[Market Economy Guide] Why the Industrial Revolution Happened in Britain

“The United Kingdom protected property rights early on and promoted technological innovation.

France failed because of state intervention and high taxes.”

The Industrial Revolution, true to the word “revolution,” brought about enormous change not only in the United Kingdom but across the world. During the Industrial Revolution, from 1780 to 1860, the population of the United Kingdom more than tripled, rising from 7.5 million to 23.13 million, while the growth of wealth reached a remarkable annual rate of 1%.

The period from 1780 to 1860

Why, then, did this tremendous Industrial Revolution occur first in the United Kingdom? Various factors have been suggested, but technological innovation is recognized as the most important among them. The defining feature of the Industrial Revolution was that, through technological innovation, the traditional domestic handicraft system was transformed into a factory-based mechanized industrial system, dramatically increasing labor productivity and making mass production possible. Therefore, if we examine what made technological innovation possible in the United Kingdom, we can also uncover why the Industrial Revolution took place there.

When people generally think of technological innovation, they tend to associate it with advances in science. However, a comparison of science policy around the 18th century shows that while the United Kingdom hardly intervened in scientific research institutions, France actively supported scientific research with massive state funding. Yet technological innovation occurred first in the United Kingdom, suggesting that there was another special reason apart from the promotion of science.

Institutions Matter More Than Technology

In fact, science during the Industrial Revolution was still at a rudimentary stage and could not directly contribute much to technological development. Rather, in the 19th century, even in the United Kingdom, technology advanced first, and scientists, stimulated by that progress, began their research by following in the footsteps of skilled technicians. Indeed, figures such as Watt, Trevithick, and Stephenson, who led technological innovation in the United Kingdom, were not scientists working at research institutes from the outset. On the contrary, they were mechanics who had either never attended school or had received only the most basic education.

Even so, the reason British mechanics were able to develop technology ahead of scientists was not only that they themselves felt the need for innovation most keenly at industrial worksites, but also that they were able to improve existing technologies through their own hands-on experience. More important still, however, was the fact that property rights were protected in the United Kingdom. After the Glorious Revolution, the judicial system was established in the United Kingdom, and property rights began to receive institutional protection. As a result, industrial property rights, including patent rights, were protected, which further accelerated technological innovation. The dramatic increase in the number of patents granted in the United Kingdom after the mid-18th century proves this point.

Meanwhile, even when technology is innovated, industry can develop only if that technology is introduced into production, and for that to happen, capital investment must support it. At the time, the United Kingdom embraced laissez-faire, abolishing various taxes, while the decline of protectionism expanded markets at home and abroad. This further stimulated economic activity and encouraged vigorous competitive investment by firms, enabling technological innovation to be introduced into production. As a result, firms that increased productivity earned profits, allowing them to continue saving and investing, further develop industry, and achieve economic growth.

France, however, did not establish property rights as the United Kingdom did, nor did it guarantee free economic activity in the marketplace. In particular, the French government at the time controlled and intervened in every sphere of society, including education, industry, and trade. It also collected enormous taxes and gave full support to scientific research institutes, but most scientists’ research remained far removed from the technologies needed on the industrial front lines.

Although Technology Also Advanced in France

Moreover, in France, even when engineers developed groundbreaking technologies or firms increased output by adopting new technologies, the taxes they had to pay the government were so high that it was difficult to make a profit. In addition, regulation of economic activity in France was so severe that firms could neither grow nor develop the economy. This difference is precisely why the United Kingdom, rather than France, became the leading nation of the Industrial Revolution.

It is no exaggeration to say that the development of not only the United Kingdom but all advanced countries began with the establishment of a system of property rights. The United States, which has long maintained its position as the world’s foremost power, is likewise a country where property rights are very well protected. In the protection of intellectual property rights, which are becoming increasingly important, the United States also established institutions ahead of other countries, and this played a major role in driving the development of the venture industry. In this way, the protection of property rights is the single most essential element in the development of a market economy.

◆ Please remember

After the Glorious Revolution, the judicial system was established in the United Kingdom, and property rights began to receive institutional protection. As a result, industrial property rights, including patent rights, were protected, which further accelerated technological innovation.

Sung-no Choi

President, Center for Free Enterprise (CFE)

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Original title: [시장경제 길라잡이] 산업혁명이 영국에서 일어난 이유

Author: Sung-no Choi

Date: 2019-07-01

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=13&idx=20308