oil had a calorific value of 40 MJ/kg, compared to wood's calorific
value of only 14 MJ/kg.

3. On the origins

3.1 Why England?

For the Industrial Revolution to take place, a series of improvements in
agricultural and industrial production, in the market, and in politics were
necessary.
We speak of conditioning factors, a common set of favourable factors, none of
which are essential, but which together must be present in sufficient quantity
to allow this great growth.
These improvements were only found in Great Britain between 1760 and
1850.
Conditioning factors:
●​ Natural factors:
○​ They had navigable rivers, which facilitated transportation.
○​ They could easily access coal and iron due to their mineral
wealth.
○​ They were an island, so they needed to spend less money on
military defense.
●​ Economic factors: The main determining factor was the availability of
food, which made it possible to feed the vast majority of people who
were not dedicated to producing food. Causing resources to be
dedicated to other productive sectors.
●​ Institutional factor: The state initiated liberalism, establishing a free
market. Taxes were lower and better distributed and spent than in other
countries.
●​ Cultural and scientific change: reason and science became established
as the preferred methods for generating and disseminating knowledge
in England and Europe.
Robert Allen, in his theory of the relative costs of energy and labor, explains
how businesses choose between different technologies based on the relative
prices of their factors of production. In England during the 18th century, wages
were significantly higher than in the rest of Europe, while capital and energy
were cheaper.
This situation generated strong incentives to substitute labor for capital, thus
driving investment in machinery and technical development. Furthermore,
energy, an essential input for capital, was cheaper in England, reinforcing this
process of industrial capitalization. Thus, the combination of high wages and
low energy prices created an exceptionally favorable environment for
technological innovation and productive modernization.
 PART 2

2. Transport, politics and technology

We Find "Waves" of Globalization During the 19th Century
(Explicado más adelante en 4. Shifting reactions)

Transportation costs have decreased thanks to:

●​ Technological innovation and access to new energy sources.
●​ Innovations in river, sea, and land transportation: with the construction
of bridges, roads, and canals connecting rivers, product costs have
been reduced.
●​ Elimination of tariff barriers and political integration.

Railway expansion (1840-1880)

Railways had fewer geographical restrictions than rivers and canals, and had
great carrying capacity and high speeds. Railways were the result of applying
the steam engine to land transport, invented by George Stephenson.
The most advanced countries began to build their own railway lines, with
Great Britain leading the way with 2,390 km.
Railway construction required state intervention to allocate the necessary lines
and land. It gave rise to a new sector due to the great need for labor and
capital.

Steam Navigation
Sailing ships carried 87% of the tonnage until the end of the 19th century.
Steam was first used in river navigation, before the railways. However, it had
some problems:
●​ The poor seaworthiness of wheeled ships
●​ The space required to store coal (and therefore less space to store
cargo)
●​ And the risk of damage or fire

A set of innovations improved transoceanic navigation: PCDRC

●​ The propeller
●​ The construction of iron ships
●​ The double-expansion steam engine, which saved half the coal
●​ The radiotelegraph, improving safety
●​ And the construction of the Suez Canal (1869)
Great Britain was also a leader in maritime navigation.
The Second Technological Revolution brought the incorporation of
refrigeration and freezing systems on ships improving international trade.
These technological improvements increased information, speed, and
capacity. However, we also encountered some restrictions, such as the need
for warm ports and the difficulty of navigating the Pacific Ocean.
As a result, transportation costs fell, and the North Atlantic crossing by ship
went from an average of 35 days around 1840 to just 12 days by 1913.

It was more expensive to ship wheat from Chicago to New York than from
New York to Liverpool. Major canal infrastructure projects were built and
transformed global maritime trade.
The Erie Canal (1817-1825) in the United States, reduced transportation costs
and shortened travel time facilitating domestic trade.
The Suez Canal (1859-1869) shortened the sea route between Europe and
Asia by 6,500 km, eliminating the need to go around Africa.
The Panama Canal symbolizes the Second Technological Revolution and the
first globalization, connected the Atlantic with the Pacific and revolutionized
global trade.

3. Patterns of specialisation
What was the impact of the rise of international trade on national economies?
According to Adam Smith in The Wealth of Nations, the main improvement in
productivity is caused by the division of labor. We are most efficient when we
focus on a small number of tasks, ways:
●​ Learning by doing: The longer we operate a machine, the better we
become at it, and the easier it is for improvements to emerge.
●​ Differences in ability: People will take on the task that produces the best
results.
●​ Economies of scale: Producing large quantities of a good is more
efficient and cheaper than producing a small quantity.

The consequences of the rise of the international market were the productive
specialization in different countries around the world. We find two groups:
- Western/central countries: they specialize in exporting high-value
manufactured goods, produced with raw materials purchased from peripheral
countries
- Peripheral countries: they specialize in supplying raw materials at low prices
The consequences of this specialization were:
●​ Dependency theory and unequal exchange: peripheral countries lose
out and are increasingly poor.
●​ And liberal trade: all parties benefit, although some more than others

The opening of international markets encouraged countries to specialize in

sectors where they were most efficient, improving their productivity and
access to advanced technologies. However, less developed countries
participated under unfavorable conditions, specializing in sectors that hindered
their development and innovation. This process generated winners and losers,
and increased inequality.

4. Shifting reactions
Who gains and who loses from the rise of trade/globalisation?
- The owners of the relatively scarce factor in the country lose out with trade
openness. The products they offer are expensive and uncompetitive
compared to similar products from abroad, which are made using more
abundant and cheaper resources, so they start to be imported.
- Owners of the relatively abundant factor in the country gain from trade
openness.
They can produce cheaply and sell abroad, where those products are more
expensive.
This is one of the most relevant effects of globalisation: international trade
tends to equalise the relative prices of both final products and factors of
production.

What attitudes did states take to trade? Waves of Globalisation

In the first phase (1815-1847), trade expansion was moderate with
protectionist policies. This phase was centered on population growth,
transportation improvements, and recovery from wars (the defeat of Napoleon
and the American War of Independence).
In the second phase (1847–1868), commercial activity was boosted by the
adoption of free trade in Great Britain and its expansion to other countries.
Trade growth rates exceeded 5% per year. This phase was marked by the
Cobden-Chevalier Treaty between the UK and France, which expanded free
trade throughout Europe.
The most-favored-nation clause also stands out; it means that if a country
lowers tariffs for another, it must offer the same conditions to all countries with
which it has that clause. This helped to expand free trade, as any commercial
advantage was automatically shared with more countries.

In the third phase (1868-1896), trade growth rates were much lower due to:
●​ Difficulties of exporting for countries whose exchange rates were
increasingly unfavorable
●​ Domestic industries were able to save money compared to foreign
purchases
●​ The economic depression with the loss of purchasing power in
disadvantaged sectors
●​ The implementation of protectionist policies, in response to the
competition generated by market integration.

In the fourth phase (1898-1914), a recovery in growth rates and an increase

in international trade were observed until the First World War. There was an
improvement in maritime communications, improvements with the telegraph,
and colonial expansion. The United States always had a protectionist policy.

Who has the political power to modulate market integration (tariffs)?

USA (from 1860): Adopted protectionist policies with higher tariffs to support
the federal government's revenue, especially during the Civil War and
industrialization.

5. Not just transport: violence and capital

The globalization of the 19th century was not only a product of advances in
transportation and technology, but also the use of violence and capital. A clear
example was the Opium Wars, where the United Kingdom forced China to
open its economy through war, imposing unequal treaties such as the Treaty
of Nanking (1842), which included reparations, the opening of ports, and the
cession of Hong Kong.
So the United Kingdom increased their control on their economy and trade,
which led to big internal problems like the Taiping Rebellion.

Furthermore, there was a huge flow of capital from Europe to other regions
(approximately 10 billion pounds), taking advantage of the lack of regulation
and investing in infrastructure such as railways and canals. This capital,
especially British and French, was not exchanged, but rather flowed from the
centers to the peripheries, generating dependency.