Here is a term paper on the ‘High Victorian Economy of Britain’ especially written for school and college students.
If we take the period 1842 to 1873, the natural division in economic history, we can better appreciate the full extent of high Victorian ‘growth’. Between those dates the volume of British exports rose by 350 per cent, about 11 per cent a year, as compared with 7 per cent a year from 1816 to 1842.
The United States and the advanced countries of the Continent were making great industrial progress, but in the early, seventies Britain still possessed two-thirds of the world’s capacity for cotton factory production and accounted for half the world’s output of coal and iron. It was a degree of pre-eminence no country matches today.
Population was growing as fast as before, and the manner of its continuing redistribution remained much the same. Three shifts of emphasis reflected important economic changes. First, as mechanization proceeded further, the woolen industry was noticeably more prosperous.
Between 1851 and 1871 exports of woolen manufacture doubled, and imports of raw material from Australia and New Zealand increased four times. Hence Bradford joined the list of British towns with more than 100,000 inhabitants. Secondly, the iron industry continued to grow fast.
Whereas in the previous period it was in Scottish iron fields that the greatest increase of output occurred, now it was in those of the far North of England: Cumberland and North Lancashire, Durham and the North Riding of Yorkshire. From these years date the boom-towns of Barrow-in-Furness and Middles brought.
In 1856 the Bessemer process was invented, and steel production made much cheaper. Thirdly, the most obvious movement revealed by the figures of urban population increase is that to the ports.
Not only did the growth of London become more rapid again, but five ports reached 100,000 inhabitants in this period: Dundee, with a large jute industry; Newcastle-upon-Tyne, port for the iron-fields and coal-fields of Tyneside, and also a centre of the chemical industry; Hull, now the third port of Britain after London and Liverpool, with Yorkshire industry behind it and with its own fishing fleet; and the naval ports of Portsmouth and Plymouth, marking the replacement of wooden by an iron navy. Two other towns attained this size by 1871: Salford, effectively part of one conurbation with Manchester, and Stoke-on-Trent, capital of the pottery industry and centre of the coal and iron district of Staffordshire.
After 1851 the absolute number of persons employed in agriculture declined. So, paradoxically, did the labour force of the textile industries, as machines displaced men. The notable increases were registered in mining, metalwork and transport. That in metalwork reflects the development of the engineering and machine-tool industries, essential accessories of general mechanization.
Growing ports, and an increasing labour force concerned with transport, point to the fact that this was a period of great development in railways and in shipping. The length of railway open in Britain in 1868 was twice that in 1850, and still the greatest of any country in Europe.
Between the same years receipts from passenger traffic nearly trebled, receipts from goods traffic more than trebled. Railway towns, such as Crewe, were built. During this period the canals lost the bulk of their custom to the railways. Producers of perishable goods benefited particularly. It was the railways which made it worthwhile to expand the North Sea fishing fleets, since their catch could now be delivered fresh to distant cities.
In general, towns could derive food supplies from further away than before. Hence, partly, London could resume more rapid growth, and hence, partly, agriculture flourished. Seaside holidays became more common: Brighton, Southport, Torquay and Margate were growing fast.
The continuing development of railways contributed to unify the country further. An outward and visible sign of this process was the standardization of building materials. Local stone or brick, slate or tile ceased to impress their character on a district. Everywhere now, there were cheap and nasty bricks to be had; and everywhere a little money and a little taste, good or bad, could diversify stark red bricks with bright blue bricks and harsh white bricks, and so on.
More remarkable was the growth of British shipping. Between Waterloo and 1837 the tonnage of British shipping remained almost the same, about 2.25 million. Over those period earnings from shipping increased in real terms, but not in absolute terms. Britain retained her primacy in the sense that she still had the largest merchant fleet in the world. But the United States’ was superior in quality and catching up in tonnage.
From the late ‘thirties the British marine grew absolutely, and from the ‘sixties even relatively to other nations’. Its tonnage of sailing ships more than doubled between 1837 and 1865—the peak, at almost 5,000,000. Steam tonnage increased twelve times, though as yet to less than 1,000,000.
Shipping earnings increased about four times over the same period. How important this growth was will be evident from the fact that these earnings were the largest item in Britain’s invisible trade until the ‘seventies, when interest on foreign investment came to rival them, and that they roughly equaled in amount the surplus on the balance of payments.
The growth of Britain’s merchant fleet was associated with a large expansion of British shipbuilding. Britain became dominant in the construction of iron ships especially. In the 1820s about 80,000 tons altogether were built each year in the United Kingdom; in the 1830s an average of 100,000; in the 1840s 130,000; in the 1850s 210,000; in the 1860s 310,000. By the late ‘sixties about half the sailing ships and almost all the steamships were iron ships.
Much of this construction was carried out on Clydeside, and by this time the industry used larger concentrations of workpeople than any other. It was investment in ships and railways, including railways overseas, which maintained the high rate of capital formation first achieved in the previous period. A principal benefit arising was a lowering of transport costs generally.
Between 1850 and 1868 the fluctuations of the economy were less wild than previously. There were exceptionally high food prices in 1853-54, partly because of bad harvests, partly because the Crimean War cut off Russian supplies of corn. The cotton famine, caused by the American Civil War, led to great hardship in Lancashire from 1862-65.
There were commercial crises in 1857 and 1866. But there was nothing like the accumulation of calamities of 1837-42 in Britain or 1845-49 in Ireland. Prices in general rose, by about 20-30 per cent from the low point of 1851—the only break in the secular fall from 1815 to 1896. There is a consensus that conditions improved for the working classes.
However, although the volume of exports was rising so quickly, real national income and real national income per capita increased at much the same rate as before. It is believed, then, that the gains were better distributed in this period. Average real wages rose slightly, because the number of people employed in the more highly-paid occupations was growing more rapidly than the population.
It was a very great benefit to the poor that Free Trade policies reduced the cost of food and also steadied the fluctuations in food prices. Much more marked, though, was the advance of the middle classes.
Investment, especially domestic, was made safer by the Acts of 1855, 1856 and 1862 providing for the registration of companies and the easy adoption of ‘limited liability’, previously available only in special cases. However, it was to be remarkable for a long time yet how small were British firms by comparison with the great American combines and German trusts.
The Stock Exchange continued to be chiefly concerned with government stocks, foreign and British and railway shares of all countries, rather than with industrial securities. But all the same there was a marked increase in the number of public and limited liability companies, and in the number of shareholders.
This development of course carried one stage further the capitalist division between owners and workers, making a new separation between shareholders and managers. The operation of the Bank Charter Act, by slowly reducing the number of provincial note-issuing banks, was increasing the control of the Bank of England over the currency, thus contributing further to the security of investment. Banking facilities were of course being extended to meet growing demand.
At some point the question must be put: how were these spectacular rates of growth maintained? The obvious answer would be: by scientific and technological discovery, in which Britain’s pre-eminence was exalted in the Great Exhibition of 1851. But this would be correct only to a certain extent and in a special way.
First, it must be realized that there were exceedingly few scientists and not very many technologists in any professional sense. As for scientists, there was a growing but small group of theoreticians and experimenters, some of whom were associated with an old University, more likely Cambridge than Oxford, but more with London University or some other London technical institution.
The most famous of these men in the field of the physical sciences was Michael Faraday, who made great advances in the study of electromagnetism. Faraday was essentially an experimenter; his ideas were put into mathematical form by James Clerk Maxwell, who also contributed much to thermodynamics and other areas of physics.
But there was no scientific course for undergraduates at either old University until 1850, though Cambridge was strong in mathematics. Moreover, the need was not as yet apparent for large-scale scientific study, undertaken for it but nonetheless with a view to making possible technological change in the long run. Nor was there much recognition of a need for technological courses at a University level.
There was a lot of technical education to be had at a modest level. But what was being trained, and what at this stage was most obviously required, was a body of skilled workmen and practical engineers capable of making comparatively small improvements not generally calling in aid any deep theoretical knowledge.
The potentialities for this sort of change that were inherent in the general process of applying steam power and coal heating to a variety of industries, or in making iron a better substitute for wood in building, or in improving machine-tools, were enormous. This approach was dangerously empirical and un-theoretical in relation to future developments, but it served very well for the period.
There could still be vast developments in chemical industry without synthesis of artificial materials—though they were just beginning to matter, with superphosphates being manufactured for manure and aniline substitutes for natural dyes. There was no call yet for the commercial use of electricity, no thought of atomic power.
Further, a good part of the growth was not directly due to any improvement or discovery of this kind. Population was increasing very rapidly in most parts of the world, providing a largely unexploited market. Some regions remained to be explored, and their inhabitants exposed to Western civilization.
The first of the United States West of the Mississippi date from the 1840s; China was being brutally ‘opened up’ to British trade from around 1840; large parts of Africa were still unvisited by white men. Railways and steamships combined with the expansion of the market to lower costs, regardless of technological development in industry.
Both forms of transport were not only faster for each journey, they made possible many more journeys. With the telegraph, first used commercially in 1844 and brought into wide use in this period, not only was the pace of diplomacy quickened to the point of loss of dignity, but trade and investment became far less of a gamble. The Atlantic cable was at last laid in 1866. Knowledge of the rest of the world increased rapidly and immensely.
It is important to appreciate that nineteenth-century economic growth proceeded under different conditions and assumptions from those of the twentieth century, especially in Britain. World trade since 1914 has grown less fast than world production.
The greatest modern economies concentrate on production for the domestic market, and insulate themselves from the economies of other countries. International travel and contact is physically easier and more common now than a century ago, but governments exercise stricter control over it.
Passports and currency restrictions were barely known in the nineteenth century. Emigration was absolutely much greater than now. There was something near to a world economy operating from the mid-nineteenth century, presided over by Britain, with sterling as its currency and London as its capital.
In this climate Karl Marx, seeing the world becoming ever more homogeneous, discounted the power of nationalism. Even Giuseppe Mazzini, the prophet of Italian unification, like Marx an exile in England, saw nationalism as tending towards international co-operation.
World trade was growing substantially faster than world production from 1815 to 1885. ‘Trade was an “engine of growth” in the nineteenth century . . ., a means whereby a vigorous process of economic growth came to be transmitted from the centre to the outlying areas of the world.’ Alfred Marshall could write in 1890: ‘The dominant economic fact of our own age is the development not of the manufacturing but of the transport industries.’
Against this background the significance of the Free Trade policy becomes clearer. In opting for it, Britain not only placed agriculture behind industry in importance, in the last analysis she placed industry behind trade. This did not at first harm British agriculture. American grain was not yet available cheaply enough and in sufficient quantity to make British arable farming largely unprofitable; there was an overall shortage of grain in Europe.
Though imports of grain and other food rose, heavy investment in drainage and fertilizers, and some shift from arable to pasture, maintained, even increased, the prosperity of British farming in the 1850s and 1860s. As for British industry, in 1846 and until the 1870s it could for almost all purposes ignore the competition of the rest of the world.
The shipbuilding industry and the merchant marine apparently benefited from the loss of their protection. The silk industry was one of the few to suffer. It seemed unreasonable to hope for still more rapid development in cotton, coal and iron, making allowance for the distortions of wars.
If exports could grow so fast, so much faster than production and national income, concentration of investment in transport, regardless of whether it was foreign or domestic, seemed natural. There was less reason than modern economists postulate to feel concern at the shortage of scientists and technologists, and at the small amount of capital flowing into industry, or to press for restrictions on the export of machinery and skilled workmen and on the import of goods competing with British products.
Britain was most obviously ‘the workshop of the world’, but as importantly its universal carrier and banker. Free Trade had not been adopted out of pure calculation. It was for some a gamble, for some an ideal.
But it was taken to be so successful in material terms that it became an economic dogma. In this period it was adopted even in some other countries. Men did not realize how unusual the circumstances which made it such a spectacular success were.
The industrial revolution [had] happened to originate on a small island with a limited range of natural resources, at a time when synthetic materials were as yet unknown. In these circumstances economic expansion was transmitted to less developed areas by a steep and steady increase in Britain’s demand for primary commodities which those areas were well suited to produce.
Local factors of production overseas, whose growth may in part have been induced by trade, were thus largely absorbed by the expansion of profitable primary production for export. On top of this, the centre’s increasing demand for raw materials and foodstuffs created incentives for capital and labour to move from the centre to the outlying areas, accelerating the process of growth-transmission from the former to the latter.
Britain’s economy, then, was developing its late Victorian and early twentieth century characteristics: ‘high specialization, a high import ratio, great dependence on manufactured exports, . . . diminishing dependence on indigenous raw materials and diminishing dependence on home food supplies’.
By 1870 the ratio of retained imports to net national income . . . had risen to about 28 per cent—a figure surpassed only for a short time in the 1880s. . . . The pattern of imports was changing. About 35 per cent of all imports were now food, of which grain was 9 per cent, and about 50 per cent raw materials; manufactures accounted for about 15 per cent.
But . . . home agricultural produce accounted for about 82 per cent of total supplies of the main staple foodstuffs, and probably about three-quarters of the whole when allowance is made for imports of sugar and other tropical produce. Exports of textiles accounted for about 56 per cent of the whole; cotton now 35 per cent, wool 13 per cent.
But exports of metals and metal manufactures were beginning to mount; now they represented 21 per cent of the whole. . . . Between 1851 and 1871 the proportion engaged in manufacturing . . . slightly declined, . . . . . while the proportion engaged in transport and commerce rose . . .
These characteristics, which were to prove dangerous in a period of world wars, were in general appropriate to the age of the Pax Britannica.