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The British Economy in 1870-1914: Industrial Retardation Essay


By 1870, the Great Britain (GB) was not only the super power, but also part of the Industrial Revolution, which was ongoing at that given time. The supremacy enjoyed by the Great Britain between seventeenth and eighteenth centuries was largely promoted by a substantial amount of resources such as water, coal, as well as mineral resources like iron. Moreover, the Great Britain had an impressive base of wage-laborers that gave an essential boon over other countries at the onset of the industrial revolution. Industries responsible for steam power, textile, iron production, as well as canal building were making a good profit. By the end of the nineteenth century, these industries had made the Great Britain to have the most supreme economic affluence. However, the economy started to decline and by 1914, it was among the top economies. The economies of Germany, Australia, as well as the United States had surpassed that of the Great Britain. Although some economists have accounted this decline to commercial collapse, there was more than that. This paper addresses the issue of industrial retardation in the Great Britain in 1870-1914. It will analyze some of the issues that contributed to this decline including foreign competition, under the era of the International Gold Standard and Free Trade.

Definition of Problems of British Economy

Before analyzing the issues surrounding industrial retardation, it is important to describe the extent at which one can discuss the issue of retardation. Several economists have often stated that the Great Britain’s economic depression was mainly a comparative one. They assert that in relation to the Great Britain’s previous development or other countries like Germany, one can notice that the industrial retardation that the Great Britain suffered in the last quarter of 19th Century was not as detrimental as compared to the previous years. Some historians have argued that the British economy did not undergo a recession during this period; instead, it maintained a steady and rigid growth. A closer analysis of the Great Britain’s economy reveals that its GDP had been steadily growing between 1870 and 1890 although the yearly rate growth was stagnant. The Great Britain’s GDP had expanded by 3.1 percent between 1811 and 1877, but it drastically dropped by 1.6 per cent in by the end of 1913. These facts compelled economists to have divergent opinions in describing when the retardation commenced.

Some historians claim that the GB attained the most impressive industrial growth from 1820s to 1830, and industrial retardation might have started during the epoch of Victoria’s succession (Drummond 77). However, other economists still agree that the GB’s retardation of the commenced from 1873. Irrespective of the deviating views, the economic recession was mainly between 1870 and 1914 for during this era, its industrial output reduced to 14.8 from an initial output of 14 per cent. Although a majority of the industries underwent a steady decline, the most remarkable loss was witnessed in the iron as well as the steel industry. The supremacy that the GB enjoyed in the steel industry drastically diminished and within forty years, it had become one of the largest importers of steel in the globe. By 1870, almost 43 per cent of steel products came from the GB, but the percentage dropped to 10 per cent by the end of 1913 (Gourvish 111). However, some main industries in the country were not shaken by this decline, for instance ship building as well as engineering companies. Having understood the core precursors of industrial retardation in the GB, it would more prudent to have a deeper understanding of the potential that must have promoted this decline.

Industrial Retardation in Europe from 1870 to 1914

Most economic historians have often stated that comparative economic decline was unavoidable. The Great Britain could not outshine the U.S considering its large size. It was normal for the U.S. to start producing more coal and steel than the GB. Moreover, it could not maintain its superpower title in a globe whereby technological as well as scientific information was quickly diffusing to every corner of the world. However, the startling issue remains, how did it lose most of that economic supremacy before the First World War? The GB was outshined in most of the contemporary industries (Drummond 45). Germany became the producer of organic chemicals whilst the transport sector reduced massively than most countries in the countries. For instance, France and the U.S. had a more advanced transport sector than that of the GB. Those in charge of fixing electric power grid were stagnant whilst telephone network remained undeveloped. Furthermore, some countries were reluctant in importing Britain’s textile products for they were expensive.

The rates of the Great Britain’s output were essentially high. Nevertheless, in comparison to other core players in the industrial revolution, it was lagging behind. Moreover, most British firms that were anticipated to become supreme companies in subsequent years failed to expand. It was also astonishing to realize that the GB initially lost the power it had in the international market in an era when the growth of technology industries was eminent (Allen 56). It frequently sought the assistance of foreign skills to build most of its industries. For example, the construction of one of the main power stations in England was carried out under the oversight of Siemens.

The challenges in electrical manufacturing industries were advanced to the point that by the end of 1914, production of electric items in Germany was twice that of the GB (Lewis 98). Moreover, the fact that the GB’s technological industries weakened was also unexpected. A country with the highest number of industries is the wealthiest, and thus it requires the usage of technology. Therefore, it is anticipated that such a country would have a properly organized system to educate and gather sufficient human resource as well as capital to exploit novel opportunities in the state. Contrary to these expectations, the GB failed to achieve the above assumptions (Gourvish 94).

Three decades prior to the Fist World War commencement, one could notice that there was a conspiracy in locating the factors of production in the country. Human resource and capital was being exported from the GB to other areas, which were considered to have lucrative opportunities. Some economists have admitted that by 1910, if one were to merge the foreign Britain’s capital and human resource in Massachusetts alone, the output would be larger than that of a machine in England, all working under similar hours (Allen 96). The Great Britain’s economic development hinged on a series of technologies, which promoted the rise of unskilled laborers; hence, the lack proper education systems, rudimentary units of technical engineers, as well as readily accessible unskilled Irish and rustic British laborers were not burden because they could help in performing some tasks that the machines could not do. Skilled workers were rarely required. However, this seclusion of skilled workers became a problem when technologies invented from the twentieth century relied mostly on skilled laborers (Lewis 32).

The leaders of the GB prior to the First World War did not underscore the importance of educating their subjects. The citizens could easily plough their farms or knit cloths even with the lack of education. They viewed education as a barrier for famers and industrial laborers to perform their duties effectively. Hence, a very minute population went for elementary education by 1860 (Allen 106).This aspect was contrary to the attitude that the United States and Germany had towards education. Britain also had a negative view towards technical as well as engineering education. Only private companies emphasized on technical education. However, they often became discouraged for most of those who received technical education went to seek job opportunities in other counties. Conversely, the U.S. as well as Germany established technical schools to train skilled laborers (Lewis 54).

Performance of British Economy in the Late Nineteenth Century

At the onset of the nineteenth century, the GB enjoyed a massive trade empire for its textile, iron, as well as machinery industries had dropped the cost of their products. By mid-nineteenth century, the nation still held the technological power it had in the various industries, but the power was gradually shifting from to other established countries like the U.S. and other competitors across Europe (Payne 44). Gradually, the drive for trade expansion was changing from technological power to globalization. International trade began focusing on food as well as raw materials originating mostly from the Western Hemisphere. Apart from the changing nature of trade, a number of other factors affected the growth of international trade. For instance, transport costs were dropping, European population was increasing at a remarkable rate, a global policy system of free trade was also established, and the gold standard that created a financial solidity (Allen 58).

Highly inhabited and developed nations in Western Europe and the United States were exporting manufactured products from the raw materials produced by immigrants who were reacting to the available exporting opportunities. The population of these producers kept expanding from mid-west America, North America, southern Russia, and ultimately Southern Hemisphere (Payne 87). Moreover, some factors were promoting globalization, for instance, steam power and augmented population. Steam powers encouraged long-distance railway transportation and lowered the cost of shipment of goods to and from other countries. The population of the United States and European countries, which were rivals of the GB, rose swiftly, thus increasing demand of food. These happenings were encouraging a rise in food prices (Lewis 40).

The dropping cost of transportation implied that the price of a given item in England appeared to be expensive in undeveloped locations across the globe. As such, undeveloped countries realized how products from the GB were constantly becoming expensive, and thus opted to practice staple production of foodstuffs as well as raw materials and shipped the surplus to the industrialized nations. In the previous years, globalization had played a core role in the introduction of novel commodities in international trade such as sugar and tobacco (Gourvish 45). As countries were largely investing in exporting staple products, the GB was importing timber in high numbers because of the domestic reduction.

By analyzing the Britain’s Stock exchange, economists have also suggested that the British capital must have also contributed to its economic diminution prior to the First World War. The examination reveals that the behavior of the Britain’s stock market was disparate from other established countries like the United States. The eminent feature in the Britain’s stock market underscores what many may term as a “fear of equities”. The price as well as the dividend figures discloses that British investors were concerned with investing their capital in their colonies than in domestic firms. Hence, there is proof that up to a particular level, the cost of the domestic market was subordinate to colonial transportation network even how different stock markets would have valued the investments. More economists have observed that the stock market at that time did not underpin the escalation prospects of modern investments and thus failed to perform its foremost duty, and thus the British stock market was largely misallocating funds prior to the First World War (Gourvish 65).

The securities being handled in the stock market were mainly from joint-stock firms sanctioned by Britain to participate in international trade and have monopoly power as ratified by the government for instance the East India Company (Allen 112). This move was followed by a series of analogous companies established to exploit the resources in its colonies. By the mid-nineteenth century, the government had a huge amount of debt and the majority of the transactions in the stock market sought to raise funds for its settlement. A typical example is in 1853 where seventy percent of the stock exchange transactions were used to settle public debt (Allen 114).

The Role of Entrepreneurship

Economists observe that even if the GB could have to battle its rivals through costs, then it could have only been feasible if it augmented its production for the foreign market. It could not have averted the retardation, but softened the drop. However, the GB failed to dominate the foreign market, but instead lost special opportunities. These opportunities had a direct correlation with management as well the structure of the industry, which would largely be seen as the underperformance of entrepreneurs. Although in comparison, Britain prices were lower than several nations almost throughout the era, when it came to production of final products; its steelmakers were not well organized as their colleagues in foreign countries (Gourvish 88).

In a bid to understand the entrepreneurial mood in the GB and its rivals during this era, it is important to analyze certain indicators. The easiest way of revealing the presence of lack of a positive entrepreneurship spirit in the GB would be through scrutinizing the techniques used by its main rivals, viz. Germany as well as the U.S. and how it responded to such ideas. Another pertinent analysis would be through examining the approximate amount, the degree of vertical integration, as well as the manufacture of basic steel.

The approximate size of steel plants in Germany and the United State was much bigger than that of the GB (Payne 124).This aspect was meant to minimize the level of coke and number of workers that would be required for the production. The GB also practiced vertical integration to minimize expenses especially when getting raw materials. However, economic historians assert that the GB adopted a sluggish approach when it came to applying this type of operation. A fascinating examination would be to compare the magnitude of vertical integration to that of its rivals. In case the examination reveals that the GB trailed the U.S. and Germany, then it confirms that entrepreneurs were unsuccessful in using a conserving technique.

The demand of basic steel in foreign markets was high whilst that of acid steel was steadily dropping. The reason for this high demand was clear, viz.; it required a low amount of fuel as well as workers, it had a high speed of production, and a lessened capital cost. Even after understanding its benefits, the GB was reluctant in producing basic steel. This reluctance is an indication that the entrepreneurial sector let down the country. The fact that basic steel had a high demand and the GB chose to neglect it led to detrimental effects on the economy and especially due to poor performance in the international market. Nonetheless, if one could presume that the GB integrated coke as well as iron ores in similar magnitude as the U.S. and Germany, the conclusion would be different.


Though some economic historians have claimed that there was no ‘industrial retardation’ in the Great Britain prior to the First World War, it is imperative to note that absolute clemency would be erroneous. For instance, the performance of railways transport was largely substandard. Various economic analysts have admitted that there was misuse of resources and funds in the railway sector between 1870 and 1914. It is estimated that over 10.2 per cent of the feasible costs had been misuse by 1900 and had reduced the GDP by about 1 per cent. Even as economists continue to disagree on the extent of the Great Britain’s economic decline from 1870 to 1914, one fact is clear, the country failed to match the competition of its counterparts in Europe and the US, which could probably explain the contested issue of economic retardation.

Works Cited

Allen, Robert. The British Industrial Revolution in Global Perspective, New Approaches to Economic and Social History, New York: Cambridge University Press, 2009. Print.

Drummond, Ian. The Gold Standard and the International Monetary System, 1900 – 1939, London: Macmillan Education, 1987. Print.

Gourvish, Terence. Railways and the British Economy, 1830 – 1914, London: Macmillan, 198I. Print.

Payne, Peter. British Entrepreneurship in the Nineteenth Century, London: Macmillan Education, 1988. Print.

Lewis, Arthur. Growth and Fluctuations, 1870 – 1913, London: Taylor & Francis, 2009. Print.

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