How the first industrial country fought its way to riches

In most advanced economies, populations are aging, fewer youth are entering the labour force, and employers and politicians bemoan labour and skill shortages. But are few workers really an economic curse? What happens if massive labour shortages suddenly hit an economy? To answer this question, researchers turned to historical evidence. Between 1792 and 1815, Britain and France fought each other for global dominance. Many men who had previously tilled the soil or tended machines found themselves fighting the Napoleonic threat instead of advancing the economy. 

In a study entitled Fighting for Growth: Labor Scarcity and Technological Progress during the British Industrial Revolution, authors Bruno Caprettini, University of St.Gallen, Joachim Voth, University of Zürich, and Alex Trew, University of Glasgow, take a deeper look into the Industrial Revolution and what it could mean for today’s challenges. We sat down with Assistant Professor Bruno Caprettini to get a deeper understanding into their research.

What drew you to this topic?

If one looks at the great arc of history and asks what are the most important events that shaped how we live today, two periods stand out: Britain’s Industrial Revolution in the 17th and 18th century, and China’s rise in the 21st century. Both lifted countless of people out of poverty, both changed the world for all generations to come. The First Industrial Revolution is especially interesting because it was the first time any society experienced sustained growth. Countries that industrialized later could always turn to Britain’s experience, but Britain went first, and had no example to follow

So how did Britain escape economic stagnation?

Britain economic ascent happened at a very turbulent time. Between 1700 and 1815, Britain was at war an average of one every three year. The period culminated with the Napoleonic Wars, a conflict sometimes dubbed “World War Zero.” The wars lasted for almost a quarter of a century and engaged massive armies and navies. At its peak, one in every ten British men was defending the King against Napoleon. With acute labour shortages, one may expect the British economy to struggle. The opposite happened. Missing men stimulated the use of labour-saving machinery. By the time the war was over, Britain’s transition to mechanized agriculture was well underway.

So technology saved the day?

Precisely. And this is a general lesson: technology is the only input of production that can generate sustained growth. Take one of the most labour-intensive agricultural tasks of the time: threshing cereals - separating cereal seeds after the harvest and preparing them for food processing. Until the 19th century this task was performed manually, and if a farmer wished to double production, he had to double the number of workers. In 1786, the inventor Andrew Meikle introduced a new machine that eventually would perform the same task with one-tenth of the workers. Now production could grow without increasing the use of labour. The labour shortages of the Napoleonic Wars were so important because they turbo-charged the spread of these labour-saving machines.

But if machines took the work of men, was there a concern, like today, that these technological advances can replace human workers?

At the beginning, the demands of war kept the labour market tight, the wages high and the workers happy. But this could not last. When soldiers came back from the wars, they found that their jobs were gone. Unemployment skyrocketed and wages remained depressed for over a decade. The situation became unsustainable, and eventually workers revolted: during the Swing riots of 1830—32 rural workers destroyed machines and demanded their jobs back: Joachim Voth and I have looked at this episode in the paper: “Rage Against the Machines: Labor-Saving Technology and Unrest in Industrializing England.”

So these labour shortages were a mixed blessing: they promoted technology adoption but led to violent unrest down the road: is there a lesson for today?

Periods of fast technological change are always disruptive, and governments have the responsibility to manage the transition, making sure to cushion the losers. But one must also remember that today nobody misses manual threshing: the new machines changed work for the better, because they eliminated a repetitive and gruesome task. Perhaps the lesson is this then: scarce labour and high wages can be a shot in the arm of the economy, as they can promote technology adoption and productivity growth. The important task of the governments is to make sure that when machines arrive, the workers that go can still live a decent life and can find something new and meaningful to do.

Assistant Professor Bruno Caprettini is an economist working on development, political economy and economic history, with an interest in the impact of new technologies on growth and welfare. His study on The Industrial Revolution can be found on the SSRN website as well as on his personal website www.brunocaprettini.com.