Riassunto esame Economic history, Prof. Tusset Gianfranco, libro consigliato Among the Waves of Globalisation, Alfani, Colli

Chapter 5 – The first industrial revolution

5.1 The first industrial revolution: general overview

The First Industrial Revolution (FIR) began in England around the middle of the eighteenth century and represents one of the most important turning points in economic history. It marked the transition from an economy mainly based on agriculture and organic energy sources to an economy increasingly based on industry, mechanised production, fossil fuels, and mineral resources.

The Industrial Revolution also represented the culmination of the process known as the Little Divergence, after which the economic centre of Europe became permanently concentrated in Northern Europe.

The expression "Industrial Revolution" was popularised by Arnold Toynbee to describe British economic development between 1760 and 1840. Although the term suggests a sudden transformation, industrialisation was actually the result of a long process of economic, social, technological, institutional, and demographic changes that had developed over centuries.

Industrialisation did not occur simultaneously

• Great Britain and Belgium were the first industrial nations.
• During the Second Industrial Revolution (1850–1914), industrialisation spread across much of Western Europe, the United States, and Japan.
• Many Asian and developing countries industrialised much later.

From organic to inorganic economy

A fundamental aspect of the Industrial Revolution was the transition from an organic economy to an inorganic or mineral-based economy.

Organic economy:

• Depended on land, wood, animal power, and agricultural resources.
• Economic growth was limited by the availability of natural resources.
• Population growth often produced diminishing returns and food shortages.

Inorganic economy:

• Based on coal, iron, and fossil fuels.
• Less constrained by population pressure.
• Allowed much higher levels of production and sustained economic growth.

The transition was gradual. Coal had already been used for heating, brewing, and soap production before industrialisation, but during the eighteenth century it became the foundation of industrial growth.

5.2 Before the industrial revolution: globalisation and mercantilism

Early globalisations

The conditions for industrialisation were created during earlier phases of global economic integration.

Globalisation can be defined as the process through which local phenomena become global phenomena through:

• International trade.
• Capital flows.
• Migration.
• Technological diffusion.
• Foreign investment.

Archaic globalisation (1200–1700)

First wave (13th century)

Characteristics:

• Expansion of international trade between Europe and Asia.
• Growing demand for luxury goods, tea, sugar, spices, and exotic products.
• Merchants became the main actors of international exchange.

Costs:

• Spread of infectious diseases.
• The Black Death in the fourteenth century. 1

Second wave (16th–17th centuries)

Characteristics:

• Expansion of overseas trade.
• Emergence of large trading companies such as the East India Company.
• Early forms of production abroad.
• China and India together produced more than half of the world's manufactured goods around 1750.

Costs:

• European wars disrupted trade routes.

Mercantilism

The economic system that dominated Europe before industrialisation was Mercantilism.

Main characteristics:

• Wealth measured by gold and silver accumulation.
• Competition among states.
• Strong connection between economic, political, and military power.
• Positive balance of trade considered essential.

The political triumph of mercantilism in Britain is commonly associated with the events of 1688.

Mercantilism encouraged:

• Colonial expansion.
• Commercial growth.
• Naval development.
• International trade networks.

These developments created markets, capital accumulation, and entrepreneurial opportunities that later supported industrialisation.

5.15 Historical interpretations of the industrial revolution

Kenneth Pomeranz

Industrialisation depended on:

• Colonial resources.
• Abundant coal supplies.

Agriculture alone could not sustain long-term growth.

Robert Allen

Industrialisation resulted from:

• High wages.
• Cheap energy.
• Abundant capital.

Britain's unique price structure encouraged mechanisation.

Joel Mokyr

The key factor was the growth of useful knowledge.

The Enlightenment and thinkers such as Francis Bacon promoted a culture of scientific inquiry and technological improvement.

Unlike previous societies, Britain developed the ability to continuously improve technologies rather than merely invent them.

For Mokyr, this sustained accumulation of useful knowledge explains the long-term success of the Industrial Revolution.

6. The second industrial revolution

The Second Industrial Revolution (ca. 1850–1914) represented a profound transformation of the world economy. Unlike the First Industrial Revolution, which had been centred mainly on Great Britain and the textile industry, the Second Industrial Revolution spread to many countries and involved a much wider range of sectors, including steel, chemicals, electricity, 2 telecommunications, and advanced mechanical engineering. Economic growth accelerated thanks to technological innovation, scientific research, and the increasing integration of national and international markets.

A symbolic event of this transformation was the Great Exhibition of London in 1851, held in the Crystal Palace. The exhibition celebrated Britain's industrial achievements while demonstrating the growing importance of railways, machinery, and modern technology. At the same time, it showed other countries the advantages of industrialisation and encouraged them to modernise their own economies.

6.1 Railways and the foundations of modern industrial growth

Railways were among the most important innovations of the nineteenth century. Their development originated in Britain, where steam power was successfully applied to transportation. The opening of the Manchester–Liverpool railway in 1830 marked the beginning of modern railway transport, while George Stephenson's locomotive Rocket demonstrated the potential of steam-powered mobility.

Railway expansion had enormous economic consequences. It reduced transport costs and travel times, integrated national markets, stimulated industrial production, encouraged labour mobility, and accelerated urbanisation. By connecting distant regions, railways allowed goods, people, and information to circulate more rapidly than ever before.

Railways also created the first modern large-scale businesses. Managing extensive railway networks required huge amounts of capital, complex administrative systems, and professional managers. According to historian Alfred Chandler, railway companies pioneered many of the managerial techniques later adopted by large industrial corporations.

6.2 Distinctive features of the second industrial revolution

Several characteristics distinguished the Second Industrial Revolution from the first.

1. First, industrialisation became increasingly dependent on science and technology. Many innovations emerged from cooperation between universities, laboratories, and industry. The chemical industry illustrates this process: discoveries such as synthetic dyes and advances in organic chemistry transformed production and strengthened the relationship between scientific research and industrial development.
2. Second, the production of steel became fundamental. The Bessemer process and later the Martin-Siemens process made large-scale steel production possible at lower costs and with higher quality. Steel became the essential material for railways, machinery, shipbuilding, construction, and military equipment.
3. Third, new forms of energy and communication transformed economic activity. Electricity, developed through the work of scientists such as Michael Faraday and entrepreneurs such as Thomas Edison, revolutionised industry and daily life. The telegraph and the telephone dramatically improved long-distance communication, making business operations faster and more efficient.
4. Finally, industrialisation increasingly required large investments. Steel plants, railway systems, electrical networks, and chemical factories demanded substantial amounts of capital, encouraging the growth of large enterprises and closer cooperation between industry, banks, and governments.

6.3 Late industrialisation: Germany and Italy

Germany and Italy are classic examples of countries that industrialised later than Britain.

Germany experienced rapid industrial growth after political unification in 1871. The Zollverein had already promoted economic integration, while universal banks provided long-term finance to industry. Steel production, chemicals, machinery, and electrical engineering expanded rapidly, allowing Germany to become one of the world's leading industrial powers by the end of the nineteenth century. Close cooperation between banks, firms, and the state facilitated industrial growth but also encouraged cartels and increasing militarisation.

Italy followed a slower and more uneven path. After unification in 1861, the country faced significant obstacles, including regional inequalities, limited infrastructure, and scarce financial resources. Government investment in railways, moderate protectionist policies, and the development of industries such as steel, chemicals, automobiles, and hydroelectric power gradually accelerated industrialisation. Companies such as Fiat, founded in 1899, became symbols of Italian industrial modernisation, although the gap between northern and southern Italy remained substantial. 3

6.4 The United States and the rise of big business

The United States became one of the principal centres of the Second Industrial Revolution. A large domestic market, abundant natural resources, and a strong culture of innovation favoured rapid industrial expansion.

Railways played a crucial role in this process. The construction of vast railway networks stimulated demand for steel, machinery, and finance while encouraging the development of modern management techniques. Large corporations emerged to coordinate increasingly complex production and distribution systems.

The growth of big business was supported by economies of scale and economies of scope. Economies of scale reduced unit costs through mass production, while economies of scope allowed firms to produce multiple products using the same facilities and technologies. These advantages encouraged the formation of large corporations that dominated sectors such as steel, oil, chemicals, and tobacco.

Prominent entrepreneurs included Andrew Carnegie, who transformed the American steel industry through technological innovation and modern management techniques, and James Duke, whose adoption of the Bonsack machine revolutionised cigarette production and allowed the American Tobacco Company to dominate the market.

6.5 Process innovation and mass production

Industrial growth was also driven by major innovations in production methods.

Continuous production systems spread across industries such as oil refining, food processing, chemicals, and steel.

Integrated steel plants combined all stages of production within a single facility, reducing costs and increasing efficiency.

The development of interchangeable parts further transformed manufacturing by allowing standardised components to be used across different products. This reduced costs, simplified repairs, and facilitated mass production.

These developments culminated in the assembly line, perfected by the Ford Motor Company in the early twentieth century. The assembly line combined division of labour, interchangeable parts, specialised machinery, and the systematic movement of materials. The result was a dramatic increase in productivity, lower production costs, and the large-scale manufacture of standardised goods.

The principles of Scientific Management, developed by Frederick Winslow Taylor, complemented these innovations. Taylor argued that production should be organised scientifically through careful observation, measurement, and standardisation of work processes in order to increase efficiency and productivity.

6.6 The modern corporation and professional management

As firms expanded, traditional forms of management became inadequate. Large corporations developed hierarchical organisational structures with specialised departments responsible for production, sales, finance, transportation, and administration.

Professional managers increasingly replaced direct control by owners. Decision-making became decentralised, while new accounting techniques, budgeting systems, cost controls, and performance measurements improved coordination and efficiency. This process contributed to the separation of ownership and management, a defining characteristic of modern corporations.

Large firms also invested heavily in research and development (R&D). Dedicated laboratories allowed companies to improve products, optimise production processes, and maintain technological leadership.

Historian Alfred Chandler described this transformation as the emergence of the "visible hand" of management, whereby managerial decisions increasingly coordinated economic activity that had previously been regulated primarily by market forces.

6.7 Globalisation and international competition

The late nineteenth century witnessed the first modern wave of globalisation. Technological innovations such as steamships, railways, refrigeration, and telegraphic communications dramatically reduced transport and communication costs. 4

As a result, international trade expanded rapidly and world markets became increasingly integrated. Goods, capital, and people moved across borders on an unprecedented scale. The United States, Germany, and Great Britain together accounted for most industrial production, while competition between nations intensified.

However, globalisation also generated tensions. Falling prices placed pressure on farmers and small producers, while increased competition threatened established industries. These distributional conflicts encouraged political opposition to free trade and strengthened demands for government intervention.

6.8 The Long Depression, protectionism, and economic nationalism

The period between 1873 and 1896 is often referred to as the Long Depression. It was characterised by prolonged deflation, financial instability, and significant industrial restructuring. Railway speculation, financial crises, and monetary disturbances contributed to economic uncertainty in many countries.

At the same time, the international adoption of the Gold Standard created a highly integrated monetary system based on fixed exchange rates and gold convertibility. While the system facilitated international trade and investment, it limited governments' ability to pursue independent monetary policies.

Increasing international competition encouraged the rise of protectionism and economic nationalism. Countries such as Germany, France, Italy, and the United States introduced tariffs to protect domestic industries and agriculture. Economic policy became increasingly linked to national power and strategic interests.

These developments contributed to growing rivalries among the major industrial powers. Although globalisation strengthened economic integration, it also intensified political competition, reinforcing the tensions that eventually contributed to the outbreak of the World War I.

Conclusion

The Second Industrial Revolution transformed the world through technological innovation, scientific research, mass production, modern management, and global economic integration. It gave rise to large corporations, new industrial sectors, and unprecedented levels of productivity. At the same time, it generated economic inequalities, political tensions, protectionism, and increasing competition between nation-states. Its central paradox was that greater economic integration often coincided with stronger political fragmentation, helping to shape the modern industrial world of the twentieth century.

7. The "dark side" of the industrial revolution & inequality

While the First and Second Industrial Revolutions marked unprecedented growth in average income and wealth (origin of modern prosperity), this average hides a "dark side." Initially, the advantages were distributed in a highly unequal way both within industrialised countries and within colonial empires. For many members of English society, living and working conditions actually worsened. The benefits began to spread to the general population very slowly, only well into the 19th century.

Key factors in the spread of wealth

The fruits of the Industrial Revolution finally spread among the general population (at least in the West) due to two main drivers:

• Workers' Organisation: The growing capacity of workers to organise themselves.
• Exogenous Shocks: External shocks, above all the arrival of cholera in Europe, which forced a reappraisal of the urban environment and led to new public policies.

7.1 Pollution, urban degradation, and health

Environmental and air pollution

• The "Dark Satanic Mills": An expression by poet William Blake (1808) that became emblematic of industrial pollution.
• Fossil Fuel Consumption: Pollution was fuelled by the growing consumption of coal used for steam engines, blast furnaces (iron and steel production), and household heating in great cities like London. 5
• CO₂ Emissions: At the start of the 19th century, Great Britain’s per capita CO₂ emissions far exceeded any other country. The United States took the lead only at the turn of the 20th century, followed by France and latecomers. By 1900, Western Europe exceeded 1 tonne of CO₂ per capita per year (1.13 tonnes).
• Particulate Matter: Chimneys and smokestacks lacked filtration systems, belching out solid/liquid substances that severely degraded air quality and worsened respiratory diseases.

Urban degradation and worsening health levels

• Sanitary Conditions: Cities suffered from an inadequacy or total absence of sewerage systems, leading to contaminated drinking water and intestinal diseases.
• Overcrowding: Factory workers lived in