Senior Lecturer in Economics
By stitching together vast amounts of historical data on Britain in the 18th and 19th Centuries, researchers have been able to study how employment, capital, energy and innovation interacted to drive the industrial revolution. Understanding these patterns could help promote investment in Britain today.
“Britain is known as the cradle for the Industrial Revolution, but there are competing claims about why,” says Dr Ravshonbek Otojanov. “One claim is that it happened because Britain had a free-market economy. Another is that Britain had scientific societies where knowledge flourished and, together with businesspeople, these promoted innovation.”
Dr Otojanov joined Queen Mary University of London as a PhD student in 2012. He is now a senior lecturer in economics at the School of Business and Management. During that time, he has studied the role of energy in the Industrial Revolution.
He continues: “Economic historian Professor Robert Allen published a book where he argued that it was Britain’s imperialistic past and its role in international trade, coupled with other factors, that grew the economy and pushed wages in Britain to increase faster. At the same time, coal was widely available in Britain and he said that high wages combined with this cheap fuel were the impetus to the Industrial Revolution. I wanted to test this to see if it could be supported by the data.”
Historians have researched wages in Britain going back to 1700 from sources such as factory logbooks. However, Dr Otojanov notes that this information was available for relatively short periods of 25 to 50 years from different sources, and there was no such thing as a national average wage. “Historians have also studied commodity prices, for example, using school records showing the price for a delivery of coal," he added.
Working with Dr Roger Fouquet, from the National University of Singapore, and Professor Brigitte Granville from QMUL, Dr Otojanov, spliced these data together and then applied modern economic analysis. This allowed them to see how wages, employment, energy cost and energy use altered in Britain as the Industrial Revolution unfolded and the economy grew. Their findings have been published open access in The Economic History Review.
“We created an index of technological progress to show if it was increasing, stagnant, or falling,” Dr Otojanov explains.
“When we compared this index with wages, we could see that wages increased as labour-saving technology increased. So, for example in the textile industry, women would refine yarn in their homes and manufacturers would collect it and put it together. But because wages became more expensive while energy was cheap, there was incentive to innovate technology that would save on labour and the first factories were built.
“However, we also saw that overall energy efficiency was falling. This was a surprising finding because technology was becoming more energy efficient. In transportation, for instance, we moved from a horse and cart to steam-powered railways. We realised that this is because of the ‘rebound effect’ where energy efficient technology means a higher output with less energy input, which is more formally known as ‘Jevons paradox’. This encouraged businesses to invest more into the technology and so consume more energy. It’s like buying an energy efficient car then driving more because it’s cheaper to drive.
“With labour-saving technology, you might wonder where the workers went, but energy and labour saving created more investment and more jobs, so people moved from agriculture to industry, and industrialisation took off. But our analysis suggests this process was not as dramatic as described in some history books. We saw slow and gradual increase in output until the 1830s, when growth became rapid, but not as rapid as often thought.”
“You might also wonder whether new technology could be copied by others. Today, you can protect your intellectual property. Back then, industrial piracy was rife, although Britain had royal patenting offices meaning protection for domestic innovators was more solid than elsewhere in the world.
“So, Allen’s conjecture that Britain’s coal deposits and high wages helped the Industrial Revolution was correct, but at the same time there are other explanations, such as institutions that look after property rights. We see how the interaction of these factors explain why Britain was first.”
Despite the focus on historical data, Dr Otojanov says these discoveries could also be important for the British economy today.
“Back then, energy costs were low and support for innovation was good, so it made sense to invest in manufacturing here. Now, wages are high, manufacturing has massively decreased, and we’ve moved to a service-based economy.
“Conditions for innovation are good now; intellectual property rights work well and we have some of the best universities and research facilities in the world. These are the factors that can drive the economy today, so it makes sense to invest in Britain in areas like banking, artificial intelligence, renewable energy technologies and drug development.”