A Perfect Storm - Lessons from the British Empire
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The document discusses factors that contributed to the Industrial Revolution happening in Britain. It analyzes how innovations in property rights, finance, energy, and trade created a "perfect storm" for industrialization. Specifically, it points to how the 1689 Bill of Rights secured property rights, the development of country bankers and fractional reserve banking, Britain's utilization of coal as an energy source, and its specialized role in transatlantic trade and colonial networks. The document concludes that the lessons for modern economies are to pursue political stability to attract foreign investment, specialize in areas of comparative advantage like finance and trade, and leverage national energy resources.
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A Perfect Storm - Lessons from the British Empire
- 1. A Perfect Storm Lessons from the British Empire Thomas J. Rones
- 2. Questions at Beginning of Research • Why did the Industrial Revolution happen in Britain? • The 1689 Bill of Rights secured property rights, was this the key event that caused the Industrial Revolution?
- 3. Thesis • What is responsible for a countries wealth? Government Institutions? Something Else? • Lessons for Emerging Economies from the British Empire?
- 4. Historical Background Johannes Gutenberg begins work in 1436
- 6. Impact of the Printing Press Supply of books Cost of book production Price of Books Estimates of the real price of Dutch books, 1460-1800
- 7. Literacy Rate Per Capita Book Consumption Annual per capita consumption of books, 1454-1500 to 1751-1800
- 8. Variation In Ideas Variation in Genres
- 9. Speed & Distance that ideas are spread # of Books per Edition Number of books printed per edition, 1450-1600
- 10. The Evolutionary Revolutions Increased Literacy Increasing Velocity in Spread of Ideas Scientific rEvolution Political Revolution Financial Revolution Industrial rEvolution Agricultural rEvolution
- 11. Pre-condition Identification by Wilde Connection to My Research – Cause of the Pre-Condition Factors of Production Affected (CELL) End of medieval economic structures Financial Revolution & Property Rights Land Labor Capital Expenditures Larger Workforce due to less disease and lower infant mortality Scientific Revolution Labor Agricultural Revolution – 1650 to 1850 – Norfolk 4 course system Agricultural Revolution Land, Labor Spare capital for investment Financial Revolution –Bank of England 1694 Entrepreneurial Risk All required resources close together Size of Britain as an island and size of Empire All 4 factors New Technology Increases and cheapens production Scientific Revolution All 4 factors Colonial Trade Networks Political Stability – 1667 Treaty of Breda Entrepreneurial Risk Culture of hard work, risk taking and the development of ideas. All four Revolutions Entrepreneurial Risk
- 12. The 1689 Bill of Rights secured property rights, was this the key event that caused the Industrial Revolution?
- 14. Adaptability of Property Rights? • “Britain’s economic ascent began after Parliament established institutions enabling property rights to adapt to changing economic conditions and enabling land and resources to be reallocated towards more productive uses” (Bogart, Richardson, 1996)
- 15. Property Rights
- 16. Parliamentary Power Solidified with: • 1689 Bill of Rights • 1701 Act of Settlement • 1707 Act of Union
- 17. Intellectual Property Rights • Learning By Doing (Bessen. p. 202): New Technology pattern Early Growth Great Knowledge Sharing Many Firms Few Patents – Can’t Profit from Patents alone To Profit: Implement Innovations for cost advantage Maturity Little Knowledge Sharing Consolidation Many Patents - Market for Patents Develops To Profit: Big Firms Have Patent Portfolio Strategy
- 18. Do Property Rights Have Anything to do With Prosperity? Take the Top 10 Countries by GDP Per Capita (PPP) Compare to International Property Rights Index
- 20. Comparative Advantage Britain Was First: Finance, Trade, Energy
- 21. Financial Innovations Country Bankers Stock Market Government Bonds Fractional Reserve Banking Paper Currency / Money Supply
- 22. Country Bankers
- 23. 1672 Stop of the Exchequer
- 24. 1693 King William Needs to Raise Money Creditors (Wealthy) Debtor (Govt) Survival Of Govt
- 25. Fractional Reserve Banking/Monetary Policy, Government Bonds/Paper Currency 1694 Bank of England Founded
- 26. Stocks were the means by which bonds were created Wealthy Landowners buy shares in Companies (Bank of England, South Sea, East India) These Companies lent to the government in Exchange for Special Privileges How it Worked
- 27. Trade • Was the transatlantic slave trade a driving force behind the industrial revolution? Scholars Disagree
- 28. Scholars in Favor Argue: Manufacturing Supply & Demand Cycle Overseas Demand Invest In Technology To Increase ProductivityWhich lowers costs And new markets become feasible (Supplier Induced Demand)
- 29. Scholars Against Argue: Domestic Explanations such as Population Growth Colonial Trade Network Unprofitable
- 30. London 1700
- 31. London 1800
- 32. London 1860
- 33. Energy First Empire to leverage coal as an energy source Organic Economies - Constrained by output of: 1) Wood for heat energy 2) Humans/Animals for mechanical energy
- 34. Heat Energy • Populations moving to urban areas • Factories & Homes needed Energy Source for Heat
- 35. Mechanical Energy Steam power for: • Factories • Transport
- 37. Energy Choice of coal over other energy sources due to social, technological, and economic factors
- 38. Why did the Industrial Revolution happen in Britain? A Perfect Storm – Innovations in Property Rights, Finance, Energy, Trade(?)
- 39. Lessons for a Modern Day Country: Property Rights: Political Stability to Attract FDI • Specialize in Comparative Advantage: Finance, Trade, Energy
- 40. References • Carruthers, B. G. (1999). City of capital: Politics and markets in the English financial revolution. Princeton, NJ: Princeton University Press. • Clark, G. (2007). A farewell to alms: A brief economic history of the world. Princeton: Princeton University Press. • Hearfield, J. (2008). National Debt and Population. Retrieved from www.johnhearfield.com/History/Banking.htm • The Richest Countries In The World - WorldAtlas.com. (2016, September 19). Retrieved from http://www.worldatlas.com/articles/the-richest-countries-in-the-world.html • Roser, M. (2016) – ‘Books’. Published online at OurWorldInData.org. Retrieved from: https://ourworldindata.org/books/ [Online Resource] • Wilde, R. Causes and Preconditions for the Industrial Revolution. Retrieved from http://europeanhistory.about.com/od/industryandagriculture/fl/Textiles-during-the-Industrial-Revolution.htm • Wrigley, E. A. (2010). Energy and the English Industrial Revolution. Cambridge: Cambridge University Press.
- 41. Any Questions?
Editor's Notes
- They provided the Crown first with a loan of £1.2 million at 8 per cent, of which £0.5 million was in paper – virtually bank-notes issued on their credit. During