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Great Britain: Colonization and the English Industrial Revolution

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Are the American colonies contributing and if so in what way to Britain's successful industrial start-up experience?

Britain was the first to embark on the Industrial Revolution and the case of Great Britain is always shown as a forerunner. Is its colonial domain an asset? A hindrance? Without its colonial domain, would Britain's industrialization have taken place?

The first question is at the time of the industrial revolution what is the British colonial domain? In the middle of the 18th century, is it a colonial domain with a lot of substance? By way of comparison, where can it be located? Are there different types of colonies?

If we are interested in the contribution of the colonies to the industrial revolution, we have to ask ourselves the question of the colonies. In the second half of the eighteenth century, India was hardly colonized at all.

On the other hand, it is an empire of relatively recent creation, the first British settlements in North America date from the beginning of the 17th century at the earliest, on the other hand, it is a rather vast but sparsely populated colonial domain.

Excluding British trading posts and bases in West Africa and the Indian subcontinent, these are settlements without a territorial basis.

Consequently, we can distinguish two types of colonies that make up the British Empire on the eve of the industrial revolution:

The first type are those that will become the United States, the thirteen colonies of North America, on the Atlantic coast are colonies of central and northern Europeans. The central colonies are Maryland, New Jersey, Delaware, Pennsylvania and New York, and to the north are New England, Connecticut, Massachusetts, Rode Iceland and New Hampshire. The Native American inhabitants of these territories were driven out beyond the settlement.

The second type of colonies are the plantation colonies located in the Caribbean, the Wests Indies, these are the British West Indies with Jamaica, Virginia, Georgia, North Coraline and South Carolina, which are exporters of tropical commodities, coffee, indigo, tobacco, sugar and cotton.

These possessions do not have a population that has the same composition as the colonies of the first type, the populations are mixed with imported African slaves who constitute either the majority as in the Wests Indies or strong minorities in the southern states of the United States.

In total, the British colonial domain of the former regime has restricted boundaries and by the mid-18th century Great Britain controls 13% of the land area owned by the five European colonial powers and 10% of the populations occupying it.

The Ancient Regime colonial powers are Spain and Portugal, the British domain in the mid-18th century is less extensive than the Portuguese possessions and less populated than the Dutch colonies.

What is the importance of colonial expansion for industrialization?

Williams' thesis[edit | edit source]

Eric Williams

For fifty years, this thesis has permeated the specialized literature, and the authors who ask themselves this question are in relation to Eric Williams.

Williams was born in 1911 in the West Indies in Trinidad, a British colony since 1902. He studied at Oxford where he presented his doctoral thesis in 1938, which was published in 1944 under the title Capitalism and Slavery.[7], the French translation was published in Paris in 1968.

« This study is forced to place in a historical perspective the relationships that exist between the beginnings of capitalism and the relationships between the successful industrial start by Great Britain three things: 1) the slave trade, 2) the slave plantation system and 3) the colonial trade. ».

The defended idea which is at the heart of his thesis: « the discovery of America was important not for the precious metals supplied by the New World, but for the new and inexhaustible markets it offered to Europeans ».

The New World is an outlet, a very appreciable new market much more important than the precious metals supplied.

What is gained with the colonization of America and who wins? It is world trade, the considerable increase that gains « is mainly due to the triangular trade in which Great Britain provides the exports of industrial goods, Africa the human goods and the American plantations the raw colonial raw materials ».

It is a network, and within this network, the North American colonies play a special role as suppliers of food for the sugar cane growers and their slaves. The colonies in the northern and eastern United States are complementary to the specialized agriculture of the West Indies.

Classic pattern of triangular trade between Africa, the Americas and Europe.

The Atlantic network based on slavery thus fulfils three functions for the economy of Great Britain:

  • distribution of British products
  • source of supply of raw products and raw materials
  • source of profits

The three functions are devolved to the colonies, which can in these different ways contribute to the industrialization, to the industrial start of Great Britain in the second half of the 18th century.

If the colonies do this effectively, then they contribute to industrialization by facilitating and supporting it.

One of Williams' ideas was that on the Atlantic network, there is a whole series of activities: the slave trade, colonial trade and also set up in particular in the East Indies and the United States, namely the plantation system.

This trade takes place within the framework of the triangular trade; these activities generate profits, the idea is that the profits from and generated on this network feed the accumulation of capital in Great Britain contributing to the financing of the industrial revolution. These profits are one of the streams or sources of capital accumulation to finance the industrial revolution.

Overseas Profits and Industrial Capital Formation[edit | edit source]

What has attracted a lot of attention from economic historians because it's something that has been in the limelight is the profits from the slave trade.

Did the slave trade in the 18th century - which was the height of the Atlantic slave trade and whose first slave nation in Europe was Britain - generate profits, and to what extent did they contribute to the formation of industrial capital? Was some of the financing able to prevent the gains generated by the slave trade?

To get to the heart of the matter, there are two characteristics of the slave trade that should be remembered and that affect the rate of profit:

  • the first characteristic is that to launch a slave expedition you need a lot of money. In the 18th century it was said that the trade was a risky business.
  • the second characteristic is that it is a risky trade, the trade can lead to spectacular profits as well as resounding losses.

We were interested in evaluating the profits and especially in estimating the profitability, that is to say the rate of profit. Knowing the number of captives transported and being able to determine the evolution of prices, we can estimate the amount of the evolution of profits.

What interests us is the rate of profit; the first evaluations of the profitability of the slave trade already date back to the end of the 18th century, one of these evaluations which will be successful and have a very long life as a reference is an evaluation of 30% for the port of Liverpool.

This rate was taken up by Williams, among others, without being verified or criticised until the middle of the 20th century. With such a supposed rate, thanks to compound interest, capital invested at more than 30 per cent doubles in less than three years, it is hardly surprising that the profits of the slave trade were justified as an important contribution to the industrial revolution.

This rate of return has been revised downwards and no one retains this rate any more, most specialists retain a rate of 8% to 10% per annum for the British slave trade of the second half of the eighteenth century.

From the 1970s - 1980s, the attempts will continue thereafter, the specialists will ask themselves what this represents by making reports. The higher the denominator, the lower the percentage ratio will be.

These are rather quantitativist historians, in the context of these exercises there are initial hypotheses, the results obtained suggest that these slave profits are large enough to finance a significant fraction of the investments required in the industry.

The first results presented assume that during a large part of the 18th century, the contribution of slave capital - provided that all the profits from the slave trade were reinvested in Great Britain - generated profits averaging 8 to 10 per cent a year and that all the profits earned by British slave traders and repatriated to Great Britain were invested in their entirety, in which case, during much of the 18th century, this contribution represented between 0.1% and 0.5% of national income, between 2.5% and 8% of gross fixed capital formation, between 16% and 40% of total investment in trade and industry. If it is assumed that the profits from the slave trade are fully reinvested in industry, then they would represent half of what needs to be invested in the industrial sector.

If the slave profits are fully invested in industry, then this would provide half of the financing in this sector at the time of start-up.

If we take a large aggregate, slave profits appear to be negligible; one must be careful with studies that neglect the contribution of the slave trade to the British industrial revolution, the other extreme must also be qualified with caution, one must always open up the widest possible range and give every possibility of quantification.

In the 1990s and early 2000s, the authors will try to stick more closely to Williams' thesis, because he does not only talk about trafficking and the profits it can generate.

There are other systems of trade, so we have to assess the profits of the triangular trade, the profits generated by the exchange of goods between Great Britain, Africa and America, and we also have to add the profits of the slave exploitation system.

This has been tried, but we must no longer consider that all the profits generated on the Atlantic network are reinvested. The reinvestment assumption today is 30%. Assuming such a rate of reinvestment, the profits from the triangular trade alone would be sufficient to finance investment in the industry around the last third of the 18th century.

These are very interesting quantification exercises because we did not have such indications or orders of magnitude, in other words, if we can talk about the achievements of historiography, we have something today, but only allowing us to say that, yes, what was set up on the Atlantic network and which was based on slavery generated significant profits.

All these exercises, which are quickly summarised, tell us nothing, however, about the actual destination of the accumulation of wealth; there is an accumulation of wealth that is no longer being debated today.

We do not know the final destination of this accumulation of wealth derived from relations between Great Britain, Africa and America.

The money of the slave traders, the money of the planters, the money of the sugar merchants engaged in colonial trade, this money contributes to increasing British national income, but it is very difficult to establish direct and clearly marked links between overseas profits and industrial investment.

Research shows that among them, especially planters returning to the British Isles and becoming directly involved in British industry, only a very small number of them. What we know of the great Caribbean sugar barons is that they are attracted by land investments and government bonds, these high income earners have strong preferences for secure and prestigious investments, they establish « more castles than factories ».[8]

There are induced effects that show the limits of quantification, merchants or planters or even slave traders enriched by the activities on the Atlantic network may prove to be the providers of the credits indispensable for the development of industries that they do not directly take the initiative to launch at a time when the banking network is beginning to emerge.

Other induced effects may be at the origin of the financing of regional infrastructures such as canals or various equipment necessary for the emergence of manufactures; banks such as Lloyds may take off thanks to the profits of the slave trade, and the profits from the Atlantic trade, which are first turned into financial jobs, may find themselves partly mobilized for the development of industry.

This is a mixed conclusion, we get something, but if we try to look for direct and immediate effects, we miss other mechanisms that are probably more important and that therefore give this conclusion on this first function a balanced character.

Colonies as a source of raw materials[edit | edit source]

The second function is the possibility for the colonies, and more particularly the plantation colonies, to provide the metropolis at a time when it is living a particular phase of its economic history, when it is engaged in industrialization and when within this framework it is considered that there are dynamic driving branches driving the rest of the productive apparatus that the colonies supply with raw materials.

In which case the colonies would fulfil the second function, namely, that of being a source of supply of raw materials in large and abundant quantities, i.e., at a given time the colony would supply raw cotton by supplying the industry on a regular basis, in other words, there would be no impediment to the supply of raw materials to such a branch.

The cotton industry in Great Britain to exist and develop must overcome a first obstacle which is competition from Asian textiles.

In order to develop, the British cotton industry needs to lower its production costs, which will be done with mechanisation, and in order to develop, grow and win foreign markets, the British cotton industry needs to be regularly supplied with cheap raw materials.

Three conditions are needed:

  • the industry must protect
  • the industry must mechanize
  • the industry must be supplied on a regular basis

The colonies if they can contribute intervene by allowing the third condition to be met.

Towards the middle of the 18th century, it is a fragile industry, it must be protected from competition from Asian textiles and especially from Indian cottons. This protection will be effective once not only protectionist but also prohibitive measures to ban the import of Asian fabrics are taken from 1700 to 1774.

For much of the 18th century, a whole series of measures will ensure the survival of the cotton industry.

Once the cotton industry is protected from external competition from Asia, Britain will - once it has protected itself from Asian textiles, once it has managed to mechanize the production process in this industry, once it has benefited from the supply from the other side of the Atlantic as well, then it will - penetrate the markets of the Indian subcontinent. At the time when Great Britain's industrial take-off was taking place, the cotton industry in the middle of the 18th century was still fragile and needed some support in order to grow.

The second condition is an endogenous factor which is mechanization. According to some authors, the British adopted mechanization because a certain pressure came from outside, but the mechanization of the textile industry, especially at the time of spinning, is a challenge that must be credited to endogenous forces.

The mechanization of textiles will lower the cost price and save labour. The handicap for Great Britain is the cost of labour compared to the cost of labour in the Indian subcontinent, this gap will be settled and closed to Great Britain's advantage through mechanisation.

A third condition must be added because the first two are not enough to understand how British industry is resisting cheap Indian textiles is the possibility of having secure sources of raw materials because Britain controls them.

It is a source that is plentiful, British consumption will be satisfied, and it is cheap, because cotton is produced by slaves.

Today we know that slavery is economically profitable, helping to lower the price of raw cotton.

The consumption of raw cotton in Great Britain was at one time very important and had to be satisfied, from 1760 to 1840 this consumption was multiplied by almost 200. A comparative advantage of British industry is the ease of supply which relieves British industry of the problem of cotton supply while other branches of British manufacturing industry are slow to solve.

From the middle of the 18th century, 85% to 90% of the cotton imported into Britain was supplied by the American slave plantation system from the southern part of what is now the United States, the West Indies and Brazil until the middle of the 19th century.

In the 18th century, Brazil was indirectly controlled by Great Britain, of which Portugal was the vassal. Portugal submitted because this allowed it to keep Brazil.

From the beginning of the 19th century, the process of industrialization in Great Britain reached a point of maturation. It is already a century since industrialization began and it is from that moment that India became a regular supplier of raw cotton to Great Britain.

After the First World War the main raw material was oil, in the second half of the 18th century and the second half of the 19th century the main raw material was raw cotton and the cotton industry was a dynamic and exciting branch.

For the period that concerns us, it is an industry that can be considered as driving up growth, it is a driving industry.

Overseas markets and industrialization[edit | edit source]

Based on the trade statistics of Great Britain, which many authors have reworked, show that the foreign trade of the first nation to engage in industrial trade became Americanized in the 18th century.

Débouchés d’outre-mer et industrialisation.png

Around 1700, 82% of Britain's exports went to Europe while Europe accounted for 62% of Britain's imports; a century later, 57% of exports went to the colonies while Europe's share fell.

This is called the Americanization of Britain's foreign trade; in other words, the colonial opportunities for Williams are « what you gain with the New World are new markets ».

Having new markets is important, because we are in an age when markets are closed in the world. What dominates until the middle of the 19th century is mercantilism, economies are protected, protectionism reigns supreme.

The main trading partner is continental Europe, but continental Europe is locked in, hence the advantage of having new markets at a certain point in time that are "guarded hunts".

This is the Colonial Pact, the French will later call it the Regime of the Exclusive, it consists in making colonial markets "guarded hunts" for the metropolis. There are provisions such as the Acts of Navigation in force from 1751 to 1849 that reserve for Great Britain the proceeds of the colonies for British ships and require the colonies to buy and sell only to the metropolis.

There is a prohibition to trade with countries other than the metropolis is therefore a prohibition to industrialize, which will notably stimulate the revolt of the thirteen American colonies leading to the unilateral declaration of independence of the United States; it is a freedom that is not given by the Exclusive Regime.

The colonies of North America and the Caribbean became increasingly important markets because their population grew from 1700 to 1815; the British colonies had a population that increased from 0.4 million to more than 9 million; to this must be added the colonies and trading posts that Great Britain had on the Atlantic coast of Africa and in Asia.

The colonies are the most consistent part of this network, but it is considered that within this network Great Britain has a free trade zone reserved for British manufacturers.

These distant markets give the British an advantage in getting around the difficulties encountered in the usual markets of a Europe that is increasingly closed to competitive British products.

If we look closely at the statistics, the colonies are among the most important clients of manufacturers, with North America and the Caribbean alone absorbing half of Britain's manufactured exports. Other interdependent trade networks are connected to the colonial trade, namely the re-export trade.

Colonial traffic will lubricate through re-exports of exotic products Britain's trade relations with continental Europe. Re-exports concerned a range of products such as imported tropical foodstuffs, but which she could not consume entirely, they included tobacco, rice from North America, coffee and rum from the West Indies, and cotton and tea from Asia.

During the 18th century, more than a third of the country's exports consisted of re-exports.

There are exports of domestic products and the export of products from Britain that come from elsewhere in the colonies or from Asian trading posts; these re-exports offer advantages that serve two functions :

  • these re-exports enable Great Britain to rebalance its trade balance with several European countries which are blocking the way for manufactured goods, but are letting tropical commodities through, because these countries do not have the networks or the means to supply themselves with tropical products. Britain will work
  • the re-exports of colonial products make it possible to buy raw materials from Northern Europe which Great Britain needs such as resin, tar flax, a necessary chamber for the construction of the merchant fleet which provides work for many British sailors and workers.

Another network is linked to the activities that Great Britain develops on the Atlantic network which are the exchanges with the West coast of Africa.

The slave trade is a barter, against the captives, the European slave traders have to bring goods to the bottom of the holds in order to exchange them. These goods constitute the cargo of the trade, but it is an assortment in which textiles dominate, but also pacottery. However, the bulk of the trading cargo is made up of processed products such as textiles and products from the steel industry.

The trading cargo is made up of textiles, of which cotton is important, but it is the Asians who hold the keys to the market; they had no rivals until the middle of the 18th century.

With mechanization, the British began to copy the design, patterns and colors of the Indian cottons known as the Star of Guinea and so prized by African brokers.

As the slave trade developed, more and more goods had to be brought in on ships that had ever-increasing capacities, a fraction of these trade shipments would be British products. The slave trade can be seen as a network of exchanges that revolves around a colonial trade across the Atlantic.

Colonial trade spills over into other trade routes. The colonial trade is inserted on the Atlantic network, that is to say the triangular trade which is wider.

We can measure the weight of colonial trade only from the second half of the 19th century which is a significant phase.

The first element is the export rate of the British economy for the period of industrialization and the economic start of the second half of the 18th century. The export rate is a ratio of the total value of exports to the gross domestic product, also known as the openness coefficient.

The smaller the size of an economy, the more competitive it has to be and therefore the greater its openness. With the United States, the larger a country is in terms of size, the more substantial its domestic market is and the less consistent its export rate is.

For the British economy, the export rate is 12-13% during the phases of the industrial revolution.

In the same way that we need to know what proportion of domestic production is exported, we need to know what proportion of industrial production is sold on external markets: about 30% of British industrial production is sold on external markets.

The colonies account for 40 per cent of Britain's total exports and 45 per cent of her manufactured goods.

If we combine these four elements, we can determine the weight of the colonial markets. They absorb about 5% of Britain's national product and 13% to 14% of its industrial production.

Sometimes a few percentages are enough to be successful.

The colonial market is protected; one could put forward an idea that exists in the specialized literature, namely that protected markets are reserved markets, easy to access and therefore able to exert a softening effect.

It so happens that colonial markets are important not for declining manufacturing branches, they are branches that are at that time driving growth upwards, in this sense, colonial demand is mainly for products of standardisation and new industry.

Thus it can be explained that in some cases small percentages are sufficient for success.

It is understood that foreign demand is much less important than domestic demand.

The colonial markets are 5% of the GNP and 12% to 13% of industrial production, but this is a trade that has been of crucial importance for some innovative branches. It is an international trade that is important for regional centres such as Liverpool and Manchester.

In these two respects, these are both branches and centres that are oriented towards the open sea, that is to say, they are part of the Atlantic network.

We have to give each its weight, we have to take things into account. The conclusion is proposed to recognise certain points, this conclusion also aims to say that Williams was probably right.

The contribution of the colonies must be taken into account, but that this contribution should not be exaggerated, but neither should it be denigrated.

In this lesson on the contribution of the colonies to Britain's industrial start-up, we must first recognize that the profits of triangular trade financed the birth industry, but it is difficult to calculate their actual contribution.

Without the American slave plantation system, the cotton industry would not have been successful, but it is questionable whether without this success the process of industrialization would have been aborted, although it can be argued that it made things easier.

There are elements that can be quantified, but we can't come to definitive conclusions, there are also non-quantifiable effects. The development of Atlantic trade based on the slave trade and the sugar trade contributed to the improvement and sophistication of insurance techniques, commercial practices and the shipbuilding industry, while the great colonial trade played a role in the affirmation of new values and elites that contributed in part to the era of revolutions.

Britain's economic take-off would have taken place without the benefits and gains generated by the slave trade, the colonial trade and the American plantation system of slavery.

It is true that the profits from the slave trade could have contributed to half of the industry's investment, but endogenous factors must be taken into account, as the secondary sector and industry is part of a national economy whose development depends on a multitude of economic, social, political and cultural factors. The endogenous factors of development are, for example, agricultural progress, population growth, the nature of the state, the strength of the market, these are structures that depend on a long time, things were put in place before Great Britain built up an American empire.

Contrary to a historiography that dominated between the 1960s and 1980s, it must be acknowledged that the American colonies and the African slaves contributed; their role should not be glossed over, but neither should their role be exaggerated.

Today, it is considered to be one contribution among others, but not the privileged precondition for the industrial revolution.

Without this contribution, it is indisputable that the rate of growth in Great Britain would have been greater, but we cannot know to what extent. The colonial contribution sustained Britain's industrialization, giving it a special lustre, a breath of fresh air and an impetus which enabled industrialization to go further than if that contribution had not existed.

Annexes[edit | edit source]

References[edit | edit source]