Why Nations Fail: The Origins of Power, Prosperity, and Poverty (31 page)

Watt’s initial breakthrough was to introduce a separate condensing chamber for the steam so that the cylinder that housed the piston could be kept continually hot, instead of having to be warmed up and cooled down. He subsequently developed many other ideas, including much more efficient methods of converting the motion of the steam engine into useful power, notably his “sun and planets” gear system. In all these areas technological innovations built on earlier work by others. In the context of the steam engine, this included early work by English inventor Thomas Newcomen and also by Dionysius Papin, a French physicist and inventor.

The story of Papin’s invention is another example of how, under extractive institutions, the threat of creative destruction impeded technological change. Papin developed a design for a “steam digester” in 1679, and in 1690 he extended this into a piston engine. In 1705 he
used this rudimentary engine to build the world’s first steamboat. Papin was by this time a professor of mathematics at the University of Marburg, in the German state of Kassel. He decided to steam the boat down the river Fulda to the river Weser. Any boat making this trip was forced to stop at the city of Münden. At that time, river traffic on the Fulda and Weser was the monopoly of a guild of boatmen. Papin must have sensed that there might be trouble. His friend and mentor, the famous German physicist Gottfried Leibniz, wrote to the Elector of Kassel, the head of state, petitioning that Papin should be allowed to “… pass unmolested …” through Kassel. Yet Leibniz’s petition was rebuffed and he received the curt answer that “the Electoral Councillors have found serious obstacles in the way of granting the above petition, and, without giving their reasons, have directed me to inform you of their decision, and that in consequence the request is not granted by his Electoral Highness.” Undeterred, Papin decided to make the journey anyway. When his steamer arrived at Münden, the boatmen’s guild first tried to get a local judge to impound the ship, but was unsuccessful. The boatmen then set upon Papin’s boat and smashed it and the steam engine to pieces. Papin died a pauper and was buried in an unmarked grave. In Tudor or Stuart England, Papin might have received similar hostile treatment, but this all changed after 1688. Indeed, Papin was intending to sail his boat to London before it was destroyed.

In metallurgy, key contributions were made in the 1780s by Henry Cort, who introduced new techniques for dealing with impurities in iron, allowing for a much better quality wrought iron to be produced. This was critical for the manufacture of machine parts, nails, and tools. The production of vast quantities of wrought iron using Cort’s techniques was facilitated by the innovations of Abraham Darby and his sons, who pioneered the use of coal to smelt iron beginning in 1709. This process was enhanced in 1762 by the adaptation, by John Smeaton, of water power to operate blowing cylinders in making coke. After this, charcoal vanished from the production of iron, to be replaced by coal, which was much cheaper and more readily available.

Even though innovation is obviously cumulative, there was a
distinct acceleration in the middle of the eighteenth century. In no place was this more visible than in textile production. The most basic operation in the production of textiles is spinning, which involves taking plant or animal fibers, such as cotton or wool, and twisting them together to form yarn. This yarn is then woven to make up textiles. One of the great technological innovations of the medieval period was the spinning wheel, which replaced hand spinning. This invention appeared around 1280 in Europe, probably disseminating from the Middle East. The methods of spinning did not change until the eighteenth century. Significant innovations began in 1738, when Lewis Paul patented a new method of spinning using rollers to replace human hands to draw out the fibers being spun. The machine did not work well, however, and it was the innovations of Richard Arkwright and James Hargreaves that truly revolutionized spinning.

In 1769 Arkwright, one of the dominant figures of the Industrial Revolution, patented his “water frame,” which was a huge improvement over Lewis’s machine. He formed a partnership with Jedediah Strutt and Samuel Need, who were hosiery manufacturers. In 1771 they built one of the world’s first factories, at Cromford. The new machines were powered by water, but Arkwright later made the crucial transition to steam power. By 1774 his firm employed six hundred workers, and he expanded aggressively, eventually setting up factories in Manchester, Matlock, Bath, and New Lanark in Scotland. Arkwright’s innovations were complemented by Hargreaves’s invention in 1764 of the spinning jenny, which was further developed by Samuel Crompton in 1779 into the “mule,” and later by Richard Roberts into the “self-acting mule.” The effects of these innovations were truly revolutionary: earlier in the century, it took 50,000 hours for hand spinners to spin one hundred pounds of cotton. Arkwright’s water frame could do it in 300 hours, and the self-acting mule in 135.

Along with the mechanization of spinning came the mechanization of weaving. An important first step was the invention of the flying shuttle by John Kay in 1733. Though it initially simply increased the productivity of hand weavers, its most enduring impact would be in opening the way to mechanized weaving. Building on the flying shuttle,
Edmund Cartwright introduced the power loom in 1785, a first step in a series of innovations that would lead to machines replacing manual skills in weaving as they were also doing in spinning.

The English textile industry not only was the driving force behind the Industrial Revolution but also revolutionized the world economy. English exports, led by cotton textiles, doubled between 1780 and 1800. It was the growth in this sector that pulled ahead the whole economy. The combination of technological and organizational innovation provides the model for economic progress that transformed the economies of the world that became rich.

New people with new ideas were crucial to this transformation. Consider innovation in transportation. In England there were several waves of such innovations: first canals, then roads, and finally railways. In each of these waves the innovators were new men. Canals started to develop in England after 1770, and by 1810 they had linked up many of the most important manufacturing areas. As the Industrial Revolution unfolded, canals played an important role in reducing transportation costs for moving around the bulky new finished industrial goods, such as cotton textiles, and the inputs that went into them, particularly raw cotton and coal for the steam engines. Early innovators in building canals were men such as James Brindley, who was employed by the Duke of Bridgewater to build the Bridgewater Canal, which ended up linking the key industrial city of Manchester to the port of Liverpool. Born in rural Derbyshire, Brindley was a millwright by profession. His reputation for finding creative solutions to engineering problems came to the attention of the duke. He had no previous experience with transportation problems, which also was true of other great canal engineers such as Thomas Telford, who started life as a stonemason, or John Smeaton, an instrument maker and engineer.

Just as the great canal engineers had no previous connection to transportation, neither did the great road and railway engineers. John McAdam, who invented tarmac around 1816, was the second son of a minor aristocrat. The first steam train was built by Richard Trevithick in 1804. Trevithick’s father was involved in mining in Cornwall, and
Richard entered the same business at an early age, becoming fascinated by steam engines used for pumping out the mines. More significant were the innovations of George Stephenson, the son of illiterate parents and the inventor of the famous train “The Rocket,” who began work as an engineman at a coal mine.

New men also drove the critical cotton textile industry. Some of the pioneers of this new industry were people who had previously been heavily involved in the production and trade of woolen cloths. John Foster, for example, employed seven hundred handloom weavers in the woolen industry at the time he switched to cotton and opened Black Dyke Mills in 1835. But men such as Foster were a minority. Only about one-fifth of the leading industrialists at this time had previously been involved in anything like manufacturing activities. This is not surprising. For one, the cotton industry developed in new towns in the north of England. Factories were a completely new way of organizing production. The woolen industry had been organized in a very different way, by “putting out” materials to individuals in their homes, who spun and wove on their own. Most of those in the woolen industry were therefore ill equipped to switch to cotton, as Foster did. Newcomers were needed to develop and use the new technologies. The rapid expansion of cotton decimated the wool industry—creative destruction in action.

Creative destruction redistributes not simply income and wealth, but also political power, as William Lee learned when he found the authorities so unreceptive to his invention because they feared its political consequences. As the industrial economy expanded in Manchester and Birmingham, the new factory owners and middle-class groups that emerged around them began to protest their disenfranchisement and the government policies opposed to their interests. Their prime candidate was the Corn Laws, which banned the import of “corn”—all grains and cereals, but principally wheat—if the price got too low, thus ensuring that the profits of large landowners were kept high. This policy was very good for big landowners who produced wheat, but bad for manufacturers, because they had to pay higher wages to compensate for the high price of bread.

With workers concentrated into new factories and industrial centers,
it became easier to organize and riot. By the 1820s, the political exclusion of the new manufacturers and manufacturing centers was becoming untenable. On August 16, 1819, a meeting to protest the political system and the policies of the government was planned to be held in St. Peter’s Fields, Manchester. The organizer was Joseph Johnson, a local brush manufacturer and one of the founders of the radical newspaper the
Manchester Observer
. Other organizers included John Knight, a cotton manufacturer and reformer, and John Thacker Saxton, editor of the
Manchester Observer
. Sixty thousand protestors gathered, many holding banners such as “No Corn Laws,” “Universal Suffrage,” and “Vote by Ballot” (meaning voting should take place secretly, not openly, as it did in 1819). The authorities were very nervous about the meeting, and a force of six hundred cavalry of the Fifteenth Hussars had been assembled. As the speeches began, a local magistrate decided to issue a warrant for the arrest of the speakers. As police tried to enforce the warrant, they met with the opposition of the crowd, and fighting broke out. At this point the Hussars charged the crowd. Within a few chaotic minutes, eleven people were dead and probably six hundred wounded. The
Manchester Observer
called it the Peterloo Massacre.

But given the changes that had already taken place in economic and political institutions, long-run repression was not a solution in England. The Peterloo Massacre would remain an isolated incident. Following the riot, the political institutions in England gave way to the pressure, and the destabilizing threat of much wider social unrest, particularly after the 1830 revolution in France against Charles X, who had tried to restore the absolutism destroyed by the French Revolution of 1789. In 1832 the government passed the First Reform Act. It enfranchised Birmingham, Leeds, Manchester, and Sheffield, and broadened the base of voting so that manufacturers could be represented in Parliament. The consequent shift in political power moved policy in the direction favored by these newly represented interests; in 1846 they managed to get the hated Corn Laws repealed, demonstrating again that creative destruction meant a redistribution not just of income, but also of political power. And naturally, changes in the distribution of political power in time would lead to a further redistribution of income.

It was the inclusive nature of English institutions that allowed this process to take place. Those who suffered from and feared creative destruction were no longer able to stop it.

The Industrial Revolution started and made its biggest strides in England because of her uniquely inclusive economic institutions. These in turn were built on foundations laid by the inclusive political institutions brought about by the Glorious Revolution. It was the Glorious Revolution that strengthened and rationalized property rights, improved financial markets, undermined state-sanctioned monopolies in foreign trade, and removed the barriers to the expansion of industry. It was the Glorious Revolution that made the political system open and responsive to the economic needs and aspirations of society. These inclusive economic institutions gave men of talent and vision such as James Watt the opportunity and incentive to develop their skills and ideas and influence the system in ways that benefited them and the nation. Naturally these men, once they had become successful, had the same urges as any other person. They wanted to block others from entering their businesses and competing against them and feared the process of creative destruction that might put them out of business, as they had previously bankrupted others. But after 1688 this became harder to accomplish. In 1775 Richard Arkwright took out an encompassing patent that he hoped would give him a monopoly on the rapidly expanding cotton spinning industry in the future. He could not get the courts to enforce it.

Why did this unique process start in England and why in the seventeenth century? Why did England develop pluralistic political institutions and break away from extractive institutions? As we have seen, the political developments leading up to the Glorious Revolution were shaped by several interlinked processes. Central was the political conflict between absolutism and its opponents. The outcome of this conflict not only put a stop to the attempts to create a renewed and stronger absolutism in England, but also empowered those wishing
to fundamentally change the institutions of society. The opponents of absolutism did not simply attempt to build a different type of absolutism. This was not simply the House of Lancaster defeating the House of York in the War of the Roses. Instead, the Glorious Revolution involved the emergence of a new regime based on constitutional rule and pluralism.