Re: Role of Total Foreign Trade

Last time I summarized some of  the basic arguments about the "vital" 
role of total trade in the industrial revolution. Now, in addition to 
the points already presented against the primary role of the colonial 
trade, I would like to put forward the counter arguments, which show 
that foreign trade was an important component of Britain's 
industrialization, but not the "vital" sector.  


If we consider the ratios of exports to gross national product for 
the British economy over the 18th century, we have the following 
numbers: the proportion of exports relative to GNP was 
about 8.4% in 1700, growing  to 14.6% in 1760, falling to 9.4% in 1780 
and then increasing to about 15.7% in 1801 (Engerman, 1994).

Now, there is indeed a rapid rise in the ratio of exports to GNP in 
the period 1780 to 1800. Moreover, considering that most exports were 
manufactured goods, the shares  of exports in industrial output were 
above the shares of exports in national output. However, most of 
these exports were textiles of cotton, wool and linen, which amounted 
to almost 3/4 of  the value of exports around 1800, with cotton 
textiles increasingly taking the lead. And cotton represented only 1% of 
industrial production in 1770, and only 8% in 1815. 

These stats would seem to say that removing the export trade, say in 
1801, would have resulted in a lowering of the national income by 15.7%. 
Yet, this arguments forgets that, if resources had not been used in the 
foreign trade sector, they would have found employment elsewhere. 
This is just a simple fact about the way the market operates; 
every activity has a substitute (Thomas& McCloskey, 1981; Mokyr, 1985). 
If they did  not export cotton - keeping in mind, too, that at lower prices 
the home market would have consumed some of what was actualy exported -  
the British could have engaged in another economic 
activity, like paving new roads, constructing new buildings, or 
making beer. As McCloskey reminds us, "exports are not the same thing as 
new income. They are new markets, not new income" (1994). 

> If WS theorists, including some Marxists (Hobsbawm, 1962; Mandel, 
> 1968), have emphasised the colonial trade, scholars like Habakkuk and  Deane 
> (1963), and Davis (1954) have looked to foreign trade as the primary 
> engine in the industrialization of England through the 18th century.  
> The verdict of  more recent scholarship, however, is that, while this 
> trade was significant, it was not the major cause of  the industrial 
> revolution. On the surface, or at first look, the stats do appear to indicate 
> that foreing trade was the 'engine of growth':
> 
> 1) Deane and Cole calculated that, if we start with a base of 100 for 
> 1700 for all industries, by 1800 the export industries grew to 544, 
> which means the expanded by more than five times, whereas the home 
> industries grew to 152 and agriculture to 143 (Mathias, 1983). 
> Another way of saying this is that those industries oriented to 
> foreign trade rose by 444% during the 18th century, while those 
> industries oriented to domestic industry rose by 52%.
> 
> 2) Given that this was the fastest growing sector of the economy, it 
> can also be shown that the export demand for British goods was quite 
> important in employment creation and that, through imports, 
> certain basic raw materials and foostuffs were acquired in exchange 
> for manufactured goods. Thus, that England was able to specialized in 
> the export of  finished goods in exchanged for cheaply produced/regulated 
> raw materials and foodstuffs that did not compete with domestic English 
> agriculture. 
> 
> 3) The industrial revolution began with a few great innovations in 
> the cotton industry. This industry experienced the fastest rate of 
> growth in the first phase of the revolution. In 1800 cotton 
> represented a quarter of all British exports, rising to 50% by 1850.  
> Moreover, "all its raw material came from abroad" (Hobsbawm). 
>