Download Lecture 2: What is industrialisation?

WHAT IS INDUSTRIALISATION?
ITS RELEVANCE FOR ECON 120:
INDUSTRIALISATION
PROVIDES THE CONTEXT FOR THE RISE OF
MODERN BUSINESS IN HISTORICAL PERSPECTIVE:
THE KEY CONCEPT:
‘INDUSTRIAL REVOLUTION’:ROOTED IN BRITISH EXPERIENCE AS THE FIRST INDUSTRIALISER
THE BROAD DEFINITION:KEY COMPONENTS
A)
TECHNOLOGICAL INNOVATION:(i)
SUBSTITUTION OF MACHINES FOR HUMAN SKILL
(ii)
SUBSTITUTION OF INANIMATE POWER FOR HUMAN ND
ANIMAL FORCE
NB)
THE FLEXIBILITY OF THE TERM- 1st / 2nd / 3rd REVOLUTIONS:-
IN TERMS OF TECHNOLOGY AND TIMING :1st =
LATE C18 EARLY C19 – STEAM
2nd =
1890-1920 – ELECTRICITY
3rd =
1960 – PRESENT – AUTOMATION/IT
OUR CONCERN TODAY
:
THE FIIRST INDUSTRIAL REVOLUTION
NOT ONLY TECHNOLOGY, BUT ALSO:B)
STRUCTURAL CHANGE
TRANSITION FROM AN AGRARIAN, HANDICRAFT ECONOMY TO ONE
DOMINATED BY INDUSTRY AND MACHINE MANUFACURE
NEXT WEEKS TUTORIAL :
THIS IS ‘ECONOMIC DEVELOPMENT’
BUT ‘ECONOMIC DEVELOPMENT’ WAS ON GOING
THE FIRST INDUSTIAL REVOLUTION EMBRACED NOT ONLY
TECHNOLOGICAL AND INDUSTRIAL CHANGE, BUT ALSO THE RISE OF THE
SERVICE SECTOR
IN THE BRITISH CASE:
THE MOBILISATION OF CAPITAL:a)
BANKS
b)
CAPITAL MARKET/STOCK EXCHANGES
c)
TRANSPORT INFRASTRUCTURE
d)
FORMAL EDUCATION
C)
THE PRODUCTIVE UNIT:
DOMESTIC SYSTEM SUPERSEDED BY THE FACTORY SYSTEM
a)
THE DOMESTIC, OR ‘PUTTIG OUT’ SYSTEM
(i)
SMALL SCALE PRODUCTION
(ii)
LABOUR INTENSIVE
(iii) LIMITED POWERS OF CONTROL OF WORKFORCE BY
EMPLOYER
b)
THE FACTORY SYSTEM
(i)
THE VEHICLE FOR MECHANISATION GIVING ACCESS TO
SCALE ECONOMICS
(ii)
CAPITAL INTENSIVE
(iii) FACTORY DISCIPLINE LEADING TO INCREASED LABOUR
PRODUCTIVITY (NB. EMBEZZLEMENT).
D)
THE STRUCTURE OF OWNERSHIP AND CONTROL
EARLY FACTORIES WERE OPERATED IN THE CONTEXT OF ‘FAMILY
CAPITALISATION’ :- THE FAMILY FIRM, OR PARTNERSHIP
(i)
FAMILY CAPITAISM
IN BRITAIN ‘OWNERS MANAGED AND MANAGERS OWNED’ = THE
DOMINANT FORM OF ENTERPRISE UNTIL WELL AFTER 1900.
REASONS
ii)
a)
LIMITED CAPITAL REQUIREMENTS OF EARLY
INDUSTRIALISATION- DESPITE TECHNOLOGICAL CHANGE
b)
EXTERNALISATION : NB COTTON TEXTILES
c)
NATURE OF DEMAND : LIMITED ACCESS TO SCALE
ECONOMICS BOTH HORIZONTAL AND VERTICAL
CORPORATE CAPITALISM
CHARACTERISED BY
a) SALARIED MANAGERS DIFFERENIATED BY FUNCTION
b) SHAREHOLDERS
CORPORATE CAPITALISM RARE IN BRITISH MANUFACTURINS BEFORE 1900
THE EXCEPTION
RAILWAY ENTERPRISE FROM THE 1830s REASONS:a)
HUGE CAPITAL REQUIREMENTS NEED TO RAISE FUNDS ON OPEN
CAPITAL MARKET
b)
COMPLEXITY OF THE MANAGERIAL FUNCTION; HENCE THE NEED
FOR ‘SPECIALISTS’
a) + b) BEYOND THE RESOURCES OF FAMILY FIRMS
E)
INFLUENCES ON THE DEMAND SIDE
EMPHASIS SO FAR ON SUPPLY-SIDE INNOVATIONS
THE DEMAND SIDE
INDUSTRIALISATION + ECONOMIC DEVELOPMENT DID NOT TAKE PLACE
IN A VACUUM.
BOTH WERE A SUPPLY-SIDE RESPONSE
TO:
a)
INCREASED DEMAND
b)
INCREASED DEMAND SUSTAINED IN THE LONG-TERM BY RISING
PURCHASING POWER/REAL INCOMES OF CONSUMERS
THE SOURCES OF DEMAND
a)
AGRICULTURAL INNOVATION = LOWER FOOD PRICES  HIGHER
REAL INCOMES TO SPEND ON MANUFACTURES
b)
AGRICULTURAL INNOVATION =  LABOUR PRODUCTIVITY THEREBY
RELEASING LABOUR FOR FACTORY/URBAN EMPLOYMENT
c)
RURAL DEMAND COMPLETED BY RICHER URBAN CONSUMERS
d)
DEMAND FOR MANUFACTURERS STIULATED BY FALLIN PRICES
NEXT WEEK’S TUTORIAL
(AGRICULTURE  INDUSTRY)
(1)
INDUSTRIALISATION
(2)
ECONOMIC DEVELOPMENT
(STRUCTURAL CHANGE)
ECONOMIC GROWTH
‘A SUSTAINED INCREASE IN REAL PER CAPITAL INCOMES’ :THE PRODUCT OF (1) AND (2)