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History Notes British Economic History - 1840-1964 Notes

Late Nineteenth Century Globalisation Notes

Updated Late Nineteenth Century Globalisation Notes

British Economic History - 1840-1964 Notes

British Economic History - 1840-1964

Approximately 40 pages

Study of Britain's economic performance in comparative context with the US, Germany, and France, with particular reference to quantitative data....

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British Economic History

Late Nineteenth Century Globalisation

What forces determined Britain's position in the world economy in the period 1870-1913?

Britain’s ‘position’ in the world economy can be measured by traditional metrics such as GNP or GDP per capita, or with reference to its industries, investment patterns, or prospects for the future; this essay will examine all of the above, and the factors which drove changes over the period of our examination. The UK economy did not ‘fail’ in the late-Victorian period; real GDP per capita rose from $3191 in 1870 to $4921 in 1913. However, the benefits that had been reaped from being the first industrialised nation were waning rapidly, and Britain’s position as the world’s leading economy was no longer unassailable. This can be explained by convergence theory, driven by migration, the dissemination of technology, and the equalisation of labour and other input costs. The forces which drove convergence may have been accelerated by free-trade policies, fashionable once again in the late-19th century. British industry concentrated resources within several sectors where the greatest competitive advantage had historically been enjoyed, but as globalisation denuded such advantages the nation struggled to nurture emerging commercial opportunities. Not entirely unconnected to this is an unsettled argument over the appetites of British investors, principally whether they illogically preferred overseas investments, and inadvertently starved British companies of an important source of capital. A great many forces acted upon Britain, as they did every other developed and developing nation, and our purpose is not simply to assess their relevance, but also the extent to which they weighed upon the nation’s economic performance.

A

The Cambridge Economic History of Modern Britain, 1860-1939: Floud, Johnson et al

- Chapter 1 – Long-run growth

- Did the UK ‘fail’ in the late-Victorian period? Did it ‘recover’ during the inter-war years?

- Measuring relative decline:

- Between 1870 and 1913 real UK GDP per capita (1990$) rose from $3191 to $4921. At the beginning of the period Britain’s GDP per capita was the world’s highest, and 10% ahead of her closest rival. By 1913 Britain was in second place, c8% behind the US, but she retained a not insignificant lead over European competitors.

- Real UK GDP per capita growth 1870-1913 averaged 1%, compared to 0.7% during the years 1913-1939. Many other nations were exhibiting faster growth rates than Britain during these periods, but as the GDP figures above demonstrate, they were coming from a lower starting position.

- Real GDP growth was 2.1% from 1873-1899, falling to 1.4% from 1899-1913.

- Britain’s free-trade policies allowed it to more resources away from the agricultural sector. Germany on the other hand, pursued agricultural protectionism, and the relative inefficiency of this sector dragged down her GDP per capita figures.

- Aspects of Britain’s relative decline fit within the neoclassical economic growth model. Whilst the nation had accumulated significant capital, this was subject to diminishing returns. Additionally technological advances made with Britain were ultimately disseminated among her competitors. Relatively poorer countries at the start of the period experience higher average growth rates than Britain.

- There is a recognition that ‘catch-up’ is not automatic, and that institutions and policy have a significant impact on outcomes.

- Restraints of late-Victorian growth in Britain: entrepreneurial failure, capital market preference for foreign investment, weak technical education, over-reliance on ‘self-regulation’.

- The US at the turn of the 20th century enjoyed numerous advantages over Britain. These included a much larger domestic market which allowed R&D and fixed costs to be borne over greater sales volume. It also had large numbers of technical graduates. Trade union militancy in the UK meant that there was difficulty in replicating the production methods of Americans such as Henry Ford.

- After valid complaints in the mid-Victorian period, British technical education had significantly improved by the turn of the 20th century. ‘There was no massive failure in the pre-1914 economy’1.

- Chapter 2 – Population and Regional Development

- Between 1840 and 1940 Britain’s population grew from c18.5million to c45.5million.

- British life expectancy was fairly steady at c40 years between the late-16th and mid-18th centuries, before climbing thereafter.

- The fertility rate decline after 1860 as the smaller family became a socially accepted norm.

- Post-1870, emigration was having significant demographic effects on Britain. The population would have been 16% larger and the workforce 14% by 1913 with emigration. Why? In 1870 real average wages were 72% higher in the US than Britain; labour was abundant in Britain but scarce in the US2.

- Chapter 7 – Trade

- After the mid-Nineteenth century, globalisation replaced technological leadership as the key driver in the expansion of trade. Much of this trade involved the export of food and raw materials from the Western hemisphere, and this was aided by rapidly falling transport costs, political support for free trade, and the stability afforded by the gold standard.

- Rising populations in Europe drove food prices higher, making imports from previously uneconomic locales practicable. The British merchant navy made up around half of the world’s commercial fleet, and so this growing demand aided the industry.

- After 1822 Britain was running a trade deficit within the commodity sector, albeit more than balanced by significant receipts from massive overseas investment and services exports.

- On the eve of the First World War Britain remained dependent on three key industries, textiles, iron and steel, and coal for two thirds of its exports by value. Technology in these industries was formed in the industrial revolution and other nations were protecting...

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