Notes: Slouching Towards Utopia 7.3: The World in 1900: Industrialization

Industrialization

The steam engine of the eighteenth century required precision metalworking to make the boilers and the pistons and the pipes strong enough not to burst, and the valves smooth enough to function. This came about because of western Europe's four-century love affair with iron, copper and gunpowder: the making of firearms was the womb of the metal-bashing technologies that are at so much of the core of our industrial civilization. The steam engine of the eighteenth century also required something really important for a steam engine to do. That need was found in the necessity of keeping coal mines from flooding. And the steam engine of the eighteenth century also required a really cheap source of heat. That was found at the bottom of the coal mines where the flooding was taking place, for where could energy possibly be cheaper than at the bottom of a coal mine? Without this confluence--skilled metalworking harnessed to the service of pumping water out of the place where coal was most abundant--it is hard to see there being an eighteenth-century technological-industrial revolution in England that produced the steam engine.

Without that confluence, how long would the coming of the steam engine have been delayed? With the steam engine, with cheap plantation-grown cotton ideally suited for machine spinning, and with practical metallurgy to make iron rails and iron wheels cheaply, the rocket that was the industrial revolution was lit. Steam power propelled the automatic spindles and looms of the nineteenth century, and powered the metal presses and the railroad locomotives as well. And toward the end of the nineteenth century it became clear that what was going on was not just a wave of particular innovations and inventions but an ongoing process of continual technological advance: steel manufacture and chemical processing and oil wells and internal-combustion engines and vacuum processing and telegraphs and electric motors and the iron-hulled ocean-going steamship.

Greg Clark of UC Davis points out that there had been previous narrowly-focused bursts of invention and innovation that had revolutionized particular sectors: printing, the windmill, the musket, the seagoing caravel. Admittedly, none of them were as large as the coal-steam-spindle-loom-rail complex of the early nineteenth century. But they did revolutionize their sectors. And none of them sparked a general industrial revolution that produced repeated waves of economy-wide growth, as the British Industrial Revolution proper did.

It is worth pausing a second to note the magnitude of the phase change. In the year 1--we guess--world population was about 170 million. In the year 1650--we guess--it was about 540 million. This tripling of world population over the course of one and two-thirds millennia was accompanied by very little improvement in the standard of living of the median peasant (though things may well have been very different for the upper-class elite). We can thus say that world real GDP--at least when measured in terms of necessities rather than luxuries--roughly tripled over this one and two-thirds millenium: a rate of growth of 0.07% per year. Between 1650 and 1800, we think that world population grew from about 540 million to about 800 million--a rate of 0.25% per year. We also think that by 1800 that perhaps a quarter of the world lived perhaps half again as well in a material sense as it had in 1650--giving a further 0.15% per year boost to world real GDP growth, for an annual growth rate of 0.4%. Between 1800 and 1900, world population grew from 800 million to 1.5 billion, and world average GDP per capita rose by perhaps 50%--for an average annual rate of GDP growth of 1.1% per year. And in the twentieth century the pace of worldwide real GDP growth has averaged some 3.5% per year.

Neoclassical economists like me like to focus not on the rate of increase of total real GDP but on the rate of increase of a quantity usually symbolized by A that we call "total factor productivity." It is a measure of how much economic output would have increased had the factors that are the productive resources of the economy--labor, capital, and natural resources--remained the same, and had output increased only because of technological inventions and innovations, improvements in business, sociological, and political organization, and other improvements in the efficiency with which the gifts of nature and the investments of previous generations are put to use today. The corresponding crude estimates of the global rate of increase of A are 0.021% per year over 1-1650--a time to double of 3,300 years--0.2% per year from 1650-1800--a doubling time of 350 years--0.42% per year over 1800-1900--a doubling time of 170 years--and 1.4% per year over 1900-2000--a doubling time of 50 years.

We have an ninefold-increase in the pace of technological and organizational invention and innovation from something trivial to something barely noticeable with the coming of the commercial revolution, a doubling to something that makes a difference with the coming of the industrial revolution, and then a further near-quadrupling between the industrial revolution and our day.

That the pace of economic innovation was about to nearly quadruple was not certain at the end of the nineteenth century. As late as 1850 it was still uncertain whether the industrial revolution would continue--whether it would ultimately wind up raising general living standards, or just be a transitory flash that would add a few interesting and important but limited technologies--steam engines, ironmongery, paddle-wheelers, automatic looms and spindles--to the human technological library. Indeed, it was in 1871 that British economist and moral philosopher John Stuart Mill revised his *Principles of Political Economy. The earlier edition had the passage:

Hitherto it is questionable if all the mechanical inventions yet made have lightened the day's toil of any human being. They have enabled a greater population to live the same life of drudgery and imprisonment, and an increased number of manufacturers and others to make fortunes. They have increased the comforts of the middle classes...

Mill passed over this, and did not alter it. It was, however, followed by:

[T]hey have not yet begun to effect those great changes in human destiny, which it is in their nature and in their futurity to accomplish. Only when, in addition to just institutions, the increase of mankind shall be under the deliberate guidance of judicious foresight, can the conquests made from the powers of nature by the intellect and energy of scientific discoverers become the common property of the species, and the means of improving and elevating the universal lot...

Just institutions and fertility control were, to Mill, more important than productivity growth. To Mill, the hopes of the working class for anything other lives of dire material penury and sodden boredom rested not in scientific research and technological innovation but in moral uplift: only severe fertility restriction could open a gap and not too large a gap between working-class standards of living and dire subsistence, and thus working-class happiness depended much more on intellectual, social, and philosophical uplift than on a high or even a moderate material standard of living. Mill, in short, believed that the industrial age was still a Malthusian age. But by 1900 it was clear that the industrial revolution was not just a lucky set of individual inventions but instead the invention of invention and innovation: the new industrial economy created by the industrial revolution could be counted on to throw out additional innovations of the same magnitude as the railroad and the power spindle at least once a generation. Nevertheless, for most people in most countries--even in most Europoean countries--the industrial transformation had barely begun. Agriculture was still more than 50% of GDP and agricultural employment 70% of total employment in Italy in 1890. In Germany and Sweden at the same time agriculture was one-third of GDP and half of employment. And in Japan and France it was two-fifths of output and three-fifths of employment. Those were, outside of Britain, among the most industrialized countries of the age.

This is not to say that there had not been progress. On the eve of World War I, in 1913, Britain burned 194 million tons of coal. In 1987 it would only burn 116 million tons–and the total coal-equivalent energy consumption of Britain today is only twice what it was back in 1913. Energy would be used much more efficiently at the end of the twentieth century than at the beginning. But at least in Britain (but in few other places), at least as far as energy is concerned (but in few other dimensions), the start of the twentieth century was definitely and highly industrial.

U.S. railroads carried passengers some 35 billion miles in 1913: that's 350 miles per person, which indicates a sizeable use of modern technology for travel even then. (But today U.S. airlines would carry passengers some 700 billion miles in a year--that's 2,500 miles per person.) Relatively cheap ways of making the fundamental building material of the twentieth century--steel--were invented in the second half of the nineteenth, with the invention first of the Bessemer process and then of the Thomas-Gilchrist process. World steel production was some 70 million tons a year by 1913, and would grow to 170 million tons by 1950. Chemistry as we know it emerged from German universities and laboratories in the second half of the nineteenth century; by the eve of World War I Germany produced a full quarter of the world’s chemical output; rayon became a competitor to silk in the first decades of this century. On the eve of World War I some 1.7 million passenger cars were registered, and some 100,000 goods-carrying vehicles were registered in the United States. But the United States was far ahead of other countries in its use of internal combustion engine vehicles: there were only some 132,000 passenger cars in Britain.

And people definitely saw what was coming. On the centennial of the storming of the Bastille during the Great French Revolution, France held a universal exposition. At the center of it was not some tableau of the martyrs of the French Revolution, but a construction of steel: the tower designed by and named after Gustave Eiffel that has dominated the Paris skyline ever since. As historian Donald Sassoon writes, the French Revolutionary centennial was transformed into a "… consecrat[ion of]… commerce and trade, modernity, and the wonders of technology exhibited in the Galerie des machines… Under the banner of modernity, progress, and the peaceful pursuit of wealth, the French people would regain national pride and unity after the humiliating defeat of 1870…"

The new technologies of the end of the nineteenth century were associated with the rise of the modern corporate enterprise. By the end of the 1880s, industrial enterprises found themselves in the middle of a web of ocean steamship, land railroad, and telegraph communication systems that greatly multiplied their ability to order materials and ship products. The vastly expanded potential of the delivery system led to a vast expansion in the size of the enterprise. The expanded firms were more capital intensive than their predecessors, and their continued profitability required that the expensive capital be used to the utmost: coordination of the flow of inputs from suppliers and of output through distributors as well as of product through the factory itself. Such coordination could not just happen: it required professional management. The modern managerial enterprise–the profession of management itself–was born with the twentieth century.

Why is it that the nineteenth century--particularly the late nineteenth century--saw the invention of invention and innovation? What made innovation not just an occasional flash of lucky insight but a continuous process, one in which you could invest in?

One important factor is that by the second half of the nineteenth century people believed in their science enough to invest large amounts on money betting that science could do things--new and very valuable things--that had never been done before. Science fiction writer Neal Stephenson marvels at that "highest of high-tech industries" of the 1860s, the telegraph: specifically the trans-oceanic submarine telegraph, the history of which is preserved at the Museum of Submarine Telegraphy in Porthcurno, Cornwall:

During the decades after [Samuel] Morse's [first telegraph message] "What hath God wrought!" a plethora of different codes, signalling techniques, and sending and receiving machines were patented. A web of wires was spun across every modern city on the globe, and longer wires were strung between cities.... [T]elegraphy, like many other forms of engineering, retained a certain barnyard, improvised quality until the Year of Our Lord 1858, when the terrifyingly high financial stakes and shockingly formidable technical challenges of the first transatlantic submarine cable brought certain long-simmering conflicts to a rolling boil... the persons of Dr. Wildman Whitehouse and Professor William Thomson, respectively... an inquiry and a scandal that rocked the Victorian world. Thomson came out on top, with a new title and name - Lord Kelvin.... Undersea cables, and long-distance communications in general, became the highest of high tech....

[...]

Very long gutta-percha-insulated wires were built. They worked fine when laid out on the factory floor and tested. But when immersed in water they worked poorly, if at all. The problem was that water, unlike air, is an electrical conductor.... When a pulse of electrons moves down an immersed cable, it repels electrons in the surrounding seawater, creating a positively charged pulse in the water outside. These two charged regions interact with each other in such a way as to smear out the original pulse.... If the sending operator transmitted the different pulses - the dots and dashes - too close together, they'd blur.... Long cables act as antennae, picking up all kinds of stray currents.... These problems were known, but poorly understood, in the mid-1850s when the first transatlantic cable was being planned. They had proved troublesome but manageable in the early cables that bridged short gaps, such as between England and Ireland....

[I]n 1858 when the Atlantic Telegraph Company laid such a cable from Ireland to Newfoundland: a copper core sheathed in gutta-percha and wrapped in iron wires. This cable was, to put it mildly, a bad idea.... Let's just say that after lots of excitement, they put a cable in place between Ireland and Newfoundland. But for all of the reasons mentioned earlier, it hardly worked at all. Queen Victoria managed to send President Buchanan a celebratory message, but it took a whole day to send it. On a good day, the cable could carry something like one word per minute. This fact was generally hushed up, but the important people knew about it - so the pressure was on Wildman Whitehouse... [who] convinced himself that the solution to their troubles was brute force... 5-foot-long induction coils capable of ramming 2,000 volts into the cable. When he hooked them up to the Ireland end of the system, he soon managed to blast a hole through the gutta-percha somewhere between there and Newfoundland, turning the entire system into useless junk....

William Thomson had figured out... that incoming bits could be detected much faster by a more sensitive instrument.... Eight years after Whitehouse fried the first, a second transatlantic cable was built to Lord Kelvin's specifications with his patented mirror galvanometers at either end of it. He bought a 126-ton schooner yacht with the stupendous amount of money he made from his numerous cable-related patents, turned the ship into a floating luxury palace and laboratory for the invention of even more fantastically lucrative patents. He then spent the rest of his life tooling around the British Isles, Bay of Biscay, and western Mediterranean, frequently hosting Dukes and continental savants who all commented on the nerd-lord's tendency to stop in the middle of polite conversation to scrawl out long skeins of equations on whatever piece of paper happened to be handy...

Invention became an industry.

The most famous inventor at the start of the twentieth century was Thomas Alva Edison (1847-1931), "the wizard of Menlo Park," New Jersey, who registered more than 1000 patents and founded 15 companies--including what is now called General Electric:

The Menlo Park research lab was made possible by the sale of the quadruplex telegraph that Edison invented in 1874, which could send four simultaneous telegraph signals over the same wire. When Edison asked Western Union to make an offer, he was shocked at the unexpectedly large amount that Western Union offered; the patent rights were sold for $10,000. The quadruplex telegraph was Edison's first big financial success.

• The quadruplex telegraph (1874)
• The phonograph (1877)
• The carbon telephone microphone (1878)
• The commercially-practical light bulb (1879)
• DC electric distribution system (1880)

Comments

[David]

One quibble--Was the steam engine really necessary to spark the Industrial Revolution? The first cotton factories were run by water power [viz. Arkwright's "water frame"], and while steam may have quickly become dominant in Britain, water power remained important in the United States until late in the nineteenth century. Steam definitely was essential to sustaining the Industrial Revolution--I'm just not so sure it was the spark.

[Kaleberg]

My guess is that steam was critical. Wind mills and water wheels had been around for centuries, but they do not scale well, and power cannot be stored as it can with coal. When the wind blows or water runs, power is available, otherwise it is not. Steam power uses stable, portable fuels. The engine can be installed where it is needed and run when it is desired.

[Bruce Wilder]

I think David is correct. Steam, per se, was not critical to the 18th century industrial revolution. The 18th century industrial revolution was a triumph of the ability of "toymakers" and other craftsman to use science to design machinery and to use machinery to make machinery. Watt's steam engine was "a" exemplar of that revolution, because it was the outcome of a long process of tinkering and mechanical innovation, inspired in part by the application of scientific physics to an analysis of hte problems posed. Another exemplar was Harrison's marine clock -- a mechanism that could keep precise time at sea! -- also the product of over forty years of tinkering. "The" exemplars of the 18th industrial revolution were the textile machinery assembled by Arkwright into a factory system.

But, Watt's steam engine was not particularly important as a source of power in the 18th century industrial revolution. I don't have the reference, but I think there were only about 1200 Watt engines in the world, when Watt and Boulton retired and their patents expired at the end of the 18th century.

Most power in the 18th century was still muscle power, from humans or horses. The big textile mills were mostly water mills. Although Arkwright early on had a steam-powered mill, I don't think it was initially a financial success.

The application of steam to steamships and railroads after about 1820, however, was stupendously important, and led to a retrospective celebration of Watt's role.

And, the development of electric motors would revolutionize manufacturing in the early 20th century, precisely because of the increased flexibility to distribute power.

[Bruce Wilder]

"Agriculture was still more than . . ."

I think I should demur against this opposition of the industrial to the agricultural as a measuring stick of progress.

Agriculture was not necessarily some other realm untouched by the industrial revolution. Before there was, and before there could be, an industrial revolution, there was an agricultural revolution. Jethro Tull preceded James Watt by more half a century.

And, in much of the settler world of North America, Australia, Argentina, agriculture was an integral part of the industrial-market system, where machinery mattered.

It was the rise in agricultural productivity, driven by the same combination of science and machinery that was affecting manufacturing, which would eventually drive people out of agriculture.

In England, enclosure had already driven a large part of the population out of agriculture, before the industrial revolution has gained much purchase. That's one reason why its statistics show differently.

[Robert Monk]

I'm trying to get a picture of the effects of carbon-based fuels (plants and fossil fuels) on total factor productivity. Or are these considered to be already accounted for in your figures for rates of growth in this measure, aka "A".

I haven't studied economics in detail, but I imagine there must be a lot of debate about how to calculate 'A'. For example, how much innovation could there have been, if fossil fuels were never developed? This source of portable, reliable and intensely concentrated energy must have had a huge impact on engineers' ability to conceive and test machines. The mere presence of abundant energy also created conditions for long-term investment in engineering technology, such as academies and, less formally, simple free time and surplus capital to invest.

Anyway, I find it very difficult to believe that, absent carbon fuel (including felled trees and other vegetation from 1600-1800), any society could double its 'A' every 70 -- or even every 500 years -- on a consistent basis.

This is pretty important today, as we contemplate global climate upheavals that threaten the ecologies our economies rely upon, and as it becomes more and more likely from the evidence that extraction of carbon-based energy has 'peaked', such that the ratio of energy input to energy extraction will get ever-worse from here on out. Oil fields and prospective discoveries are pretty clearly at their turning point, natural gas I don't know about but with consumer prices rising steadily I expect the situation is similar, and coal and living carbon sources all have environmental impacts that make them particularly expensive to the global economy in aggregate, and increasingly so as unchecked growth in greenhouse gas and particulate emissions continues to put the squeeze on climate systems that may simply break down under the pressure, loosing chaos even beyond a simple (but still catastrophic) global warming trend.