A Perfect Storm - Lessons from the British Empire
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Transcript of A Perfect Storm - Lessons from the British Empire
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A Perfect StormLessons from the British Empire
Thomas J. Rones
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Questions at Beginning of Research
• Why did the Industrial Revolution happen in Britain?
• The 1689 Bill of Rights secured property rights, was this the key event that caused the Industrial Revolution?
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Thesis
• What is responsible for a countries wealth?
Government Institutions?
Something Else?
• Lessons for Emerging Economies from the British Empire?
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Historical Background Johannes Gutenberg begins work in 1436
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Impact of the Printing Press
Supply of books
Cost of book production
Price of Books
Estimates of the real price of Dutch books, 1460-1800
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Literacy Rate
Per Capita Book Consumption
Annual per capita consumption of books, 1454-1500 to 1751-1800
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Variation In Ideas
Variation in Genres
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Speed & Distance that ideas are spread
# of Books per Edition
Number of books printed per edition, 1450-1600
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The Evolutionary Revolutions
Increased LiteracyIncreasing Velocity in Spread of Ideas
Scientific rEvolution
Political Revolution
Financial Revolution
Industrial rEvolution
Agricultural rEvolution
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Pre-condition Identification by Wilde Connection to My Research – Cause of the Pre-Condition Factors of Production Affected (CELL)
End of medieval economic structuresFinancial Revolution & Property Rights
Land
Labor
Capital Expenditures
Larger Workforce due to less disease and lower infant
mortalityScientific Revolution Labor
Agricultural Revolution – 1650 to 1850 – Norfolk 4 course
systemAgricultural Revolution Land, Labor
Spare capital for investment Financial Revolution –Bank of England 1694 Entrepreneurial Risk
All required resources close together Size of Britain as an island and size of Empire All 4 factors
New Technology Increases and cheapens production Scientific Revolution All 4 factors
Colonial Trade Networks Political Stability – 1667 Treaty of Breda Entrepreneurial Risk
Culture of hard work, risk taking and the development of
ideas.All four Revolutions Entrepreneurial Risk
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The 1689 Bill of Rights secured property rights, was this the key event that caused the Industrial
Revolution?
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Scope
Historical Background
TradeProperty Rights
Finance Energy
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Adaptability of Property Rights?
• “Britain’s economic ascent began after Parliament established institutions enabling property rights to adapt to changing economic
conditions and enabling land and resources to be reallocated towards more productive uses” (Bogart, Richardson, 1996)
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Property Rights
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Parliamentary Power Solidified with:
• 1689 Bill of Rights
• 1701 Act of Settlement
• 1707 Act of Union
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Intellectual Property Rights
• Learning By Doing (Bessen. p. 202): New Technology pattern
Early Growth
Great Knowledge Sharing
Many Firms
Few Patents – Can’t Profit from Patents alone
To Profit: Implement Innovations for cost advantage
Maturity
Little Knowledge Sharing
Consolidation
Many Patents - Market for Patents Develops
To Profit: Big Firms Have Patent Portfolio Strategy
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Do Property Rights Have Anything to do With Prosperity?
Take the Top 10 Countries by GDP Per Capita (PPP)
Compare to International Property Rights Index
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Comparative Advantage
Britain Was First:Finance, Trade, Energy
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Financial Innovations
Country Bankers
Stock Market
Government Bonds
Fractional Reserve Banking
Paper Currency / Money Supply
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Country Bankers
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1672 Stop of the Exchequer
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1693 King William Needs to Raise Money
Creditors
(Wealthy)
Debtor (Govt)
SurvivalOf Govt
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Fractional Reserve Banking/Monetary Policy, Government
Bonds/Paper Currency
1694 Bank of England Founded
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Stocks were the means by which bonds were created
Wealthy Landowners buy shares in Companies (Bank of England, South
Sea, East India)
These Companies lent to the government in
Exchange for Special Privileges
How it Worked
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Trade
• Was the transatlantic slave trade a driving force behind the industrial revolution?
Scholars Disagree
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Scholars in Favor Argue:
Manufacturing Supply &
Demand Cycle
Overseas Demand
Invest In Technology
To Increase ProductivityWhich lowers costs
And new markets become feasible
(Supplier Induced Demand)
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Scholars Against Argue:
Domestic Explanations such as Population Growth
Colonial Trade Network Unprofitable
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London 1700
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London 1800
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London 1860
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Energy
First Empire to leverage coal as an energy source
Organic Economies - Constrained by output of:1) Wood for heat energy 2) Humans/Animals for mechanical energy
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Heat Energy
• Populations moving to urban areas
• Factories & Homes needed Energy Source for Heat
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Mechanical Energy
Steam power for:• Factories
• Transport
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Energy
Choice of coal over other energy sources due to social, technological,
and economic factors
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Why did the Industrial Revolution happen in Britain?
A Perfect Storm –Innovations in Property Rights,
Finance, Energy, Trade(?)
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Lessons for a Modern Day Country:
Property Rights: Political Stability to Attract FDI
• Specialize in Comparative Advantage:
Finance, Trade, Energy
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References
• Carruthers, B. G. (1999). City of capital: Politics and markets in the English financial revolution. Princeton, NJ: Princeton University Press.
• Clark, G. (2007). A farewell to alms: A brief economic history of the world. Princeton: Princeton University Press.
• Hearfield, J. (2008). National Debt and Population. Retrieved from www.johnhearfield.com/History/Banking.htm
• The Richest Countries In The World - WorldAtlas.com. (2016, September 19). Retrieved from http://www.worldatlas.com/articles/the-richest-countries-in-the-world.html
• Roser, M. (2016) – ‘Books’. Published online at OurWorldInData.org. Retrieved from: https://ourworldindata.org/books/ [Online Resource]
• Wilde, R. Causes and Preconditions for the Industrial Revolution. Retrieved from http://europeanhistory.about.com/od/industryandagriculture/fl/Textiles-during-the-Industrial-Revolution.htm
• Wrigley, E. A. (2010). Energy and the English Industrial Revolution. Cambridge: Cambridge University Press.
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Any Questions?