Econstudentlog

The Cambridge Economic History of Modern Europe: Volume 1, 1700-1870 (2)

Here’s my first post about the book. I have now finished it, and I ended up giving it three stars on goodreads. It has a lot of good stuff – I’m much closer to four stars than two.

Back when I read Kenwood and Lougheed, the first economic history text I’ve read devoted to such topics, the realization of how much the world and the conditions of the humans inhabiting it had changed during the last 200 years really hit me. Reading this book was a different experience because I knew some stuff already, but it added quite a bit to the narrative and I’m glad I did read it. If you haven’t read an economic history book which tells the story of how we got from the low-growth state to the high-income situation in which we find ourselves today, I think you should seriously consider doing so. It’s a bit like reading a book like Scarre et al., it has the potential to seriously alter the way you view the world – and not just the past, but the present as well. Particularly interesting is the way information in books like these tend to ‘replace’ ‘information’/mental models you used to have; when people know nothing about a topic they’ll often still have ‘an idea’ about what they think about it, and most of the time that idea is wrong – people usually make assumptions based on what they know about, and when things about which they make assumptions are radically different from anything they know, they will make wrong assumptions and get a lot of things seriously wrong. To take an example, in recent times human capital has been argued to play a very important role in determining economic growth differentials, and so an economist who’s not read economic history might think human capital played a very important role in the Industrial Revolution as well. Some economic historians thought along similar lines, but it turns out that what they found did not really support such ideas:

“Although human capital has been seen as crucial to economic growth in recent times, it has rarely featured as a major factor in accounts of the Industrial Revolution. One problem is that the machinery of the Industrial Revolution is usually characterized as de-skilling, substituting relatively unskilled labor for skilled artisans, and leading to a decline in apprenticeship […] A second problem is that the widespread use of child labor raised the opportunity cost of schooling (Mitch, 1993, p. 276).”

I mentioned in the previous post how literacy rates didn’t change much during this period, which is also a serious problem with human-capital driven Industrial Revolution growth models. Here’s some stuff on how industrialization affected the health of the population:

“A large body of evidence indicates that average heights of males born in different parts of western and northern Europe began to decline, beginning with those born after 1760 for a period lasting until 1800. After a recovery, average heights resumed their decline for males born after 1830, the decline lasting this time until about 1860. The total reduction in average heights of English soldiers, for example, reached 2 cm during this period. Similar declines were found elsewhere […] in the case of England, it is clear that the decline in the average height of males born after 1830 occurred at a time when real wages were rising […] in the period 1820–70, the greatest improvement in life expectancy at birth occurred not in Great Britain but in other western and northwest European countries, such as France, Germany, the Netherlands, and especially Sweden […] Even in industrializing northern England [infant mortality] only began to register progress after the middle of the nineteenth century – before the 1850s, infant mortality still went up […] It is clear that economic growth accelerated during the 1700–1870 period – in northwestern Europe earlier and more strongly than in the rest of the continent; that real wages tended to lag behind (and again, were higher in the northwest than elsewhere); and that real improvements in other indicators of the standard of living – height, infant mortality, literacy – were often (and in particular for the British case) even more delayed. The fruits of the Industrial Revolution were spread very unevenly over the continent”

A marginally related observation which I could not help myself from adding here is this one: “three out of ten babies died before age 1 in Germany in the 1860s”. The world used to be a very different place.

Most people probably have some idea that physical things such as roads, railways, canals, steam engines, etc. made a big difference, but how they made that difference may not be completely clear. As a person who can without problems go down to the local grocery store and buy bananas for a small fraction of the hourly average wage rate, it may be difficult to understand how much things have changed. The idea that spoilage during transport was a problem to such an extent that many goods were simply not available to people at all may be foreign to many people, and I doubt many people living today have given it a lot of thought how they would deal with the problems associated with transporting stuff upstream on rivers before canals took off. Here’s a relevant quote:

“The difficulties of going upstream always presented problems in the narrow confines of rivers. Using poles and oars for propulsion meant large crews and undermined the advantages of moving goods by water. Canals solved the problem with vessels pulled by draught animals walking along towpaths alongside the waterways.”

Roads were very important as well:

“Roads and bridges, long neglected, got new attention from governments and private investors in the first half of the eighteenth century. […] Over long hauls – distances of about 300 km – improved roads could lead to at least a doubling of productivity in land transport by the 1760s and a tripling by the 1830s. There were significant gains from a shift to using wagons in place of pack animals, something made possible by better roads. […] Pavement was created or improved, increasing speed, especially in poor weather. In the Austrian Netherlands, for example, new brick or stone roads replaced mud tracks, the Habsburg monarchs increasing the road network from 200 km in 1700 to nearly 2,850 km by 1793”

As were railroads:

“As early as 1801 an English engineer took a steam carriage from his home in Cornwall to London. […] In 1825 in northern England a railroad more than 38 km long went into operation. By 1829 engines capable of speeds of almost 60 kilometers an hour could serve as effective people carriers, in addition to their typical original function as vehicles for moving coal. In England in 1830 about 100km of railways were open to traffic; by 1846 the distance was over 1,500 km. The following year construction soared, and by 1860 there were more than 15,000 km of tracks.”

How did growth numbers look like in the past? The numbers used to be very low:

“Economic historians agree that increases in per capita GDP remained limited across Europe during the eighteenth century and even during the early decades of the nineteenth century. In the period before 1820, the highest rates of economic growth were experienced in Great Britain. Recent estimates suggest that per capita GDP increased at an annual rate of 0.3 percent per annum in England or by a total of 45 percent during the period 1700–1820 […] In other countries and regions of Europe, increases in per capita GDP were much more limited – at or below 0.1 percent per annum or less than 20 percent for 1700–1820 as a whole. As a result, at some time in the second half of the eighteenth century per capita incomes in England (but not the United Kingdom) began to exceed those in the Netherlands, the country with the highest per capita incomes until that date. The gap between the Netherlands and Great Britain on the one hand, and the rest of the continent on the other, was already significant around 1820. Italian, Spanish, Polish, Turkish, or southeastern European levels of income per capita were less than half of those occurring around the North Sea […] From the 1830s and especially the 1840s onwards, the pace of economic growth accelerated significantly. Whereas in the eighteenth century England, with a growth rate of 0.3 percent per annum, had been the most dynamic, from the 1830s onwards all European countries realized growth rates that were unheard of during the preceding century. Between 1830 and 1870 the growth of GDP per capita in the United Kingdom accelerated to more than 1.5 percent per year; the Belgian economy was even more successful, with 1.7 percent per year, but countries on the periphery, such as Poland, Turkey, and Russia, also registered annual rates of growth of 0.5 percent or more […] Parts of the continent then tended to catch up, with rates of growth exceeding 1 percent per annum after 1870. Catch-up or convergence applied especially to France, Germany, Austria, and the Scandinavian countries. […] in 1870 all Europeans enjoyed an average income that was 50 to 200 percent higher than in the eighteenth century”

To have growth you need food:

“In 1700, all economies were based very largely on agricultural production. The agricultural sector employed most of the workforce, consumed most of the capital inputs and provided most of the outputs in the economy […] at the onset of the Industrial Revolution in England , around 1770, food accounted for approximately 60 percent of the household budget, compared with just 10 percent in 2001 (Feinstein, 1998). But it is important to realise that agriculture additionally provided most of the raw materials for industrial production: fibres for cloth, animal skins for leather, and wood for building houses and ships and making the charcoal used in metal smelting. There was scarcely an economic activity that was not ultimately dependent on agricultural production – even down to the quill pens and ink used by clerks in the service industries. […] substantial food imports were unavailable to any country in the eighteenth century because no country was producing a sufficient agricultural surplus to be able to supply the food demanded by another. Therefore any transfer of labor resources from agriculture to industry required high output per worker in domestic agriculture, because each agricultural worker had to produce enough to feed both himself and some fraction of an industrial worker. This is crucial, because the transfer of labor resources out of agriculture and into industry has come to be seen as the defining feature of early industrialization. Alternative paradigms of industrial revolution – such as significant increases in the rate of productivity growth, or a marked superiority of industrial productivity over that of agriculture – have not been supported by the empirical evidence.”

“Much, though not all, of the increase in [agricultural] output between 1700 and 1870 is attributable to an increase in the intensity of rotations and the switch to new crops […] Many of the fertilization techniques (such as liming and marling) that came into fashion in the eighteenth century in England and the Netherlands had been known for many years (even in Roman times), and farmers had merely chosen to reintroduce them because relative prices had shifted in such a way as to make it profitable once again. The same may also be true of some aspects of crop rotation, such as the increasing use of clover in England. […] O’Brien and Keyder […] have suggested that English farmers had perhaps two-thirds more animal power than their French counterparts in 1800, helping to explain the differences in labor productivity.[2] The role of horsepower was crucial to increasing output both on and off the farm […] [Also] by 1871 an estimated 25 percent of wheat in England and Wales was harvested by mechanical reapers, considerably more than in Germany (3.6 percent in 1882) or France (6.9 percent in 1882)”

“It is no coincidence that those places where agricultural productivity improved first were also the first to industrialize. For industrialization to occur, it had to be possible to produce more food with fewer people. England was able to do this because markets tended to be more efficient, and incentives for farmers to increase output were strong […] When new techniques, crop rotations, or the reorganization of land ownership were rejected, it was not necessarily because economic agents were averse to change, but because the traditional systems were considered more profitable by those with vested interests. Agricultural productivity in southern and eastern Europe may have been low, but the large landowners were often exceedingly rich, and were successful in maintaining policies which favored the current production systems.”

I think I talked about urbanization in the previous post as well, but I had to include these numbers because it’s yet another way to think about the changes that took place during the Industrial Revolution:

“On the whole, European urban patterns [in the mid-eighteenth century] were not very different from those of the late Middle Ages (i.e. between the tenth and the fourteenth centuries). The only difference was the rise of urbanization north of Flanders, especially in the Netherlands and England. […] In Europe, in the early modern age, fewer than 10 percent of the population lived in urban centers with more than 10,000 inhabitants. At the end of the twentieth century, this had increased to about 70 percent.[7] In 1800 the population of the world was 900 million, of which about 50 million (5.5 percent) lived in urban centers of more than 10,000 inhabitants: the number of such centers was between 1,500 and 1,700, and the number of cities with more than 5,000 inhabitants was more than 4,000.[8] At this time Europe was one of the most urbanized areas in the world […], with about one third of the world’s cities being located in Europe […] In the nineteenth century urban populations rose in Europe by 27 million […] (by 22.5 million in 1800–70) and the number of cities with over 5,000 inhabitants grew from 1,600 in 1800 to 3,419 in 1870. On the whole, in today’s developed regions, urbanization rates tripled in the nineteenth century, from 10 to 30 percent […] With regard to [European] centers with over 5,000 inhabitants, their number was 86 percent higher in 1800 than in 1700, and this figure increased fourfold by 1870. […] Between 1700 and 1800 centers with more than 10,000 inhabitants doubled. […] On the world scale, urbanization was about 5 percent in 1800, 15–20 percent in 1900, and 40 percent in 2000”

There’s a lot more interesting stuff in the book, but I had to draw a line somewhere. As I pointed out in the beginning, if you haven’t read a book dealing with this topic you might want to consider doing it at some point.

March 8, 2014 - Posted by | books, data, economic history, economics

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