Economic history of the uk

Chapter 1.17th century

The Age of Mercantilism

The modern British Empire was based upon the preceding English Empire which first took shape in the early 17th century, with the English settlement of the eastern colonies of North America, which would later become the original United States, as well as Canada's Maritime provinces, and the colonizations of the smaller islands of the Caribbean such as Trinidad and Tobago, the Bahamas, the Leeward Islands, Barbados, and Jamaica. These sugar plantation islands, where slavery became the basis of the economy, were part of Britain's most important and successful colonies. Britain's American empire was slowly expanded by war and colonization. Victory over the French during the Seven Years' War gave Britain control over almost all of North America.

The Industrial Revolution

In a period loosely dated from the 1770s to the 1820s, Britain experienced an accelerated process of economic change that transformed a largely agrarian economy into the world's first industrial economy. This phenomenon is known as the "industrial revolution", since the changes were all embracing and permanent.

A long run of good harvests, starting in the first half of the eighteenth century, resulted in an increase in disposable income and a consequent rising demand for manufactured goods, particularly textiles. The invention of the flying shuttle by John Kay enabled wider cloth to be woven faster, but also created a demand for yarn that could not be fulfilled. Thus, the major technological advances associated with the industrial revolution were concerned with spinning. James Hargreaves created the Spinning Jenny, a device that could perform the work of a number of spinning wheels.

The first mills were constructed in rural locations by streams or rivers. Workers villages were created around them.

The first practicable steam engine was invented by Thomas Newcomen, and was used for pumping water out of mines. The first steam power driven textile mills began to appear in the last quarter of the eighteenth century, and this transformed the industrial revolution into an urban phenomenon, greatly contributing to the appearance and rapid growth of industrial towns.

By the turn of the century, imported American cotton had replaced wool in the North West of England. The application of steam power stimulated the growth of the coal industry, the construction of mills and the demand for machinery and engines impacted upon the iron industry.

The application of technology and the factory system created such levels of mass production and cost efficiency that enabled Britain to undercut foreign competitors. The political dominance created by the growth of an overseas empire and the strategic control of the world's seas by the Royal Navy, enabled British manufacturers to export their goods to Europe, Africa, Asia, and Latin America.

In the late eighteenth and early nineteenth century a series of technological advances led to the Industrial Revolution. Britain's position as the world's pre­eminent trader helped fund research and experimentation. The nation was also gifted by some of the world's greatest reserves of coal, the main fuel of the new revolution.

The Industrial Revolution saw a rapid transformation in the British economy and society. Previously large industries had to be near forests or rivers for power. The use of coal-fuelled engines allowed them to be placed in large urban centres.

During the Industrial Revolution the empire became less important and less well-regarded. The British defeat in the American War of Independence (1775-1783) deprived it of one of its most populous colonies.

The victory of forces of the British East India Company at Plassey (1757) opened the great Indian province of Bengal to British rule. The nineteenth century saw Company rule extended across India after expelling the Dutch, French and Portuguese. Following the First Indian War of Independence of 1857 India became a crown colony. The territory continued to expand as Ceylon (now Sri Lanka) and Burma (now Myanmar) were added to Britain's Asian territories.

Chapter 2.19th century

Second Industrial Revolution

In the latter decades of the nineteenth century, when the ultimate control and direction of large industry came into the hands of financiers, industrial capitalism gave way to financial capitalism and the corporation. The establishment of behemoth industrial empires, whose assets were controlled and managed by men divorced from production, was a dominant feature of this third phase.

New products and services were also introduced which greatly increased international trade. Electricity and chemical industries also moved to the forefront. In many of these sectors Britain had far less of an edge than other powers such as Germany and the United States.

Mass production techniques greatly expanded output and lowered production costs. As a result, production often exceeded domestic demand. The new conditions, more markedly evident in Britain, the forerunner of Europe's industrial states, had the long-term effects of the severe Long Depression of 1873-1896, which had followed fifteen years of great economic instability. Businesses in practically every industry suffered from lengthy periods of low — and falling — profit rates and price deflation after 1873.

Cut-throat competition in the mid-1800s caused the creation of super corporations and conglomerates. Many companies borrowed heavily to achieve the vast sums of money required to take over their rivals, resulting in a new capitalist stage of development.

At the end of the Victorian era, the service sector (banking, insurance and shipping, for example) began to gain prominence at the expense of manufacturing.

Foreign trade

Foreign trade thus tripled in volume between 1870 and 1914. In 1913, only 11 percent of the world's trade took place between primary producers themselves. Britain ranked as the world's largest trading nation in 1860, but by 1913 it had lost ground to both the United States and Germany.

Breakdown of Pax Britannica and New Imperialism

The late nineteenth century Romantic Age was an era of "empire for empire's sake".

With the expansion of the Industrial Revolution, Britain could no longer reap the benefits of being the sole modern, industrial nation. Britain by the outbreak of the Franco-Prussian War was no longer the 'workshop of the world', meaning that its finished goods were no longer produced so efficiently and cheaply that they could often undersell comparable, locally manufactured goods in almost any other market.

The decline of the British capitalist economy began in the last third of the nineteenth century, contributing to a breakdown of Britain's natural superiority in industry and commerce. Britain's share of world trade fell from one-fourth in 1880, one-sixth in 1913, and one-eighth in 1948.

With the rise of industrial capitalism in Germany, North America, and Japan, British finished goods no longer had a comparative or absolute advantage in any other market. Industrialisation progressed dynamically in Germany and the United States allowed them to clearly prevail over the "old" French and English capitalisms.

The expansion of the Second Industrial Revolution and the rise of similar economic practices (such as amalgamation of industry) in Germany and the United States intensified the competition with Britain for overseas markets and hence formal colonialism.

Britain was no longer the world's sole modern, industrial nation. The prospect of having to compete to remain the forerunner of the world's economies and empires due to recent changes in the global economy and continental balance of power thus left it ripe for Disraeli's Conservative rule in the 1870s.

Joseph Chamberlain argued that formal imperialism was necessary for Britain because of the relative decline of the British share of the world's export trade and the rise of German, American, and French economic competition.

Business after 1873 in practically every industry suffered from lengthy periods of low profit rates and deflation; profits were falling because too much capital were chasing too few markets.

In addition, such surplus capital was often more profitably invested overseas, where cheap labour, limited competition, and abundant raw materials made a greater premium possible. Another inducement to imperialism, of course, arose from the demand for raw materials unavailable in Europe, especially copper, cotton, rubber, tea, and tin, to which European consumers had grown accustomed and European industry had grown dependent.

British policymakers feared the prospect of another German military victory over France, which could have reasonably resulted in a German take-over of France's formal colonies. This prospect was especially frightening considering that French colonies tended to be closely situated to Britain's; Nigeria, for instance, was surrounded by French territory, India was near French Indochina, and so forth.

The UK and the colonisation of Africa, imperialism in Asia

Between the 1870 Franco-Prussian War and the Great War (the age of New Imperialism), Europe added almost 9 million square miles (23,000,000 km²) — one-fifth of the land area of the globe — to its overseas colonial possessions.

Chapter 3. 20th century

Second Industrial Revolution

By the time of Queen Victoria's death in 1901, other nations, including the United States and Germany, had developed their own industries; the United Kingdom's economic advantage had lessened, and the ambitions of its rivals had grown. The Great Depression hit the nation especially harshly, as it had still not fully recovered from the war. See also the Great Depression in the United Kingdom.

In World War II, there was again a great deal of destruction to British infrastructure, and the years after the war also saw Britain lose almost all of her remaining colonies as the empire dissolved. In the 1945 general election, the Labour Party was elected, introducing reforms of the British economy. Taxes increased, industries were nationalised, and a welfare state with national health, pensions, and social security was created.

The next years saw some of the most rapid growth Britain had ever experienced, recovering from the devastation of the Second World War and then expanding rapidly past the previous size of the economy.

By the end of the 1960s, this growth began to slow, and by the 1970s Britain entered a long running period of relative economic malaise. The latter decades of the 20th century have seen an increase in service-providers and a drop in industry, combined with privatisation of some sections of the economy.