John Stuart Mill’s claim--that even as late as 1871 the First Industrial Revolution had not yet really begun to matter very much--will probably strike you as surprising, even bizarre, especially if you have taken a course in economic or technological history. Was not the steam engine invented by Thomas Newcomen in 1712? Was not the spinning jenny invented by Thomas Hargreaves in 1764? Was not the first cotton mill built in 1771? Was not the thirty-five mile Liverpool and Manchester Railroad opened in Britain on September 15, 1830? And was not that the day on which William Huskisson M.P. (1770-1830), President of the Board of Trade (the equivalent in the United Kingdom of the Secretary of Commerce) became the first human killed in a railway accident—runover by a non-runaway train? Were there not 20,000 miles of railroads worldwide by 1850? Were there not 25,000 miles of telegraph wires in the United States alone by 1850?
Did not Karl Marx write back in 1848 of the Industrial Revolution that he saw very clearly going on around him? Marx saw what was going on as of of Prometheus defying Zeus to bring fire to humanity:
[S]team and machinery... modern industry… revolutions in the modes of production and of exchange… wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals... expeditions that put in the shade all former exoduses of nations and crusades…. In place of the old wants, satisfied by the production of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes…. The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together. Subjection of nature's forces to man, machinery, application of chemistry to industry and agriculture, steam navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalization or rivers, whole populations conjured out of the ground…
Didn’t all this matter?
The answer is: yes it did matter for population, and no it did not matter--or it barely mattered--for living standards.
Let’s pick up Gregory Clark’s argument . From 1250-1640 or so, whenever population fell--because of plague, usually--real wage levels rose as fewer Englishmen meant that the average family had a bigger farm and could grow more food, and that was what mattered in an economy in which the population is more than 90% rural. The golden age for the peasant as far as material consumption happens in the early fifteenth century, as the successive waves of the Bubonic and other plagues reduce England’s population from its medieval high of five to below three million. The reign of Elizabeth I Tudor in the second half of the sixteenth century sees the impoverishment of the working class as the same farmland is now made to support nearly seven million.
Then, starting after 1640, the Malthusian pattern of inverse movements in living standards and numbers begins to crack. Between 1640 and 1700 living standards and productivity levels rise while population remains roughly constant. Between 1700 and 1800 English population rises toward ten million while living standards and productivity levels remain constant. And then after 1800 comes the first inflection point as both population levels and living standards rise. By 1870 England holds 20 million people—compared to 9.5 in 1800 or 6.5 in 1600 or 3 in 1430 or 5.5 in 1250. If we set English working-class real wages in 1870 at a level of 100, then they were 65 in the late eighteenth century or 35 in 1600 or 50 in 1250.
Thus John Stuart Mill was largely right even if not completely right insofar as England itself was concerned. The inventions since 1712 and perhaps since 1640 had in fact lightened the toil and boosted the real incomes of England’s working class. But the pace was very slow: an average annual growth rate of working-class real wages of only 0.2% per year from 1640-1800, and only 0.4% per year from 1800-1870. Each generation had, on average, a real wage level 10% higher than its predecessor. Contrast that with us today, where we expect real incomes to rise by 10% in five years—or with China today where 10% is the real income growth of a year and a half.
The pace of improvement was slow because higher living standards meant faster population growth and because the pace of invention was slow. The pace of invention was relatively slow because science was not yet hooked to invention and invention and innovation were not yet hooked together to business, industrial research, and profit. Things did not change that much even in the age of the first Industrial Revolution. As Northwestern University’s Joel Mokyr puts it, the thing that jumps out at you is that:
[the] first Industrial Revolution... had little or no scientific base…. [It] created a chemical industry with no chemistry, an iron industry without metallurgy, power machinery without thermodynamics… pragmatic bodies of applied knowledge in which things were know to work, but rarely was it understood why they worked…. Moreover, even when things were known to work, they tended to be inflexible and slow to improve… difficult to remove bugs, improve quality, and make products and processes more user-friendly without a more profound understanding of the natural processes involved…
That was what did change around 1870. But it did not change until then.
In 1870 nearly all human beings still earned their bread out of the earth by the sweat of their brow. Most human beings could not read. Most human beings had not seen a steam engine up close, or travelled in a railway train, or spoken on a telephone, or lived in a city. For most human beings life expectancy was still low—little higher than it had been in most parts of the world since the neolithic revolution. At the start of the twentieth century Germany was the world's third superpower, more powerful and more industrialized than any other nation save Britain and the United States. But when Adolf Hitler's Nazi Germany went to war against France in the spring of 1940, four-fifths of the wheeled and tracked vehicles in its army were powered by horses. And mules. Worldwide, 1870 saw five ounces of copper mined per person in the world. Today we mine five pounds. 1870 saw one pound of steel produced per person in the world. Today we produce 350.
Great Britain was the economic heart of the late nineteenth-century world. It was not the richest country in the world—its settler colonies of Canada and Australia and its ex-settler colony of the United States were richer because of their large farm and ranch sizes and their abundant natural resources. But the relative wealth of Canada and Australia and the United States at the end of the nineteenth century was due as much to human and animal muscles and lucky geography as to industry. In Great Britain alone was the economy primarily industrial at the turn of the twentieth century.
Even in Great Britain the veneer of modernity was little more than a veneer. The eve of World War I did see agriculture account for only twelve percent of the British labor force; while manufacturing and construction accounted for 38%; and distribution and services for 32%. But a quarter of Britons were still illiterate as late as 1870. Primary school enrollment did not become universal until the eve of World War I. Life expectancy at birth was still less than fifty years or less. Less than five percent of the population went to secondary school. And Britain was by far the most advanced and industrialized of the world’s economies.
In the United States, and in Europe outside of Britain, farmers still made up the largest single occupational group. More than half the population still lived in the country, farming the land or providing the basic goods and services that farmers needed. Agriculture was still a very substantial share of GDP in the late-nineteenth century. It was only halfway through its long decline to its present role as a very small share of economic activity in industrialized economies. In the American west, and in the other countries that Arthur Lewis named “regions of European settlement”--Canada, Australia, New Zealand, and Argentina--farming was not only the core of the economy but farmers were relatively rich, both compared to those dwelling in the cities and compared to those who had remained in Europe.
The eve of World War I still saw more than one out of three Americans at work in agriculture. And with the exception of Belgium, other European countries were much closer to the American than the British pattern in their distribution of the labor force between town and country, and among sectors. This turned out to have powerful implications for politics as World War I drew closer: too much political influence by agrarian landlords who saw themselves as the descendants of knights who fought for their kings with their swords, and proved their worth and thus justified their wealth through battle. That is a very dangerous attitude to have in an age of battleships, machine guns, and poison gas.
John Stuart Mill was depressed about the past but optimistic about the future--about those “those great changes in human destiny” that he expected to follow not from productivity revolution but from moral, cultural, and political uplift. He died in 1873, just as the pace of invention and innovation and the rate of increase in productivity and living standards took a sudden, discrete, large upward jump throughout the North Atlantic. Before, from 1800-1870, we see living standards and labor productivity levels grow at 0.4% per year. After, from 1870-1950, we see 1.2% per year. (And then 1.9% per year from 1950-present). The pace of economic growth in living standards and productivity levels triples as we move across 1870.
Lightspeed communications and capital flows across the globe was the first. Cheap world trade in staple commodities was the second inflection point. The invention of the process of continual invention was the third, and the biggest. That is when technological progress and rising incomes become something standard and routine and fast, rather than something extraordinary and haphazard and glacial.
To put it another way: In 1870 the daily wages of an unskilled worker in London would have bought him (not her: women were paid less) about 5,000 calories worth of human, not horse food: not oats (although Scotsmen would disagree) but bread--5,000 wheat calories, about 2½ times what you need to live (if you are willing to have your teeth fall out and your nutritionist glower at you). In 1800 the daily wages would have bought him about 3,500 calories, and in 1600 2,500 calories. Karl Marx in 1850 was dumbfounded at the pace of the economic transition he saw around him. That was the transition that carried wages from 3500 calories per day-equivalent in 1800 to 5000 in 1870. Continue that for another two seventy-year periods, and we would today be at 10,000 calories per unskilled worker in the North Atlantic today per day.
Today the daily wages of an unskilled worker in London would buy him or her 2,400,000
Not 10,000. 2,400,000.
That is the most important fact to grasp about the world economy of 1870. The economy then belonged, even for the richest countries, much more to its past of the Middle Ages than to its future of--well, of you reading this. Compared to the pace of economic growth since 1870 and even more so since 1950, all other centuries--even the first-half of the nineteenth century that so impressed Karl Marx--were all but standing still.
That is why there is a very good case that it is 1870 that is the most important historical axis on which the wheel of economic modernity, modern economic growth, the modern economy--whatever you choose to call it--turns.