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The Industrial Revolution

By the beginning of the eighteenth century Great Britain had become the world’s wealthiest nation. This was achieved by using the supply sources provided by the British Empire and the activities of organisations such as the East India Company to dominate international trade in commodities. At this time the world’s economies were predominantly agrarian and most manufacturing was undertaken as cottage industries using hand tools or very simple, basic machines. This scenario was changed forever, however, when Great Britain demonstrated that the entrepreneurial application of new technology to industrialise a society can provide the basis of a new, even more powerful source of wealth generation (Moykr 2001).

A number of factors contributed to Britain’s role as the birthplace of the Industrial Revolution. It had significant deposits of coal and iron ore, which proved essential for industrialisation. Additionally, Britain was not only a politically stable society but the world’s leading colonial power, whose colonies served both as a source of low-cost raw materials and as a marketplace for manufactured goods (Allen 2011).

The country’s textile industry was transformed by industrialisation as the result of a series of innovations which led to ever-increasing productivity requiring less human involvement. James Hargreaves invented the spinning jenny, a machine that enabled the simultaneous production of multiple spools of thread. The machine improved with Samuel Compton’s development of the spinning mule and subsequently Edward Cartwright’s power loom which mechanised the process of weaving cloth.

Together these technological advances permitted the establishment of the world’s first factory-based production systems (MacCleod 1992).

The other critical development necessary for Britain’s successful industrialisation was the steam engine. Thomas Newcomen developed the first practical steam engine which was used primarily to pump water out of mines. The Scottish inventor James Watt improved on Newcomen’s design enabling the steam engine to power machinery critical to the creation of Britain’s factories. The steam engine also had an important role in improving transportation through the development of the steam locomotive to haul goods and people on railways, and steam power to replace sail in the world’s vitally important maritime industry (Nuvolari and Verspagen 2009).

Developments in the iron industry also played a central role in the Industrial Revolution. Abraham Darby developed a cheaper, easier method of producing cast iron, using coke in place of charcoal-fired furnaces. Subsequently Henry Bessemer developed the first inexpensive process for mass-producing steel. Both iron and steel became essential materials used to make everything from appliances and tools to machines, ships, buildings and industrial infrastructure (Berry 1999).

Industrial advances can share the same problem as commodities when imbalances in supply and demand lead to price volatility. This occurs as firms and nations, having observed the success of a new industry, eventually acquire an understanding of the relevant technology and expand total available production. In some cases this can result in industrial goods acquiring the same characteristics as natural resources with extreme volatility ultimately leading to the failure of major firms. This outcome is exemplified by the major downturn in the output of the iron and steel industry in Western economies during the twentieth century, which has more recently been exacerbated by China seeking to sustain its revenues by increasing the export of its lower-priced output.

Even where commoditisation does not occur, once markets enter maturity and capacity continues to increase, the increasing level of competition may lead to price wars and a massive decline in the scale of wealth generation in one or more nations. Such proved to be case for British industry in the late nineteenth century as countries such as Germany and America adopted a model of generating economic growth through industrialisation. Usually the only way to avoid this outcome is to seek new ways of exploiting technology as the basis for creating new forms of industrial output. Unfortunately for a number of reasons Britain’s business community ignored this reality, and it was left to Germany and the USA to instigate the next industrial revolution based upon exploiting chemicals, electricity and the internal combustion engine (Doepke and Zilibotti 2005).

 
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