Great Britain, throned and dethroned
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Manual labour and machines have combined during the industrial revolution
With last week’s coronation at Westminster Abbey, King Charles III became the “head of state” for the United Kingdom as well as for 14 more sovereign states in the world including Canada, Australia, and New Zealand. Sri Lanka also remained a country within this dominion of the Commonwealth until it was made a “Republic” in 1972. However, leaving the Commonwealth and changing the name of “Ceylon” did not improve the fortunes of the country.
One of the great-great grandfathers of King Charles III was King George III who reigned Britain (and Ireland) from 1760-1820 for nearly 60 years. It was during his time that the entire Sri Lanka too became a British colony with the fall of the Kandyan Kingdom in 1815 into the hands of the British Empire.
At that time, the British had succeeded well surpassing all other European colonisers such as French, Portuguese, Spanish and Dutch. Accordingly, the British Empire expanded over Northern America and Caribbean Islands in the West, and Africa, Asia, and the Pacific in the East.
New thing, first and foremost
About 200 years ago, accordingly, the global economic power was with Great Britain. It all started during the 60-year rule of King George III, as it has come to be known later, “industrial revolution” – a revolutionary change in production that transformed the British economy from a feudal agriculture-based economy to a modern industry-based capitalist economic system.
It was the first and foremost experience in the world for any country to become rich with growth and development with new discoveries in every area of production enabling a new economic and political order. Every aspect of production change was led by new discoveries within little more than half a century, hence the title, “industrial revolution”.
Industrial revolution brought about a series of new technological inventions (discovery of knowledge) and innovations (application of knowledge), that was inevitably combined with industrialisation. Accordingly, hand tools were replaced with machines, labour power with new sources of energy, and primitive production with speeded-up and scaled-up mass production.
Some of the basic technological and industrial discoveries were related to iron and steel, coal-fired steam power, production of machinery and chemicals, mining and quarrying, textile and apparel, railway transportation, roads and infrastructure, banking and finance, and large-scale agriculture.
Agriculture revolution
With the contemporary land-enclosure movement in Britain which expelled rural village populations from land, large-scale agriculture production also emerged. It too was supported by new technology and new machines to bring out higher production and productivity. Farmers and slaves in agricultural land were replaced with wage-labour and machines.
Urbanised areas were flooded with the rural people who lost their feudalist-type of living and livelihood, creating massive shanty-towns. They supplied labour for emerging industry, mining, and infrastructure without any modern working conditions.
At the beginning it was not at all a comfortable and lucrative change, as human suffering was immense. Industrial revolution, which changed labour relations to production, is at the heart of emerging working-class movements and socialist political movements.
Industrial revolution is considered to be the most profound revolution in human history, because of its sweeping impact on people’s living and working that also enabled economic, political and social change in the world. As everything had to be discovered for the first time in history, the British experience in growth and development was through trial and error.
Economics of the revolution
I thought of discussing the episode of “industrial revolution” not only to highlight the British rise-up to a world economic power but also to bring about its underlying basic “economics” which has a universal value. The economic principles that were born out of the then industrial revolution are equally valid today as well, even though some of us tend to argue otherwise.
The early economists from the 18th Century witnessed the industrial revolution and contributed to the knowledge of economics. The most influential economists, starting from the Scottish economist Adam Smith, are grouped today into a single club called Classical economists – the oldest influential school of economic thought.
Smith, who is today considered to be the forefather of modern economics, published his book “Wealth of Nations” in 1776 during the time of King George III, highlighting “how a nation can become wealthy”. Subsequently, other writers substantiated the classical economics ideology with elements of a market-economic system that leads to growth and development.
Although Classical economists witnessed industrial revolution, expansion of the British empire, regulatory barriers that protected British monopolies, misery of labour and social issues, and the contemporary ideas of mercantilism, they didn’t promote any of them. Rather they were against all that but saw the underlying market-based economic principles of wealth creation.
Not gold, but income
To Smith, economic power of a nation is not the amount of gold piled up according to mercantilist ideology at the time, but the growth of income based on production. A nation would increase its production leading to higher incomes, when it is able to expand its productive capacity with capital accumulation and technological progress, leading to large-scale and speeded-up production.
Large-scale and speeded-up production results in a division of labour which would specialise in a specific task only so that labour becomes more productive. Large-scale production requires larger markets and international markets. Output has to be sold, and inputs have to be brought as the size of the market imposes limits on the scale of production and speed of production.
When the market size is “small”, then the industries do not expand, and unit costs do not fall. Therefore, international trade is the engine of growth, because it provides access to an unlimited global market for industries to grow and reduce their unit cost.
If a country adopts a market economy, open to free trade, they will enhance their growth prospects through specialisation in production according to comparative advantage. This was revealed by the classical economist, David Ricardo in 1821 by taking trade between England and Portugal. The market opens room for competition, so that constant progress with more investments, technological upgrading, product development and cost reduction, are all needed to remain stronger in competitive markets.
Miss the mark
Many have missed the market principles of creating wealth of a nation, as it emerged out of the industrial revolution. Instead of capital accumulation, they prefer to look at robbing and exploiting resources from other nations. Instead of market expansion, they prefer to look at colonisation and imperial expansion conquering other nations.
Instead of market power to create wealth, they prefer to look at cohesive hegemonic powers of the state exercised over other competitor nations. Instead of speeded-up and scaled-up production, they prefer to look at labour alienation and labour exploitation. In doing so, we missed the mark – the factors underlying wealth creation by a nation.
It was the widespread Classical economic ideology that changed and challenged the Western mercantilist ideology and that promoted market economic environment in Europe including in Britain. And it paved the way for many countries in the West as well as around the world to create wealth and become developed nations in the world.
Losing the hegemony
One of the great advantages that all other countries had was that they didn’t have to bear the pain of “discovering for the first time”. It was all done in Great Britain so that other countries had the privilege of emulating what was already discovered.
European colonisation and imperial expansion came to an end. But capital accumulation continued to take place, and market expansion never came to an end. The countries carried out the relay race, by making wealth creation faster and easier.
About 100 years ago, however, Great Britain started losing its world economic power to the emerging US even above and beyond what Britain had. While many other countries were growing since then, today the US is losing it too due to emerging new global hegemonic powers. (The writer is a Professor of Economics at the University of Colombo and can be reached at sirimal@econ.cmb.ac.lk and follow on Twitter @SirimalAshoka).
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