Capitalism and the Industrial Revolution

I’ve recently been reading some of the work of Eric Hobsbawm, focusing on the Industrial Revolution in Britain and its causes.

Now, there’s an idea which is widespread both among ardent defenders of capitalism and among many of its Marxist and Marxist-inspired critics, that the industrial revolution, and the worldwide technological transformation which it initiated, is intimately involved with capitalism – we have capitalism ‘to thank’ for it. Mostly this is presented as a good thing, and I would overall concur with that analysis, although the environmental consequences have not been brilliant.

What Hobsbawm argues, though, is that while the industrial revolution emerged along with the growth and strengthening of British capitalism, and while the two were certainly connected, capitalism was not actually a very ‘fertile’ ground for industrial revolution, because profit-oriented production tends to be actually quite conservative. He writes:

“It is often assumed that an economy of private enterprise has an automatic bias towards innovation, but this is not so. It has a bias only towards profit. It will revolutionise manufactures only if greater profits are to be made in this way than otherwise. But in pre-industrial societies this is hardly ever the case.

The available and prospective market – and it is the market that determines what a businessman produces – consists of the rich, who require luxury goods in small quantities, but with a high profit-margin per sale, and the poor, who – if they are in the market economy at all, and do not produce their own consumer goods domestically or locally – have little money, are unaccustomed to novelties and suspicious of them, unwilling to consume standardised products and may not even be concentrated in cities or accessible to national manufacturers.

What is more, the mass market is not likely to grow very much more rapidly than the relatively slow rate of population increase. It will make more sense to dress princesses in haute couture than to speculate on the chances of capturing peasants’ daughters for artificial silk stockings.”

Why, then, did the industrial revolution happen at all? This is not a question on which there is a consensus, but Hobsbawm’s suggestion is that the combination of Britain’s control of world commerce with its growing economy was crucial: if it had been producing for stable domestic markets, it would not have had the incentive to invest in sudden, massive, unpredictable increases in production.

But export markets could fluctuate enormously, and so there were rewards available for those could expand rapidly enough to capitalise on those fluctuations, which was enabled by new and revolutionary methods of production. The British had such complete naval supremacy, and a foreign policy so entirely focused on commercial advantage, that it was able to corner and control this market. This then provided the ‘spark’ for the industrial revolution.

Now I’m not qualified to say whether this historical account is the right one. It seems like a plausible account of why mercantile activity didn’t produce industrial revolution everywhere, and how the creation of a world market was important.

And it gels with something I think is probably true, namely that profit-driven systems are actually quite sub-par producers of innovation and experimentation. It basically implies that capitalism could only produce industrialisation given a collection of very very favourable conditions – a single capitalist country controlling most of the world market (not most of the world’s markets, but most of the market that European expansion into the Americas and across the globe created), which it did so through war and slavery, was able to industrialise, though it also in so doing held back its rivals from doing so.

But does this mean that capitalism wasn’t ‘responsible’ for the industrial revolution? I think the answer to this hinges on noting that something can be responsible for things in virtue of some of its features but not others.

Speaking in rough generalities, we might distinguish four sorts of society; rationalistic ones vs. traditional ones, and class-divided ones vs. communistic ones. Capitalism and its variants of the last few centuries are rationalistic class societies; the feudal aristocracies it replaced, alongside most other societies for most of recorded history, were traditional class societies. In the pre-history of mankind, it is sometimes argued, there were traditional or ‘primitive’ communist societies, hunter-gatherers. And the goal to which modern communists aim is rationalistic communism.

What do I mean by ‘rationalistic’ vs. ‘traditional’? Broadly speaking (and this is more hand-waving than dictionary-writing) societies before the rise of modern science have not accepted the idea that the ways of the past were fallible and should be actively criticised and tested, and that new methods should be actively sought out, experimented with, and understood.

In capitalism, the dominant class is an investing class, which seeks to rationally identify the most productive use of its resources – even though this ‘most productive’ is defined in the flawed terms of profit. Previous ruling classes had tended to amass wealth and use it either to fund more wars, or to splurge on building monuments or holding orgies, and their methods had often been held back by respect for tradition or superstition.

We might then suggest that capitalism enabled the industrial revolution, but that it did so in virtue of being a rationalistic system, drawing on the results of rational science, not in virtue of being a class system, not in virtue of its private property or its market-centred nature. Not in virtue of its ‘individualism’, if by that is meant its support for individual property-ownership.

As I’ve argued in other posts, this rationalism is not in all respects a good thing, as is indicated by simle monosyllable ‘nuke’. But the benefits are enormous, both politically (no more divine right of kings! whoohoo) and technologically. The thing is, this innovatory rationalism could be found in a classless communist society as much as in a class-divided capitalist one. Capitalism-as-opposed-to-communism played no ‘progressive role’, as some versions of Marxism suggest, though capitalism-as-opposed-to-pre-capitalist-class-systems did.

6 Responses to “Capitalism and the Industrial Revolution”

  1. Francois Tremblay Says:

    Uh, I’m not really following you. First you argue that the Industrial Revolution was caused by imperialism (implying a class system), then you argue that it wasn’t caused by the class system at all. How do you reconcile this?

  2. Alderson Warm-Fork Says:

    I’m saying, the profit-drive of the capitalist class system was fairly infertile ground for radical innovation, and could only be stimulated into industrial revolution by the very unusual situation of a single very dominant imperial power.

  3. Francois Tremblay Says:

    “the very unusual situation of a single very dominant imperial power.”

    What’s unusual about it? Seems like that’s how most of history was, actually.

  4. Emperor Penguin Says:

    Possibly Britain’s control of the carrying trade over many oceans was unusual. The Dutch may have come near to equalling this in previous centuries. As far as I am aware the Indians and the Chinese were not, after the fifteenth century anyway, particularly outgoing and relied on someone else to transport their goods in the main. However, on the whole I’m not sure there would have been no moves to what we are calling industrialization without big accessible overseas markets being present, although it is probable these speeded up the adoption of new technologies. England was very big on textile manufacture in the Seventeenth Century, producing for a domestic and European market and also produced stacks of coal and this in quite a highly marketized enviroment. So motives were present for the adoption of new methods sans ‘imperialism,’ I would have thought.

  5. Becky Says:

    Up until recently, I was pretty much clueless about the economic issues that we are currently undergoing. Randy Charles Epping has come out with a great book titled, “The 21st Century Economy—A Beginner’s Guide” that has helped me understand things much better. I now can honestly say that I knowing these things helps me step up and make a difference to help. Why can’t economists explain this as simply as he does?

  6. Alderson Warm-Fork Says:

    Francois: It is at least unusual in that only one country can occupy such a position at once.

    Penguin: as I said, this may not be a correct interpretation of the history, although as I understand Hobsbawm argues that the “domestic and European market” didn’t expand rapidly enough to tempt people into risky investments in new and untested methods of mass-production – although he does argue that the “highly marketized enviroment” was needed for industrialisation to spread and get established widely in the country after it had taken off.


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