Aggregate Measures of Econ Growth

How does Crafts characterise the British Ind. Rev.? Make sure you discuss growth rates, the role of agriculture, cotton, rev/non-rev sectors and structural change.

Growth Rates:

The terms of the debate

How do we calculate growth rates? Crudely one takes a base year X. One takes set of sectors i=1,...,N for year X and then calculates growth from X to Y for each sector. One then weights these growth rates by the proportion of economy they represent in year X. Things get more complicated because:

  1. We don't have raw output figures but only output in terms of prices. It then becomes important to estimate changes in prices which e.g. in cotton could be dramatic (see [esteban_1994] for impact of reassessing cotton prices - prices fall 9x 1770 to 1841 rather than 3x in estimate of Harley/Crafts)

The great growth debate, consensus and dispute:

  1. From about 1820 significant consensus because of much better available data (e.g. Crafts + Harley hardly revises deane and cole)
  2. Disputed: growth rate and output before 1820. Dispute centres weighting not around growth as much.

Crafts/Harley view in detail

Summary: Though not as dramatic as once thought there was still a significant increase in growth rates 1760 - 1840 though this varied heavily by area. Much of the downward revision in estimates comes not from reducing growth rates of any industry but in reducing the proportion (weighting) of the 'revolutionary' industries (such as cotton) in output and increasing that of non-revolutionary ones (such as agriculture).

  1. See fig 1 in crafts_1994 p.49. Trend growth in British Industrial Production where growth rate of 0.75% in 1760 peaking at 3.25% around 1830 and then dropping back to around 2% by 1880.
  2. Standard output growth figures (crafts_1994 p.47 citing crafts+_1992) show gradual acceleration:
    Year GDP Industry Agriculture
    1700-60 0.7 0.7 0.6
    1760-80 0.6 1.3 0.1
    1780-1801 1.4 2.0 0.8
    1801-31 1.9 2.8 1.2
  3. 'Despite its increasing prowess the eighteenth-century economy was quite unable to match the industrial growth of the more mature economy of a century later' [crafts_1994:49]
  4. 'The sharp increases in the growth rate of the industrial production and income during the last quarter of the 18th century now appear to have been an artifact of inappropriate index construction by Hoffman and Deane and Cole. It now seems that change in manufacturing was largely concentrated in the famous industries, that agriculture contributed much, and that growth accelerated gradually over many decades.' [harley_1999:163]
  5. ... by the early nineteenth century the old long-run equilibrium understood by Malthus had been swept away and rapid population growth no longer had catasrophic effects on real wages. The basic character of the economy changed from one dominated by balance of land and population to one governed by technological change and capital accumalation. We are happy to agree with O'Brien that .... 'over the period 1750-1850 the growth of the British economy was historically unique and internationally remarkable'.
    We do, of course, reiterate that industry overall grew much more slowly than was once thought. Revolutionary changes in industrial technology were not widespread and productivity improvements contributed modestly to the growth of GDP before the second quarter of the nineteenth century. .... To be sure, industrial change helped alter social structure, demographic behaviour, and savings habits, all of which may have stimulated growth. Nevertheless, it seems impossible to sustain the view that British growth leapt spectacularly in one generation as a result of innovations in manufacturing.'
    [crafts+_1992:704-5]
  6. 'Finally, we reaffirm the importance of the industrial revolution as an historical discontinuity' [crafts+_1992:721]

Agriculture and Other Industries

Agriculture

  1. In Crafts view (at least compared to Deane and Cole etc) agriculture much more significant. Output grows faster, more significant technological progress etc. At same time as with other items no abrupt change in 1760.
  2. Significant increasing productivity and output throughout period
  3. Significant move away from agriculture in employment: See table 3.1, [crafts_1994 : 45]. Significant. 1700 61.2% employed in agric compared with 40.8% 1800 and 28.6% 1840.
  4. "If as Mathias suggests, the most important feature of an 'Industrial Revolution' is the 'fundamental redeployment of resources way from agriculture' (1983:2), then the remarkable change in Britain between 1760 and 1840 certainly qualifies for this description." [crafts_1994:44]

Cotton and Iron - The Revolutionary Industries

  1. 'From the 1760s onward there was a spectacular acceleration in the growth of output of cotton textiles and also strong growth in iron' [crafts_1994:49]
  2. Table 3.1 [harley_1999:168] showing indices of output by industry where cotton and metal are most significant growers (0.8 to 19 to 100 and 7 to 29 to 100 respectively).
  3. Table 3.6 [harley_1999:184] showing productivity growth by industry where cotton is highest (1.9%). Other significant: worsteds (1.3), iron (0.9), canals and railways (1.3)

Structural Change

Main Items

  1. Increase in investment. cf Transport. Government creates favourable environment (low tax 7-11% according to crafts_1994 p56, enclosure (though much disputed), secure property rights and support for innovation through patents)
  2. Shift away from agriculture. See section above on agric.
  3. Transport improvments and volume increase
  4. Population growth accelerates. Continuing and accelerating urbanization in some areas (particularly new industrial towns) [wrigley_1986]

My 2 Cents

Why do growth rates matter so much. To be sure they are important. But the industrial revolution exists for us to a large extent because we know what came after. We know it didn't falter/fall back. For example it could even be plausible to have the significant changes that lay the groundwork for later take-off /sustained growth in a period where there is no change in the growth rate. Thus this constant focus on growth rate could be misleading. What matters is that by the 1850s Britain (and the whole world) had entered a period of growth that in its size and sustainability had never before been witnessed.

Also have Landes point [landes_1999:144ff]: in something like industrial revolution where it was the new dynamic sectors that were going to take over is it not growth in these sectors that we should focus on rather than the aggregate (where the affect of rev. sectors is diluted by their small initial share in output). Put more formally: perhaps we should not be counting aggregate output but either 1. Using hindsight heavily. So look at sectors that were the rapid growth / innovative later on and look at when they started growing. 2. Construct different indices. Don't create aggregate but e.g. do a counting one: divide your economy up into sectors and try and do estimates of how many sectors you have in each category of growth (such as slow (0-0.5%), medium (0.5 - 1.5) fast (1.5-3) very fast (3+)).

The critique against the 'revolution' school often seems to be about skewering a straw man [landes_1999:145ff]. Who really thought there was a sudden structural break (Rostow maybe but that got trashed back in 1963 anyway [landes_1999:132-134]). There was significant change but the growth trend accelerated it didn't rupture.

Notes

  1. Summary and Quotes from [landes_1999]
    1. [136] Fact that escaped Malthusian trap in late 18th - mid 19th century is testament enough to dramatic change in economy (rapid pop increase AND real wage still rises). Quotes Wrigley and Schofield 1981 p 412:
      ... the possibility that the period before 1800 can be subdivided should not be allowed to obscure its general uniformity of experience, nor the decisive nature of the break occurring during the industrial revolution, a change so decisive that it must reflect a dramatic rise in the rate of growth of the economy as a whole .... Perhaps for the first time in the history of any country other than a land of recent settlement rapid population growth took place concurrently with rising living standards. A basic feature of the humna condition had changed .... England crossed the threshold into a new era.

Bibliography

  1. crafts+_1992. 'Output Growth And The British Industrial Revolution: A Restatement of the Crafts-Harley View'. EHR 703-730.
  2. crafts_1994. 'The Industrial Revolution' in Floud and McCloskey Vol 1.
  3. crafts+_1992. '... Restatement of Crafts-Harley View' crafts + harley.
  4. harley_1999. 'Reassessing the industrial revolution' in mokyr_1999.
  5. landes_1999. 'The Fable of the Dead Horse' in mokyr_1999.
  6. mokyr_1999. 'The industrial revolution: An economic perspective'. Mokyr eds. 1999