The Transformation of the World (140 page)

However, the assumption that this was a
necessary
transitional stage toward industrialization has not been confirmed, and the model does not appear to fit England itself very well. The Industrial Revolution did not grow in linear fashion out of a broad proto-industrialization.
³²
Moreover, in England and southern Scotland, the first three quarters of the eighteenth century were a time of such lively enterprise that the installation of the first steam engines in large-scale production processes appeared less as a completely new beginning than as a consistent continuation of older trends. There was proto-industry, to be sure, but also a broad increase of output and productivity in the crafts and manufactures—for example, knife and scythe making in Sheffield.
³³
In some cases, protoindustrialization made it easier for industry to be later organized on a factory basis. In others, proto-industrial arrangements settled in without setting up a dynamic that would eventually make them redundant.

As to longer-term continuities, the Industrial Revolution is seen as one of a series of economic upswings through which parts of western and southern Europe had passed since the Middle Ages—as had the Islamic Near and Middle East at the end of the first millennium, China under the Song dynasty in the eleventh and twelfth centuries or under the Qing emperors in the eighteenth, and maritime Southeast Asia between roughly 1400 and 1650. If the Industrial Revolution is compared with the upward phase of earlier cycles, its growth effect does not appear so out of the ordinary. What was new was that the Industrial Revolution, and the various national and regional industrialization processes, set up a
stable long-term
growth trend amid the cyclical fluctuations of “long waves” and conjunctures. This, together with other social changes associated with it, ended the epoch of stationary economies, in which productivity gains and rising prosperity were eventually canceled out by countervailing forces such as population growth. Along with demographic trends that had a largely independent dynamic, the Industrial Revolution and the ensuing industrializations brought a final escape from the “Malthusian trap” during the first half of the nineteenth century.
³⁴

Although the two opposing extremes of interpretation—quantifying growth skeptics and cultural theorists focused on an “institutional” revolution—have continued to raise objections, it remains to some extent justified to speak of a unique English Industrial Revolution. Yet the image, borrowed from aeronautics, of a powerful “takeoff” is an undue dramatization. On the one hand, economic dynamism did not break all of a sudden into stagnant conditions: the
British economy had already been experiencing long-term growth throughout the eighteenth century. On the other hand, growth in the first few decades of the nineteenth century was less spectacular than it was long assumed.
³⁵
It took until mid-century for the new dynamic to free itself from various brakes on its unfolding. The early decades of the century were a time of sharp social conflicts, a period of transition or incubation rather than the actual breakthrough period of industrialization. Economic growth only just kept pace with population increase, yet for almost the first time in history demographic pressure did not hold down living standards. Some groups of workers plumbed the lower depths of poverty. New technologies, including the use of coal as an energy source, spread only slowly, and until 1815 war conditions imposed a heavy financial burden on the country. With an antiquated political system that had scarcely changed since 1688, governments had only limited capacity to build institutions in accord with the new requirements of the economy and society. Such initiatives became possible only with the Reform Act of 1832, which bridled the influence of uncontrolled “interests” (especially large landowners and commercial monopolists) on policymaking. Free trade and the gold standard (which automatically regulated the money supply) later enhanced the rationality of the system. But the transition from Industrial Revolution to genuine industrialization took place in Britain only after the year 1851, when the Great Exhibition at the Crystal Palace symbolically set the country on its way. It was now that per capita income grew appreciably; steam engines in factories, ships, and railroads became the chief means of energy transmission; and a declining trend in food prices shook the power basis of the landowning aristocracy.
³⁶

Britain's initial lead over continental Europe should not be exaggerated. Celebrated British inventions soon spread abroad, and by 1851 it was clear to everyone drifting through the marvels of the Crystal Palace that the United States had overtaken Britain in machine-building technology.
³⁷
Despite early export prohibitions, British engineers and workers made the country's technology well known on the Continent and in North America.
³⁸
In the time scales of economic history, a lag of three or four decades is by no means extraordinary; sometimes a particular invention needed so long to mature and to become economically relevant.

Repeated attempts have been made to date the starting point of national bursts of industrial activity. But this is largely a spurious problem. In some countries industrialization began with a bang, in others almost unnoticed; in some the economy immediately shot upward, in others several attempts were required before it got moving. Where the state actively promoted industrialization, as it did under Russia's finance minister Sergei Y. Witte from the nineties on, the break in continuity was greater than elsewhere. The sequence of European countries is reasonably clear even without exact dating: Belgium and Switzerland were early industrializers, France began after 1830, Germany after 1850, and other nations considerably later. More important, however, are the overall picture and the fundamental contradiction that it reveals. On the one hand,
each European country took its own path of industrial development; there can be no suggestion that a British model was simply copied, if only because people elsewhere did not perceive one that was clear, unambiguous, and attractive. British peculiarities were so singular that such direct imitation would scarcely have been possible.
³⁹

On the other hand, from a greater distance we can discern amid the diversity of national paths a growing overlap that amounts to pan-European industrialization. Looking back from around 1900, countries like Britain, France, and Germany had arrived at similar performances through distinct trajectories. After the middle of the century, industrialization nearly everywhere received government support, while commercial links and international agreements (on free trade, among things) contributed to the integration of a European market, and the cultural homogeneity of the Continent made technological and scientific exchange ever easier to achieve.
⁴⁰
By 1870 a few European economies had come so far that they were beginning to contend with British industry for markets. It was also generally apparent what was required, in addition to favorable natural conditions, for industrialization to be successful: that is, agrarian reform releasing the peasantry from extrae-conomic constraints, and investment in “human capital” ranging all the way from mass literacy campaigns to state research facilities. That well-educated manpower can make up for a shortage of land and natural resources—a conclusion still valid today—was first understood by certain European countries and Japan in the final third of the nineteenth century.
⁴¹

An advantage of the industrial mode of production was that in at least one sense it was
not
revolutionary: it did not eradicate all earlier forms of value creation or bring about a radically new world. In other words, industry developed and develops in many different forms and can easily subordinate nonindustrial modes of production without necessarily having to destroy them. Large-scale industry, with thousands of employees in a single plant, was almost everywhere the exception rather than the rule. “Flexible production” maintained itself
⁴²
even as mass production—probably an invention of the Chinese, who for centuries had been trying out modular series production based on a division of labor in ceramics and timber architecture
⁴³
—advanced into one sector after another. Where flexibility bore greatest fruit, industrialization played itself out in a dialectic of centralization and decentralization.
⁴⁴
Only Stalin's policy of industrialization under a central plan created a radical alternative from the late 1920s on, and the success of that was doubtful. The electric motor, which can be built in many different sizes, and wall-socket energy in general gave a new impetus to smallscale production at the end of the nineteenth century. The basic pattern was the same everywhere, taking in Japan, India, and China. Rings of small suppliers and competitors grew up around the conspicuous factories of large enterprises, and unless the state intervened, the conditions for workers in such sweat shops were much worse than in large-scale industry with its tightly regulated procedures, its premium on skilled labor, and its sometimes patriarchal social values.

The Second Economic Revolution

The term “second industrial revolution” has often been used to denote the period in the late nineteenth century when steel (Big Steel, on a far larger scale than before 1880), chemicals, and electricity replaced cotton and iron as the leading sectors. This was associated with a shift of industrial dynamism from Britain to Germany and the United States, which had both forged well ahead in the new technologies.
⁴⁵
It seems more useful, however, to go beyond this narrowly technological focus and to speak of a second
economic
revolution.
⁴⁶
It was this that shaped the modern “corporation,” the dominant form of enterprise in the twentieth century. This key change, datable to the 1880s and 1890s, had an
immediate
global impact, whereas the effects of the first Industrial Revolution had only gradually made themselves felt outside its birthplace. During this watershed final quarter of the nineteenth century, a change in the leading technologies was not all that happened: complete mechanization in the most advanced economies swept away preindustrial “niches”; hired managers replaced owner-capitalists as the dominant agency of entrepreneurship; the limited liability company, funded through the stock exchange, rose to prominence; large-scale business spawned growing numbers of white-collar office workers; concentration and cartelization restricted the classical mechanism of competition; and multinational corporations, sporting brand names, took control of marketing their own products, founding global networks for this purpose together with numerous local partners.
⁴⁷

This last point gave particular global relevance to changes in the manner of industrial production. In China, for instance, American and European multinationals such as Standard Oil of New Jersey and the British-American Tobacco Corporation appeared on the scene in the 1890s and began to penetrate the consumer goods market with unprecedented directness. As vertically integrated companies, they controlled their own raw material sources as well as the processing and marketing side of their operations. Industry now became “business”—a new transnational complex in which industrial enterprises were more tightly interwoven with banks. It first developed into big business in the United States, where the first giant companies had earlier been confined to the railroad sector. Japan, which had begun industrializing in the mid-1880s, had a head start insofar as some of the great merchant houses of the Tokugawa period had changed with the times and reinvented themselves as
zaibatsu
: large, highly diversified, and often family-owned companies that took large parts of the economy under their common oligopolistic control. Their closest resemblance was not to the vertically integrated conglomerates that divided up whole sectors of American industry toward the end of the nineteenth century but rather to holding companies, with their set of loosely integrated commitments. After roughly 1910, the organization of major
zaibatsu
such as Mitsui, Mitsubishi, and Sumitomo became tighter and more centralized, with the result that Japan joined the United States
and Germany—in this respect different from Britain or France—as a country of large corporations integrated horizontally as well as vertically.
⁴⁸

The Great Divergence

The discussion of industrialization in the last two or three decades, taking place mainly in journals or collective volumes and not yet condensed into a new synthesis, remained at a distance from the major theoretical work of an earlier period.
⁴⁹
Research became modest and specific in focus, largely adhering to conventional definitions of growth. The most influential theorist of
global
history in the 1970s and 1980s, Immanuel Wallerstein, did not participate in the debate. Citing a long series of well-known objections, he considers the very concept of an Industrial Revolution “deeply misleading,” on the grounds that it diverts attention from the key issue of the development of the world economy as a whole.
⁵⁰
Paradoxically, a return of grand theory in the industrialization debate around the year 2000 was triggered by intensive historical research, though not in relation to Europe. Regional experts came to realize that in the seventeenth and eighteenth centuries both China and Japan, but also parts of India and the Muslim world, by no means corresponded to the stereotype of Asiatic impoverishment and stagnation that European social science had from its earliest days unquestioningly perpetuated on slender foundations of reliable knowledge. Certain prerequisites of the Industrial Revolution, according to the new consensus, had truly been present in those parts of the world. Meanwhile some authors, eager to dispense compensatory justice, went to the opposite extreme and painted premodern Asia in positively glowing colors, so that the “European miracle” appeared either as an optical illusion of Western image making or as the outcome of random concatenations with no inner necessity. In fact, it was argued, the Industrial Revolution
should have
taken place in China. That is certainly going too far. But the revaluation of “early modern” Asia has breathed new life into the “Why Europe?” debate, in which for a long time nearly everything seemed to have been said already.