How the Industrial Revolution Changed the World Economy

¶ … Industrial Revolution Changed the World Economy?

The Industrial Revolution that started in Great Britain in the latter part of eighteenth century is considered by some historians to be the most significant transformation in the economic environment of human civilization after the Agricultural Revolution. While there is no disagreement on the view that the 'revolution' had a great effect on the world economy and transformed the lives of a large number of people, its effect was by no means uniform. While it rapidly took roots in certain parts of the world, e.g., in Great Britain to start with, followed by certain countries of Western Europe, and the United States, large parts of the world -- in particular Africa -- remained untouched by it. In this paper I shall discuss the causes of the industrial revolution; identify the countries that were most affected by it and why; explain the effect of the industrial revolution on the world economy and focus on why the phenomenon missed Africa altogether.

Causes of the Industrial Revolution

In order to understand the effect of the industrial revolution on the world economy, it would be useful to take a brief look at its causes.

The most important reason behind the 'revolution' was the advancement in scientific knowledge in Europe following the Renaissance (14th to 17th century), and change in the outlook of people following the age of Enlightenment. As such change in thinking also applied to several other European countries, it is pertinent to ask: why did the industrial revolution start in Great Britain and not elsewhere? The short answer to the question is that the social, political, and legal conditions in the country were ripe for such a movement in the 18th century -- more so than the other European countries. For example, the property rights in the country, such as those for patents on new inventions were well established at the time. By the 1700s, Britain had known political stability for some time, and there was less interference from the government in the country's economy than most other countries. The policy may, in part, have been influenced by Adam Smith's landmark "Wealth of Nations" that was published on the eve of the Industrial Revolution in 1776 and extolled the virtues of a Laissez-Faire economy. (Stearns 5-8) The importance of minimal control of the economy is underlined by famous historian, Arnold J. Toynbee, who terms the essence of the Industrial Revolution as "the substitution of competition for the mediaeval regulations which had previously controlled the production and distribution of wealth." (Toynbee 58)

Another important reason was that Britain, due to its vast Empire and trading interests around the globe, was making significant surplus profits that were available for industrial investment. Its expertise in world trade meant that it could easily find markets for the surplus goods produced by its industries. Britain also had the required natural resources such as iron and coal that were necessary for development of industry. At the same time, some of the most important technological innovations of the time took place in Britain that contributed greatly to the consolidation of the industrialization movement. The most important of these inventions was the development of the steam engine by the British engineer, James Watt that enabled the availability of vast amounts of power for important industries such as the iron and steel and textile mills. Other innovations that contributed significantly to the advancement of the industrial revolution were the improvements in the smelting process of iron and the power loom for the textile industry. When the steam engine was used to power the textile mills and applied to blast furnaces in 1788 industrial production really took off.

There was also a rapid increase in the population of Britain that coincided with the period of the industrial revolution. Some writers have attributed the increase as an effect of the industrial advancement; others have termed it a cause but in all probability the two phenomena are unrelated. T.S. Ashton, in his book, "The Industrial Revolution 1760-1830" argues that if increase in population was a cause of industrial growth, most countries in western and northern Europe experiencing similar population growth as Britain in the eighteenth century should have experienced an Industrial Revolution as well -- but they did not. Besides, large population increases were witnessed in Egypt, India, and China in the nineteenth century without corresponding increase in industrialization. (Ashton 3-6)

Industrial Revolution beyond Britain

The eighteenth century industrial revolution was essentially restricted to Britain. France, the other major power of the time was beset with internal turmoil and foreign wars, while Germany was still struggling to forge itself into a single nation-state. The United States was involved in a struggle for independence. Hence Britain took a head start in industrial development in the eighteenth century. Soon, however, the benefits of industrialization became evident to all these countries that had the potential for industrial advancement and they accelerated their efforts to catch up with Britain.

Industrial Revolution in France

Apart from Britain, France was the other major European power in the eighteenth century. However, it embraced the 'Industrial Revolution' rather slowly. There were a variety of reasons for this. First, France had greater sources of agricultural land than Britain to feed its people, and had less reason to turn to other means of sustenance than traditional agriculture. It had fewer resources of iron and coal as compared to Britain and less capital available for investment in industries since its trading efforts overseas had been less successful than Britain. But most of all, the French Revolutionary and Napoleonic Wars, had kept the country in turmoil and peace did not come until 1815.

The advances made in Britain in the fields of technical innovations could not remain confined to the country's borders for long. Other countries that were capable of assimilating such advancement in technology started to apply the lessons of industrial growth in their own countries. France entered a period of rapid industrial growth around 1830, initially led by its textile industry. From 1860 onwards, the heavy industries and railroad building brought France into the fold of the Industrial Revolution. (Rostow 206)

The United States

In the United States, the need for industrialization was felt soon after it became independent as its political and business leaders realized that economic strength was vital for sustaining the country's independence. At the time of its independence, the United States had a traditional economy with more than three-fourths of its workforce engaged in agriculture. However, the United States enjoyed many advantages that made it fertile ground for an Industrial Revolution. It inherited a rich, sparsely inhabited continent to which the U.S. government soon added vast stretches by buying or seizing land from the Native Americans, Mexico and other European powers. The philosophy of individual liberty and minimum interference by the government adopted by the country, created the Laissez Faire environment that industrial development required.

In addition, the American population was highly literate, and there was little hindrance for upward mobility for the white population. Limitless opportunities in the "new land" attracted many skilled immigrants, particularly from Britain who transferred the required technology. As a result, industrialization in the United States in the 19th century grew at an even faster rate than in Europe. Advancement in communication technology through a vast railroad system and the invention of the telegraph; continuous-process manufacturing and mass production methods were American innovations that further added to the industrialization process. The spurt of industrialization in the United States in the latter part of the 19th century and early 20th century is sometimes termed the "Second Industrial Revolution." It is typified by the introduction of the Assembly Line production methods introduced by Henry Ford for making cars and the introduction of scientific management principles by Fredrick Taylor. The advances made The United States the most industrially advanced nation in the world. ("Industrial Revolution.")

How did the Industrial Revolution Affect the World Economy?

While the Industrial Revolution benefited the economies of the industrial world, the others -- particularly the countries colonized by the Western powers were left far behind giving rise to increased levels of inequality. Outside Europe and North America, only Japan and Russia were able to industrialize until the latter part of the 20th century.

The industrial revolution led to dramatic improvement in productivity through the systematic application of scientific knowledge to the manufacturing process. Equally significant improvement in efficiency was achieved due to the resulting concentration of groups of industries or business enterprises within a limited area. Increased production of goods meant unprecedented creation of wealth, a shift of the rural population to the urban areas, and a radically changed work and family life. Apart from its direct effect on manufacturing, the application of improved work methods adopted in the wake of the industrial revolution filtered down to other areas of the economy such as transportation, communication and marketing further improving the standards of living. It increased the power of the state, especially its military power. The economic and military advantages gained by the countries affected by the industrial revolution helped them to dominate the countries that were left behind in the industrialization race. The economic development triggered by the industrial revolution, thus, made the European nations and the United States, the most powerful in the world in the 18th and 19th centuries.

The Industrial Revolution in some European countries and the U.S. And the surplus goods produced by them as a result created the need for global markets. The accompanying military power of the industrialized countries enabled them to dictate terms on a global level and the European imperial expansion in the 1800s was one of the consequences of the Industrial Revolution. (Stearns 56) The effect of the Industrial Revolution is amply illustrated in the following example. Until the late eighteenth century, India was one of the largest exporters of cotton textiles and was famous for the fine quality of its muslin cloth. In the early 19th century, British cotton exports began to move into India on a substantial scale to Asia expanded in volume from £1.7 million in 1811 to £4.4 million in 1821 and India started to transform from being the industrial workshop of the world to one of its richest raw material-producing regions. In other words, it entered a period of de-industrialization. (Rostow 214)

Such arm-twisting by the colonial powers is also evident in its dealings with China in the 18th and 19th centuries. When trade between China and Britain started in the 18th century, the balance of trade was initially in China's favor. This, obviously, did not suit the British colonial power, and in order to reverse the balance it introduced opium among the Chinese population. Within a few years, as a result of opium addiction among the Chinese, the balance of trade was reversed in favor of the British. When the Chinese government reacted to a serious addiction problem by closing down opium stores in coastal cities run by the British, they had to face a massive British naval force and a treaty was negotiated at gunpoint in 1842 that forced the Chinese to cede the island of Hong Kong and forced them to open 5 major seaports for foreign trade and residence. ("China"-History, Encarta). The overwhelming effect of the Industrial Revolution on the world economy, therefore, was a large increase in world trade with a major share of the profits going to the industrialized countries. The role of the non-industrialized countries was largely reduced to providing raw material for the industries of the industrialized nations.