As high wages continued while more efficient production drove down prices throughout the later eighteenth century, people could afford to buy more. This was particularly true of cotton. Robert Heaton, a Yorkshire farmer in the second half of the century, kept records of his payments to servants and noted that his women servants, for example, had significant disposable income which they spent on clothing. The fall in textile prices had begun in the early eighteenth century; from 1600 to 1730 the price of woollen broadcloth had declined from 138d to 54d per yard, the price of baize from 36d to 10d, linen from 24d to 13d, fustian from 31d to 10d, and calico or cotton from 28d to 24d. Low prices and high wages also drove specialisation in the chain of clothing supply: ready-made garments – coats, suits, petticoats, gowns, shirts and breeches – began to appear in drapery shops after 1700 as middle-class families were able to buy in clothes rather than make them.18
The ability to make lighter, thinner cloths helped this decrease in price as producers were getting more yardage from the same amount of raw material. But more significant cost reductions came from better trading networks, lower transaction costs and the concentration of industries in particular regions. From the 1770s the Industrial Revolution drove all of these factors further and added the crucial ability to produce the same amount of cloth at higher quality with fewer workers. By the 1790s, when Arkwright’s mechanisation of spinning spread across the industry, the price of high-grade yarn had fallen by 90 per cent in a decade, and by the 1830s labour costs per pound of yarn were around one-tenth of their level in 1770. Cotton cloth was affordable for virtually everyone in Britain.19
The consumption of good quality, durable yet convenient clothing and textiles, began to be replaced with an emphasis on low-priced, colourful, fashionable yet disposable clothing. Cheap, easy to clean and colourful, cotton did not need to last; instead its versatility and low price gave birth to rapidly changing fashions. When everyone could afford cotton then tasteful people distinguished themselves from hoi polloi by changing their clothes from one season to the next. By the late eighteenth century Manchester weavers and calico printers would eagerly await the arrival of the London stagecoach bearing the latest designs, so they could adapt their looms and printing machines. The wider range of buyers that could afford disposable clothing was less concerned with quality and more interested in appearance; makers responded by focussing on how to make goods attractive for customers.
By the late eighteenth century, as standardisation in production and the powered mechanisation of industry took hold, the appeal of inexpensive disposable goods spread out from textiles to other industries. Clever craftsmen made veneers look like solid wood, and cotton shine like silk; wallpapers were made to look like Italian marble (nobody was fooled but the point was to appreciate the deception), and elaborate rugs covered cheap wooden flooring. Makers were naturally only too happy to see the lifespan of goods reduced so that the market regenerated itself. But fashion didn’t necessarily mean a drop in quality. Cotton cloth was made progressively finer by improved technology and the arrival of Jacquard and Dobby looms gave manufacturers the ability to weave complex and sumptuous patterns into cloth at low cost. Earthenware could be made to a high standard and was in many ways better than the pewter or wood of preceding centuries. Thanks to technically savvy entrepreneurs like Josiah Wedgwood, pottery improved in quality and became more affordable. These new goods were more convenient too: washing cotton, for instance, was easy, reducing the need for labour in the household and allowing further specialisation of labour. The move from high-quality utilitarian goods to inexpensive, convenient and disposable products was a key development that prepared the way for the mass production and mass consumption that followed on from industrialisation.
Along with this gradual but fundamental change in consumption came a retail revolution. From about 1650 to 1750 markets, fairs and direct sales by artisans were supplemented by shops and peddlers stocking a range of goods. Traditionally towns had held markets where butchers, bakers, barbers, metalsmiths and drapers sold their wares from stalls. But while markets still dominated, by 1700 almost every English town had at least one shop selling a range of goods, an innovation that soon spread out to villages. And as people worked longer hours, shops were certainly more convenient than buying direct from suppliers, even if the prices were higher.
Selling goods had been traditionally restricted by guild rules, but clothing-makers managed to separate retailing from guild control. Draper’s shops began to sell ready-made clothes as well as cloth. Other trades followed suit and by the mid-eighteenth century a small town of 1,500 population would typically have several blacksmiths, carters, and perhaps a cooper, drapers, milliners and tailors; bakers, butchers and grocers; ironmongers and stationers. Coal and timber merchants were common, as were pedlars selling produce door to door. By 1752 Britain had one retail shop for every fifty-two people.20 While shops were first and foremost a functional innovation, the concept of shopping as a leisure activity was arguably first exploited by Josiah Wedgwood, whose luxury emporiums in London began the creation of shopping as entertainment, social occasion and pleasure. Shopping became a leisure activity similar to visiting coffee houses, theatres, concert and dancing halls.
Already by the middle of the eighteenth century British life had become commercialised to a previously unknown degree. A patchwork of regional agrarian economies had been gradually integrated into a single commercial capitalist market system which fed both increasing consumption and higher productivity. How long Britain could have continued to produce more goods from its traditional organic economy is open to question; there is no doubt, however, that the introduction of production based on steam power came at a propitious moment. British consumers were ready and eager to buy goods that were mass-produced, while retaining a degree of quality and utility; just as important, they had the disposable income necessary to stimulate further increases in demand, thereby fuelling continuous investment in innovation.
21. Money for Industry
MONEY IN THE hands of consumers drove demand which in turn brought increases in industrial production, but industries also needed money in the form of investment. Even though many of the inventions in the early phase of the Industrial Revolution were on a small scale, their exploitation required investment in new machines and processes; and as the scale of production grew, innovators and industrialists needed ever-greater financial backing. This meant more money up front for ironworks, mines, mills and foundries from investors prepared to wait years for returns. The earliest capitalist entrepreneurs were helped by the relatively low cost of industrial start-ups. In the 1790s a cotton-spinning mill with 1,000 spindles cost around £3,000 to build and equip, one with 2,000 spindles around £5,000, money that could probably be met by a small group of wealthy investors; by the 1830s as the industry was scaled up cotton mills were costing £20,000 to £50,000 and could only be realistically backed through the financial system.1
We should remember too that Britain prospered because industrial entrepreneurs such as Boulton, Arkwright, Wilkinson and Wedgwood were able to marry craft industries with technical innovations in order to produce goods on an industrial scale. Developing an invention from the initial patent to a productive, profit-making machine or process demanded a new set of skills and experiences, and a new scale and system of finance. The prototype of the Fourdrinier paper-making machine, for example, was invented in France and patented in England in 1801; developing and building a prototype cost £46,000 with a further £12,000 spent on improvements before production began in 1808. The machine was to be the basis of all paper-making for the next 200 years but the upfront costs eventually bankrupted its small group of investors.2 This was a salutary lesson but of course many expensive investments bore fruit and repaid their backers handsomely. Watt’s steam engine was patented in 1769, and although it only began to pay back Matthew Boulton’s investment in the 1790s, in the long term the engine made them both wealthy men.
In t
heory the degree of investment needed by industry was not a problem for Britain – there were plentiful savings put aside by merchants, traders, farmers and small-scale manufacturers, while the needs of industry never rose above around 11 per cent of GNP. Potential investments were also helped by the financial stability created by the Bank of England. The national debt grew to worrying amounts at times like the American War of Independence (1775–83), and attempts to reduce debt by taxing goods could be painful for industry, but overall British commerce benefitted from a stable financial structure and a stable rate of interest. The introduction in 1757 of the Consolidated Stock (the Consol) at 3 per cent meant that interest on government bonds remained stable, dictating wider interest payments and encouraging holders of cash to make long-term investments.
The key problem was the lack of a national system for channelling savings to the places where they were needed. There was virtually no retail banking system to take deposits from savers in order to lend to borrowers.3 Instead Britain’s commercial finance was concentrated in London, where bankers made returns by lending to merchant traders and to the government, channelling the cash reserves built up by individuals and businesses into secure government investment. The system was designed primarily to serve the needs of the state and to provide a stable system of national finance. In this it was extraordinarily successful, giving a stable underpinning for the growth of British economic, trading and military power. Industrialisation, on the other hand, was concentrated in the Midlands and north of England, in central Scotland and South Wales. As well as being beyond the reach of London banks, the new industrialists had no track record for bankers to rely on.
These difficulties were compounded by the restrictions of the 1720 Bubble Act, which effectively outlawed the formation of corporations with shareholders. Any grouping of investors had to be a partnership, with a maximum of six members, each of whom was responsible for the losses of the whole – a restriction that also applied to banks. This discouraged investment from third parties so, for much of the eighteenth century, investments in industry were made through family, social and faith networks. The only other sources of major capital financing were fellow industrialists. Richard Arkwright, for example, was refused capital by the Nottingham bank of Ichabod and John Wright, and instead formed a partnership with industrialists Samuel Need and Jedediah Strutt, both of whom had made money from the stocking trade. Correspondence between members of the Birmingham Lunar Society, as another example, shows how Matthew Boulton, James Keir, Josiah Wedgwood and John Roebuck put money into each other’s businesses, while also investing further afield.4 The use of so-called merchant capital spread further with merchants and industrialists investing in industries in which they had no expertise. Merchants making profits from tea, for example, were largely responsible for the large-scale investment in the South Wales coal and iron industry.
Before we see how a banking system developed to enable more third-party investment, we should take note of the historic shift that was taking place, led once again by the artisan industrialists. Historically most makers of goods had been self-employed, owning their own premises and tools and either buying their own raw materials or working through the putting-out system. But the mechanisation of production went hand in hand with the development of a new system in which one person owned the premises, equipment and raw materials and paid others to do work for him. The entrepreneur would invest his own money and would take the profits made by the enterprise. Capitalism was not invented by the British industrialists – it had originally developed in northern Italy in the fifteenth century – but they fostered the establishment of the capitalist as the basis of the new industrial economy.
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Land and Money
One of the abiding myths of British history is that the Enclosures – the taking of common land into private ownership – drove up agricultural productivity and pushed peasants off the land and into cities. This then enabled the countryside to support a large urban population while also freeing up workers for the new factories. The Enclosures were therefore a key driver of the Industrial Revolution. However, the relations between land, food and urban expansion were almost the exact opposite. First, the doubling of agricultural productivity (i.e. output per acre and output per agricultural worker) happened from 1600 to the 1730s, well before the peak period of Enclosures began, while during the time of Enclosure the rise in productivity slowed to around 10 per cent. Second, Britain’s urban population was much higher by proportion than elsewhere in Europe well before the Enclosures (London’s population increased from around 50,000 in 1500 to 500,000 in 1700). In fact, the increase in urban population led by London was driven by the growth of craft manufactories and burgeoning world trade, and this in turn provided an incentive for farmers to increase food production; in other words, in a complete reversal of the traditional explanation, it was the cities that led the countryside.5
How, then, did farmers raise their productivity so dramatically in the period from 1600 to 1730? The answer lies partly in the security given to farming families through copyholder and beneficial tenancies which had developed over the preceding century through the Court of Chancery.6 Copyholders became legally entitled to manage their own affairs without oppressive interference from the manor house and could profit from the sale of surplus produce, while the growing urban populations gave a ready market for farm produce.
The market provided the incentive, but how was increased productivity achieved? Although nutritious crops like beans and root vegetables were introduced, of more importance were improvements to the land itself. Records show that farms spent more labour on measures to improve the soil than on any other activity.7 These were energy-intensive processes; making lime, for example, used up vast amounts of coal which Britain had in abundance.
The increase in food production between 1600 and 1730 came without a significant rise in the agricultural workforce. Throughout human history the production of surplus food almost always encouraged families to have more children, who were seen as the future labour force; the subsequent increase in population gave more mouths to feed and so nutrition returned to the level of subsistence. So why was this time different? It seems likely that both social attitudes and the new commercial system in which farms operated played a role. Historians have long noted that in Britain and northern Europe, from the Tudor period onwards, women married much later than in southern Europe, and in many cases (up to 20 per cent) chose not to marry at all.8 This cultural difference is thought to stem from the relative independence of young women. The rise in prosperity in the seventeenth and eighteenth centuries did not, as might be assumed, lead to British women deciding that they should marry and have large families; instead it made them more financially independent and kept the fertility rates low.9 So greater prosperity in the countryside brought more independence, not more children.
The other reason why the agricultural workforce remained stable was the increasing commercialisation of British life. Farmers were producing more food in deliberate response to a growing market; their principal incentive was financial gain and so they were highly motivated not to spend their gains on more children. It was this revolution in attitude that produced the agricultural productivity that freed up more people to work in craft manufacturing and eventually in industry.
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A rough and ready capitalist system developed as people like Arkwright, Boulton and Wedgwood became owners and large scale in the businesses that they ran. But while technical innovations improved productivity and the growing market presented opportunities, making industry pay was no simple matter. Few industrial entrepreneurs had experience or expertise to call on and the biggest danger was over-expansion and resultant drying up of cash. As with today’s innovators, the first industrialists needed to produce on as large a scale as they could, as quickly as they could, to keep ahead of their competitors; but bills from suppliers came in well before payment from customers. Manufacturers were also vulnerable
to piracy of patents, abuse of credit, legal challenges, destruction of machines, underhand dealings, cartels and even, in Arkwright’s case, death threats. Lots of companies went under and even those that thrived had to be helped through their cash-flow problems by sympathetic customers. The ironmaster John Wilkinson was supported by his customer Boulton & Watt on more than one occasion, as shown in this letter of 21 June 1792 from James Watt:
Dear Sir,
In reply to yours we send you inclosed our draft on Mrs Matthews value £1,000, the receipt of which please acknowledge.
B. and W. never were lower in cash than at present, for by our long absence in London our Customers were not craved, so that we have not received for castings this year the half of what we now send you. Mr B. is gone to Birmingham to procure you another £1,000 on his own account and will write you. Wishing you happily over this crisis and that you may reap much profit and satisfaction from your new Estates,
I remain,
Dear Sir,
Yours sincerely,
JAMES WATT
Mrs Watt says that if you do not call at Heathfield and stay a day with us on your way down she will conclude you have quarrelled with her.
Richard Arkwright became a villain to some and a hero to others for his aggressive business practices. He made the cotton-spinning mill into a profit-making business, and was the first to show that investing in a large-scale enterprise could bring rewards, but only with careful control over the financial aspects of the business. Arkwright learned that extending long-term credit to customers – a common practice given the dearth of currency and banking – could lead to disaster, while he implemented systems for keeping track of the money tied up in stock and processed goods. Those who failed to follow suit went under, despite the opportunities of the growing market.
Iron, Steam & Money Page 28