The Second Industrial Revolution (covers America’s Rise But Mainly Victorian Britains Fall) Flashcards
The 2nd IR looks at US rise, and why Victorian Britain failed.
US saving rates, foreign investment, and trade balance?
(LaFeber)
High saving rates: 10-12% 1850s to 18-20% 1864-1914
Foreign investment- $3bn US compared to to $1.5bn in Britain
Became huge net exporter
US key industry were electricity, steel and fuel
Metals facts (2)
Iron and steel, replaced cotton for most important export to Russia. (Through rail, bridges, cars etc)
1902 - US produced more iron and steel than Britain and Germany combined
US continued (oil) (2)
Petroleum products- 4th largest US export
Engine development-35hp to 1000hp 1893-1900 (rapid speed of innovation in US)
US new market structure characteristics (4)
Emergence of MNC
-became better at gathering investment
Policy events facilitating the success of MNCS
Availablility of labour
Protectionism
2 policy events facilitating success of MNCs in the new US market structure.
Sherman Anti-Trust Act: 1890
-limited anti-competitive measures (firms merged to avoid)
Gold standard adoption 1879
-eliminated currency risk (increased certainty-stimulating trade)
Availability of labour facilitating corporation success (2)
Immigrants to US increased
Increased efficiency, only most efficient firms survived, prices fell steadily.
US immigration from (1821-1924)
33,188,000
33 million.
Protectionism facilitating success (2)
1870 Tariff protected iron and steel
Producers gave back generously to protectionist politicians.
So overall, 4 contributions to the new market structure (just covered)
Emergence of MNCs
Policy events facilitating the success of MNCs
Availability of labour
Protectionism
Key industries in Southern US and what happened in the South.
- South’s double dependence
Cotton
Tobacco
A reconstruction occurred. Big corporations and capital flowed South. Began to produce its own resources with their own machinery. e.g cotton mills, now they produce theirselves (used to send to Britain to produce) which is cheaper, opening new export markets in Asia and Latin America.
So South had a double dependence: North for their capital, Asia and LA for exports.
Did Victorian Britain (1870-1913) fail? We have to define failure, 2 possible criteria
Fail relative to historic performance?
Fail relative to other countries?
What was Britain 1850-1870 known as
Mid Victorian success- Workshop of the world
Workshop of the world characteristics (3)
(Hint: manufactured goods, rich, GFC)
Produced 1/3 of manufactured goods, and controlled 40% of world trade in manufactured goods
Richest-twice GDP per capita of EU
Global financial centre
What was Britain in 1870s known as
WW1: Later-Victorian Failure (Penalties of Early Start)
WW1: Later-Victorian Failure (Penalties of Early Start) (3)
Hint: GDP, manu, % of manu change
GDP growth slowed while US and Germany grew
German overtook in manufacturing
Britain manufacturing share fell to 25% (was 40% as shown earlier)
Causes of Victorian Britain failure
Overcommitment
Too much capital abroad
Poor education
Banking failures
Business/labour market failures
1st cause of failure:
Overcommitment to 1st Industrial Revolution (4)
Over-invested, stuck in traditional low productivity industries
Tariff protection required to restructure industry, but free trade existed. (Unlike America)
Support for overcommitment (2) and overall evaluation
Great Depression destroyed previous policies and institutions
Reforms of the old structures mentioned occurred finally in 1980s with Thatcher, which showed rapid growth, so why couldn’t Britain do this in 1870?
Overall, difficult to blame Britain for overcommitting to first IR industries, first mover disadvantage was not our fault
2nd cause of failure:
Too much capital abroad
Lots of foreign capital investment, could’ve been used for domestic K accumulation e.g built domestically not in Singapore
Social returns to investment domestically high e.g building universities etc, but private returns were prioritised as they were high abroad e.g building rail in America
App: how much actually went abroad relative to total investment
1/3 of Britain’s investment went abroad, far greater than US and Germany, when we all had similar savings rates!!
3rd cause of failure:
Failures in banking (3 points)
Clearing banks inefficient
Stock market inefficient
New industry bias
Clearing banks inefficient (2)
-unable to supply long run finance
-concentrated and centralised (small banks combined) meaning less flexibility, so less lending, only short term lending
Why Stock market inefficient
Stock exchange wanted issues of 1m+, small/medium firms were priced out (as had to be of a certain size, so couldn’t receive share capital to invest)
New industry bias and example
Bias against new industries as risky.
Nearly all new electrical engineering companies failed within 5 years in 1880.
4th cause of failure in Britain:
Poor education- compare to Germany
Elementary education compulsory was late.
-Britain 1870
-Germany 1800
Secondary education deficiencies
-no science, Germany taught modern subjects (science)
-we took classic
Tertiary education
-universities in Britain taught classical, Oxbridge only taught Latin.
-civic unis taught science but only 1213 graduated in 1910 compared to German-17000 science graduates in 1910.
5th cause of failure in Britain:
Business/labour market failure: 2 arguments
Industrial structure
Labour market
Industrial structure part 1:
Atomistic competition in Britain (3)
Large number of firms
Small market share for firms
Lack of R&dD
Industrial structure part 2:
Corporate capitalism- US & Germany (4)
Small number of large firms (oligopoly)
Large market share
Vertical integration
Advanced marketing
R&D
Industrial structure part 3:
Managerialism and mass production (Chandler)
Britain slow to understand- no separation of ownership and management
Labour market characteristics
Unions developed (44% of workers unionised by WW1)
Higher wages- a problem
Main issue with unions (4)
Constraints on management choices regarding production techniques and technology
British unions wouldn’t play fair- American unions agreed to new tech if given share of profits. Ours didn’t agree to that.
Key industries suffered-cotton spinners in Britain organised to control pay and job hierarchy
Collective bargaining was not industry wide but Union specific, contrasted to US and Germany
Flash card summary
US characteristics (savings, FDI, exporter)
US key industries and stats and facts
US market structure characteristics (MNC, Policy, Labour, Protectionism)
Southern reconstruction.
Workshop of World>Penalties of early start and their characteristics.
Causes of Victorian failure (overcommitment, FDI, poor ed, banking, business/labour market failures)
