THE INDUSTRIAL REVOLUTION: BIRTH OF

MODERN ECONOMIC GROWTH AND

SKEPTICISM TOWARDS ITS SUSTAINABILITY

Gabriel Söderberg, Department of Economic History, Uppsala

University

This lecture The Industrial Revolution: - What was its core? - How did it change the world? - How does it affect us?

Skepticism towards its sustainability: - Early proponents - End of skepticism during 20th century and

return around the 1970s - Relevance of question today – with your help

What was the Industrial Revolution?

England 1760-1830 Replacement of organic energy (wood,

animals, human work), water and wind with fossil energy

Replacement of human work with machines

Enormous increase in productivity Enormous increse in use of natural

resources

Three Patterns of Development

Breaking the Energy Barrier

Factories close to energy sources: water, wood lands

Transition to fossil fuel through a number of technological innovations

Expensive labor incentives for machines Problems with coal mining: water in tunnels

steam engine for better pumping more coal Coal: portable, extremely compact factories

can be set up anywhere Coal as energy, iron as material better

transport increased world trade

”The Dismal Science”

Thomas Malthus 1766-1834

David Ricardo 1772-1823

Malthus Humans must have food + food supply

increases slowly + humans cannot control their reproduction = Population will grow faster than food supply

Increased food supply increased population return of misery optimists are wrong

Constraining factor: agricultural technology

Ricardo Growth not possible in the long run –

stationary state Diminishing return of the soil more

expensive food higher wages less profits less investments end of growth

Two ways to counter this: technology and free trade

- technology not to be trusted freetrade as ideal partly explained be technology pessimism!!

World GDP/Capita 1900-2000

”The Golden Age” 1945-1970

Time of great optimism, reduction of inequality, increase in general welfare for the masses, large and stable economic growth

Technology and science widely accepted as the driving force

The optimism of the Enlightenment and modernity is mixed with economic theory

Post-War Technology Optimism

Simon Kuznets 1901-1985

Robert Solow 1924-

Technology and science important…

The reason for economic growth is:”…the vast increase in the stock of useful knowledge…the underlying capacity of the knowledge transmitted to control production processes, the emergence of experimental science and the empirical outlook which, building upon past attainments of mankind, provided the indispensible basis for modern economic growth” – Kuznets 1965

…but taken for granted.

The Solow model (1956): Y=A+K+L A=Y-K-L technological development is the thing left!

The most important factor, but is left unexplained in the model!

Technological development is taken for granted, ”a gift” from public funding of science

World GDP/Capita 1900-2000

Worse times… 1970s: oil crisis, stagnant growth,

ideological and theoretical shift

Crisis of values: growth questioned, environmental movement skeptical about eternal growth

Club of Rome founded 1968 ”Limits to Growth” (1972) – population growth

and consumption needs to be reduced; sells in 12 million copies, in 30 languages

Solow’s Criticism: ” "The authors load their case by letting some things grow exponentially and others not. Population, capital and pollution grow exponentially in all models, but technologies for expanding resources and controlling pollution are permitted to grow, if at all, only in discrete increments."

World GDP/Capita 1900-2000

Return of growth (pre-2008)

Pro market shift in ideology and economic theory

Financial deregulations, innovations

Increased globalization

Chinese industrialization cheap consumer goods

Present day Financial crisis part of end of growth? - Yes: No growth opportunity capital

goes into financial assets building bubbles

-No: Depressions natural part of industrial society, followed by new growth

Yes: Environmental problems and depletion of oil will stop growth

No: Science and technology close to major breakthroughs

Close to debate around 1800

Questions and comments?