The British Industrial revolution is one of the most important events in history and the cause of it still remains a mystery. There have been various approaches to explain the cause of the Industrial Revolution – institutions, agricultural revolution, steam engine, innovations, natural endowments…
Britain’s favourable geographical position and natural resources, particularly coal, is often used as an explanation for the cause of the Industrial Revolution in Britain. Britain had access to cheap coal which provided cheap and powerful energy and compensated for the lack of wood in Britain. Moreover, Britain also benefited from its geological position which allowed convenient and cheap transportation of coal and expansion of world trade through waterways. Coal has contributed to the industrial revolution in several ways. To some economists, coal is the cause of the Industrial Revolution and claims that “it is difficult to exaggerate the importance of coal to the British economy between 1830 and 1913.” Firstly, the provision of cheap energy from coal helped reduce production costs, therefore increasing production and output, allowing more trade and economic growthh. Secondly, it lead to technological advancement in several ways. Bob Allen argued that cheap energy prices created an incentive to replace labour-intensive technologies with capital-intensive technologies as “cheap energy contributed to the fall in capital prices relative to wages.” This therefore encouraged innovations of labour-saving technologies such as the spinning Jenny. Furthermore, technologies such as the steam engine used during the process of the extraction of coal, was also useful in other industries and helped improve productivity, for example transport.
Other economists such as Mokyr argued that Britain’s endowment of coal instead was a contribution than a causation. The fact that coal has been used in China in the 14th century and had more resources than Britain goes against the explanation of coal as the cause of the Industrial Revolution – although some would argue that coal in China was not as easily accessible, far from economic activities, difficult to extract and incurred high transportation costs due to its geological location. Clark also believes that “without a single ton of coal being dug from the ground in England 1760-1860 there would still have been an Industrial Revolution.” He argued that coal didn’t lead to economic growth but innovations in the textile industry. He agrees that coal shaped the Industrial Revolution but didn’t create it. He argues that firstly, coal isn’t necessarily needed and in fact horse power could have been used instead. Secondly, coal was also easy accessible and close to other places such as Amsterdam. Therefore the impact of coal on the economy still remains unclear as some would argue that the use of coal during the eighteenth century was limited.
Another important factor was the high wage rate in Britain. Bob Allen argued that the unique wage and price structure was a significant factor as it lead to innovations and inventions. He argued that wages were high in four different aspects – “firstly, at the exchange rate, British wages were higher than those of its competitors. Secondly, high silver wages translated into higher living standards than elsewhere. Thirdly, British wages were high relative to capital prices. Fourthly, wages in northern and western Britain were exceptionally high relative to energy prices.” As wages were high and energy prices were low due to the large supply of coal, it was therefore cost-effective to employ capital-intensive technologies rather than labour-intensive technologies. The price structure – high wages, low capital costs and cheap coal therefore created an incentive to develop labour-saving inventions. As wages were high in the eighteenth century, demand for goods were also high, inventions were therefore also driven by the increased domestic. As Britain had geographical conditions that benefited transport, world trade also increased, leading to an increase in foreign demand as well.
The high wage rate is a key factor that lead to technological innovations and it explained the adoption of labour-saving technologies in Britain, but it fails to explain why it was not adopted elsewhere. Although French wages were lower than British wages in the eighteenth century, the adoption of the spinning Jenny would still be profitable. Moreover, the wage data used to support Bob Allen’s argument were wages given to the contractors instead of workers and were approximately 20% to 30% higher than their actual wages. Furthermore, “spinning the industrial revolution” provided data that goes against Allen’s theory of high wages as Jane Humphries pointed out that spinning wages were actually low due to the structure of the cotton industry. This also contradicts to Bob Allen’s theory of high wages leading to technological advancement. The argument that high wages incentivised the development of technology also cannot fully explain the start of the Industrial Revolution as not all inventions were economically driven and labour-saving.
While Bob Allen explains the demand for technological innovations, Mokyr takes a different approach and tries to explain the supply of technological innovations – knowledge. Mokyr believes that it is the spreading and exchange of knowledge that was crucial. In addition to lowered access costs due to spreading of knowledge, institutions also provided public lectures. Moreover, the political fragmentation in the eighteenth century Britain also facilitated the diffusion of ideas and knowledge because despite the fact that Britain was politically fragmented, they were culturally united and communicated easily. The political fragmentation allowed different ideas and avoided any kind of suppression, therefore was open to different ideas and had a competitive market for ideas. This can also explain why the Industrial Revolution didn’t happen in China. As China was politically unified, the market for ideas was limited and the educational system only focused on Chinese classics and the imperial exam. Gregory Clark also provides an explanation to the increase in supply of knowledge. He explains in “a farewell to the alms” that birth rates of the upper classes were higher, consequently a large proportion of the British population were upper classes. They therefore could spread their work ethic and knowledge.
Many economists try to give an explanation but none of them are able a full explanation to the cause of the Industrial Revolution, as Clark said “no episode is more important. Yet the timing, location, and cause of this Revolution are unsolved puzzles.” I believe that each explanation is necessary but not sufficient to explain the causation of the Industrial Revolution.