The British Economy in the 19th and early 20th century

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The British Economy in the 19^th and early 20^th century

1. The rise to Economic Supremacy

economic supremacy industrialisation financial

Great Britain is one of the world's leading industrialized nations and is considered to be the heartland of industrialization. It holds this position despite the lack of most raw materials needed for industry. In the 19^th century Britain became the leading economic and trading power in the world. Several factors caused the rise of the country's success and built its image.

The great inventions of Britain were a consequence of the fast progress in the industrial sphere. Great Britain was the first country in the world to introduce mechanization of manufacturing and to replace the antiquated domestic, handicraft system by the factorisation. As a result of this transformation rural Britain became an industrial country. This economic revolution was made possible by a series of epoch-making inventions, which are:

1764 - The “spinning jenny” was a wooden hand-powered machine. It used a wheel to turn the spindles of cotton and a drawbar to pull the cotton back and forth to spin it into yarn.

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1769 - James Watt patented his design in 1769, and the first successful `single-acting' steam engine was completed in 1774.

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1785 - This invention made it possible for weaving to become a large-scale factory based industry. Before the invention of the power loom it was handloom weavers who made cloth. These were men who worked in the basements of their homes using wooden hand powered looms to weave cloth.

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1814 - After ten months' labour, this steam locomotive, created by George Stephenson was completed and put upon the Cillingwood Railway on the 25^th of July, 1814, and tried. On an ascending grade of one in four hundred and fifty feet, this engine succeeded in drawing after it eight loaded wagons of thirty tons' weight, at about four miles an hour, and was the most successful working engine that had ever been constructed up to this period. It was called "Blusher."

Main areas of industrialisation:

Britain is considered to be the heartland of the industrialization.

The textile industries, coal-mining and the iron and steel industries played a crucial part in the growth of the British economy.

Abundant natural resources like coal, iron ore and cheap supplies of raw materials from the colonies. The British prosperity was dependent on the export of manufactured goods in exchange for raw materials and foodstuffs.

Establishing of secure markets in the colonies for British manufactured goods.

Britain had a very strong export policy and the merchant fleet was the chief source in the economy.

There was a rapid extension of a transportation network of waterways and railways.

The British entrepreneurs were ready to invest capital in technological innovations.

Britain had very a strong banking and credit system.

Very important step in the British government policy and legislation was the free trade that resulted in economic expansion. As result, the country took the lead in manufacturing, banking and investment of capital. A very significant event in British economic history was The Great Exhibition of the Works of Industry of All Nations in London (1851). It demonstrated the industrial and commercial superiority of Britain's innovations to the whole world. The Great Exhibition was the first World's Fair. Joseph Paxton designed the Crystal Palace, a glass-and-iron structure modelled on a horticultural conservatory, which was then constructed by the firm of Fox and Henderson in Hyde Park in 1850-51. The Crystal Palace served as the single building housing the exhibition at this fair.

Foto: The Crystal Palace

2. Economic Decline

After this great economic euphoria, especially in the 6o's and 70's Britain lost very fast its position as one of the leading industrial nations in the world. In 1986 it only ranked 19^th.

Industrial decline and problems in the economy paralysed the whole country. Some of the most noticeable results were:

Inflation. The rate of inflation was up to 16% in 1974 and 23% one year later (1975)

Devaluation. The British currency devaluated to a very low level and in 1960 one Pound was 12 DM. In the 8o's one pound was worth 4 DM

Strikes. That was the period of the worst strikes ever among Western industrial nations. In 1979 was the worst strike record of the nation.

Stagnation of the car industries. The so called “British disease” resulted from a combination of economic, political and social factors.

The reasons for the stagnation of the British economy were of different origin, but all of them were strong enough to reflect the decline in the country's economic growth.

We can distinguish between two types of reasons:

Politico-economic Reasons:

Britain lost capital during the world wars and also colonial markets after the disruption of the Empire.

The post-war between Labour and Tory governments contributed to instability and lack of continuity in the economy.

After the innovation boom in the 19^th century there was stagnation in the industrial sphere and low productivity, especially in the traditional industries, that made the British economy uncompetitive. The nationalisation of mining, shipbuilding, steel and textiles (by the post-war Labour Government) sheltered these industries from competitive market forces.

British capital flew to foreign countries and Britain lost confidence in the face of its citizens.

Because of the low exports of British-made goods the country was faced with a very weak balance of payments. For example the British car industry was handicapped by delayed delivery (strikes), insufficient marketing and management, poor manufacturing quality and second rate service.

The traffic system of motorways and electrified railways was also insufficient.

The strikes were mainly influenced by the bad industrial relations between the powerful TRADE UNIONS and their management.

The Trades Union Congress (TUC) was founded in 1868 and it is a voluntary organisation of 80% of the trade unions. The TUC has comparatively little power and therefore there are not only strikes affecting whole industries or occupations, but also a large number of regional or even local strikes. The local strikes are called by the shop steward, who is the representative of the local work force.

In the 60's and 70's, the time of the great strikes, there were two reasons, which combination resulted in the economy and developed serious long-term crisis. The first one were the confrontation between very left wing union leaders and managers about wage increases and safe work conditions and the second one reflected by the over timing and the profitability of the firms.

The winter of the 78/79, marked by the strikes and political and industrial unrest, is also called “the winter of discontent” (The Shakespeare mentioned it as “Now is the winter of our discontent”, Richard III). The situation in the country was unbearable and that caused the fall of James Callaghan's Labour Government, replaced later by the Tories.

Socio-economic Reasons:

The class system in the country also affected the stagnation and the decline of the economy.

The representatives of the upper class are generally prejudiced and they repress the manufacturing careers.

The class antagonism (“them and us”) of the British working class leads to industrial conflicts, instead of industrial cooperation. Something similar can also be observed in the communist systems.

The talented and ambitious people among the working class had problems moving up the social scale. It was difficult for them to work and to live because of this unfair class situation.

The dual school system of state and private education increases the gap between employers and employees. The working class is repressed.

The lack of prestige of managerial jobs has led to a crisis of industrial management. The British managers are not prepared for the commercial conditions and often have problems with the acting on the world market scene.

3. Structural changes in the British economy

The differences between the production possibilities of the separated parts of the country reflected on the quality of the wellbeing of the British society's members.

The main industries like aerospace, electrical and electronic engineering, computer manufacturing, consumer goods manufacturing, the chemical, plastic and pharmaceutical were situated in the London conurbation. This concentration increased the gap between North and South.

In the 70's the North Sea oil and Gas was discovered and exploited and that was the beginning of the new petro-chemical industry in North East Scotland, whose centre was Aberdeen. It eased the balance of payments and Britain has become self-sufficient in terms of oil. Nowadays Britain occupies the fifth place in the world among the oil-producing countries.

After the manufacturing revolution, Britain change its chief economic structure and it's now mainly concentrated on the production of services. The most important spheres of this new economy are communications, banking, insurance, finance and business service, transport, public health and education and they contribute 70,9% of the country's GDP.

As you can see on this graph, Britain has the greatest part of the private service industries, compared with other countries in the world.

Britain is a famous financial and banking centre!

Today, more and more state-owned enterprises are privatized, self-employment makes up 13% of the workforce, 35% of all employees are trade unionists and about 50% of all employees especially in part-time jobs are women. Britain as a successful trading nation expands more and more its trade with the Far East, Southeast Asia and the European Union, above all Germany.

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