The Industrial Revolution and Economic Growth

R. M. Hartwell

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351696944
• Edition: 1
• Topic: History
• Subtopic: World History
• Index: History

This volume, first published in 1971, brings together eleven essays and articles on the history of the industrial revolution. Method is the central consideration, and the author discusses ways in which historians have analysed the industrial revolution, demonstrates inconsistency and bias in their interpretations, and suggests an appropriate framework of economic theory for future studies. This title will be of interest to students of history and economics.

PART ONE

Methodology and Background

1 Lessons from History

I

Towards the end of the Second World War, when politicians began to think about post-war reconstruction, they were certain that the main post-war problem would be a recession and consequent unemployment. Economists did not disagree, and their aid was enlisted in framing post-war policies for full employment. As it turned out, the post-war problems were rather inflation and growth. I am not suggesting that the war-time efforts were entirely misdirected and wasted. I am more interested in the reasons for these efforts, and these are not hard to find. The great social evil of the inter-war years had been unemployment; economists were already preoccupied with the theoretical problem of the unemployment of resources, especially human resources, and, equally important, the lesson of history was that wars were followed by depressions. Historians showed that the two great wars of the previous century and a half—the Napoleonic Wars and the First World War—had both been followed by recessions. The warning of this story is that neither history nor economics is necessarily a reliable indicator of future problems. Neither historian nor economist was particularly successful during the war in predicting the relevant problems of the post-war world.

How does one account for changes in academic interests? For the directions which subjects take at particular points of time? To an important extent, the growth of a subject is in the logic of its structure; the autonomous growth of knowledge itself determines the problems to be solved at any point of time, and hence the direction of effort. With the social sciences, however, it is obvious that interests are also motivated by contemporary problems of the real world, and that the larger those problems, the greater is likely to be the diversion of academic talent to their solution. Hence, for example, the great stimulus between the wars to a consideration of the factors which determined the utilization of resources, and, in particular, to the conditions under which resources remained idle. But the theoretical problem is often unsolved after the practical problem has disappeared or has changed. Often, in consequence, present academic effort is devoted to the problems of the previous period. Of course, contemporary social policies have to be decided even if the theoretical apparatus of the appropriate social science cannot handle the problems which the policies aim to remedy. Practical men (politicians and business men, for example) in their decision-making on complicated issues—assuming they are rational—use the advice of specialists, and/or use their own (often out-of-date) specialist knowledge, and/or depend on the currently accepted translation of theory into easily understood generalizations, and/or they appeal to history (to their own past experiences or to the past experiences of others). Many policy-making statements, for example, are prefaced with: ‘History proves …’, ‘History shows …’, ‘History tells us …’, etc.

It is obvious that decision-making, on any of these bases, is dangerous. Keynes warned, in a well-known quotation, that, ‘In the field of economic and political philosophy there are not many who are influenced by new theories after they were twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest.’ Again the dilution of theory into generalizations for practical men leads almost invariably to over-simplification—both of the problems and also of the solutions; complicated problems do not become less complicated because of the need to explain them to the non-specialist or because of the need to make an immediate decision about policy. The appeal to history can be the most dangerous as it is probably the most common of all the bases of decision-making.

There was a period when an attempt was made to give economics a historical basis. And the current interest in economic growth has to some extent revived a historical school in economics. Economic history, after all, is the history of past growth or decline. But this was so before the modern interest of the economist in history. Even so, the emphasis on growth in current discussion does not stem from economic history. The theoretical growth models can be traced back to the Ricardian growth model, but the modern models are to a large extent the outcome of the Keynesian revolution. There is also a vast body of literature which has been motivated by, and is concerned with, the problems of the contemporary underdeveloped world. In the main, this latter literature is policy-oriented, and has taken the form of detailed case studies (historical and contemporary) of particular economies, with the practical aims of understanding the factors which influence economic growth, and of consolidating this understanding into generalizations about policy. At its more general level this largely empirical study has resulted in books like A. Lewis’s The Theory of Economic Growth.

The importance of the empirical school, however, is not only practical; these latter-day historicists act as a constant reminder to the theorists that real economic growth is more complicated than the growth models, and strongly suggest that it is necessary to go beyond the limits of quantifiable economic factors to a consideration of unmeasurable and non-economic factors. These empiricists have also established an uneasy relationship with the historians. History seems important because it provides (or should provide) a large quarry of information about past economic growth, a rich source of raw materials for processing into generalizations about growth. Thus almost all economic history is now used by the economists who inefficiently process it with the aim of extracting from it some ingredients of ‘the Elixir of Growth’. The process, however, is not one-sided. While the economists have been searching history for facts and examples, the historians have been looking to economics for tools of analysis. With the growth of economics and the other social sciences, with tools of analysis much sharper than those of the historian, the historians have become increasingly critical of traditional historical methods of inquiry. Both economists and historians have been disappointed. Indeed, the situation has developed in which economists are reading history, with little satisfaction, and historians are studying economics, with little understanding. Nevertheless, in seeking, with their traditional methods, the explanations of historic growth, the historians have identified many of the growth factors which the economists are now fitting into their growth models or into their policy discussions. In particular the historians have stressed, even if they have been unable to determine, the relative roles in economic development of changes in population growth, in technology, in capital accumulation, in economic policy, and in natural resources. At the same time they have not been so tempted, as the economists for a long time were, to overstress factors capable of quantification and of being represented mathematically in functional relationships. The historians have always stressed the non-economic factors in growth; for example, they have stressed the importance of social attitudes and how they have been modified sufficiently to allow a society to accept change and innovation; they have been equally interested in the institutional limitations to growth. Such factors only belatedly entered the economists’ analysis of growth. In spite of the success in identifying relevant factors, it would be quite wrong, however, to claim that the historians have had any general operational theory of growth or decline, and, indeed, many historians would argue that any attempt to formulate such a theory would be ‘rationally untenable’. The historians have been trying to explain single events and, generally, have not been seeking universal laws. However, two general theories of growth have commanded (and still do) some support among the historians: the Marxist theory of growth (a perverse development of the growth theory of the English classical school of economists) and the theory of the stages of economic growth (expounded originally by the German Historical School, and revived recently, with inexplicable success, by W. W. Rostow).

Have the economists been more successful? It is salutary to remember that Alfred Marshall failed to write his projected fourth volume on ‘Progress: Its Economic Conditions’. In pure theory the economists have been puzzling about problems that should be able to be translated into real and historical terms; for example, the problem of how to separate the growth effects of capital accumulation, increasing labour supply, and shifts in the production function. But the conclusions derived have been both inconclusive and also difficult to use in defining policy for underdeveloped countries. Indeed, the economists have changed their minds more than once about the relative importance of the factors considered. As regards the problem of the separation of influences, E. Domar has written: ‘A historical play about growth models might consist of three acts: in the first, labour, supported by an invisible chorus of capital, land and technological progress, holds the stage; in the second, capital and labour exchange roles. Finally, in the third act now being performed, labour, capital (and sometimes land) and technological progress appear on the stage together, with the first two (or three) reading from the script while technological progress holds forth the rest of the time.’ On a more general level, both theorists and empiricists have been unsuccessful in formulating either realistic general theories of growth or rigorous criteria of policy. Perhaps the infinite complexity of economic change, growth or decline, precludes generality? Certainly a general theory that was both precise and realistic would have to contain a very large number of variables and could only be represented in a very complicated and difficult mathematical system. For this reason it would be of little use to the historian, whatever use it might be to the policy-maker.

One interesting feature of the economists’ failure to formulate a realistic theory of growth is their criticism of the historians for not doing what they themselves have failed to do. Thus, for example, B. Higgins writes of the ‘Lessons of History’: ‘We must admit to a sense of disappointment at what the economic historian has to offer by way of explanation of how economic development did take place in the now advanced countries.’ A. Lewis even doubts that there are enough relevant facts in history to make an inductive approach to the understanding of economic growth possible:

Every economist goes through a phase where he is dissatisfied with the deductive basis of economic theory, and feels sure that a much better insight into economic processes could be obtained by studying the facts of history. The instinct is sound yet the enthusiasms of this phase seldom survive any serious attempt to get to grips with the facts of history. This is because there are very few facts of history in the relevant sense. We mean by this, in the first instance, that it is only for very few countries and for very recent periods that any adequate quantity of historical records exist; and even when there are plenty of records we cannot always be certain exactly what happened. We mean also, more significantly, that the ‘facts’ which would interest the theorist are not what happened but why it happened; and while history may record what happened, it is seldom able to record why it happened.

Higgins, in fact, argues that the historian, even without the technical expertise of the economist, has been able, nevertheless, to identify, if not to relate, the strategic factors in growth! Lewis, on the other hand, argues that the incompleteness and irrelevance of historical data make the task of explaining historical growth impossible!

II

The economists have been disappointed in history, but can they learn anything from the historians? I think they can; and something quite important. But what I say now depends on my idea of what the economists say about growth, and I do know enough economists who conform closely enough to this idea, and historians who are influenced by them, who could profit from what I now propose to call ‘the lessons of economic history’.

The first lesson is that history does not, and cannot, repeat itself; the past is past. However, one thing ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Acknowledgements
• Introduction
• PART ONE Methodology and Background
• PART TWO Causes and Process
• PART THREE Social and Economic Consequences
• Index