Over the last two centuries, the British Empire is often debated to be the launchpad for the Industrial Revolution. This is due to the fact that the size and importance of the empire peaked at around 1770, which coincides with the beginning of industrial revolution. However, while some historians maintain that the Empire facilitated the revolution, others argue that it hindered it, and British resources would have been more effective if they were invested into the domestic economy. This essay will analyse the impact of the profits from slave trade in causing industrial revolution, as well as evaluate the significance of the profits and capital accumulation from the colonial trade.
On one hand, British Empire facilitated the emergence of the Industrial Revolution by generating abnormal profits through slave trade. One of the key advocates of this theory is Eric Williams. In his book Capitalism and Slavery, he outlined what became known as the Williams Thesis (Williams, 1944). Williams emphasized the connection between slavery and industrial capitalism. He argued that the slave trade and the sales of cash crops, like sugar, provided Britain with significant amount of capital that kickstarted Industrial Revolution. Contemporary evidence, collected by James Wallace in 1795 suggests that slave voyages in the period of 1783-93 made abnormal profits of over 30% (Wallace, 1795). These values support Williams thesis, suggesting that slave trade became the foundation of the early industrialisation in Britain, providing enough capital and investment to finance the technological developments. Since both capital (K) and technological development (A) are elements of the production function (Y=AK^α L^(1-α)), it follows that the output increases as well. Furthermore, modern study of the hypothetical balance sheet, published by Michael Craton in 1974, suggests a profit ratio of 33%, once again supporting earlier findings (Craton, 1974). Another area of focus is the impact of such profits in certain regions. Successful merchants often invested in areas around the ports and major cities, bringing prosperity to the area around. Evidence from Bristol and Liverpool suggests that in 1780s merchants have invested approximately £280,000 and £1,000,000 in two areas respectively (D. Richardson, 1975). After careful recalculation in 1985, Barbara L. Solow cited the highest ratio of slave trade profits to industrial investment of 10.8% (Solow, 1985). Such high figures demonstrate how the British Empire laid the foundation for the Industrial Revolution and financed the early development in Britain.
On the other hand, it could be argued that British Empire did not give rise to the Industrial Revolution as the generated profits were too small and insignificant to finance the technological changes. While Williams and Craton have based their findings on many assumptions and patchy evidence, D. Richardson, in his work in 1975-76, has used the account of the Liverpool merchant William Davenport, which states that between 1757-84, there were a total of 67 voyages with 49 being profitable and 18 resulting in a loss. The annual average profit of this company turned out to be around 10.5%, a figure much lower than Williams’s estimates (D. Richardson, 1975). This set of data demonstrates very small profits generated and furthermore, show that almost a quarter of the voyages result in a loss. This does not factor in the added cost that the shipping industry can bring such as maintenance of the ships. As these figures only cover one firm, Roger Anstey has provided a broader analysis in 1975, concluding that the aggregate profit between 1761-1800 was 9.5% (Anstey, 1975). These findings are already 3 times lower than the ones proposed by Williams and Craton, suggesting to historians that slave trade profits did not have as big of the impact on the capital accumulation and thus industrial revolution as previously thought to be. In support of this, Royal African Company frequently complained about the lack of profits and difficulty to raise capital (Davies, 1957). In addition, in 1770 slave trade profits comprised 0.54% of the British national income (Engerman, 1972): a miniscule proportion that could not have facilitated the industrial revolution as it was previously believed to be.
It could also be argued that British Empire generated abnormal profits from colonial trade as a whole, which resulted in capital accumulation in Great Britain, facilitating Industrial Revolution. Conservative political thinker of 18th century Edmund Burke believed the empire was crucial to the growth of the economy (Sheridan, 1973). Dynamic rates of growth of trade in those years from 0.8% between 1700-40 to 2.6% between 1770-1800 (Deane and Cole, 1967) suggest a significant correlation between the growth of the economy and the start of the industrial revolution. According to the work of Deane and Cole, published in 1967, these rates were rising faster than that of the total output, while the contribution of overseas trade to national income led to a 19.3% increase in the ratio of exports to GNP (Crafts, 1985). These figures suggest growing accumulation of capital in Great Britain as well as increased demand for growth over the same time period. Theoretical model suggests that this would lead to increases in output, and, assuming technology was endogenous, this also allowed significant investment into research and development. In addition, in the beginning of the growth of British Empire, 5 Navigation Acts were implemented between 1651-96, which gave Britain complete monopoly over transatlantic trade and stimulated various re-export trades, which grew from £2.136M in 1700 to £11.802M in 1797-8 (Deane and Cole, 1967). Furthermore, Navigation Acts have benefitted Great Britain significantly with the implementation of bounties (Thomas, 1965). These bounties were used to encourage colonies to produce inefficient goods vital to England, such as Indigo, Naval Stores and Lumber. As it can be seen in the graph of bounty for Indigo, without the bounty, these goods would not be produced and thus, these commodities would have to be imported from elsewhere. The value of the bounty is less than the resources wasted if produced in Britain or imported from other regions. Thus, Britain is able to still benefit from consumption of these inefficient goods while focusing on the production of manufactured goods. This stimulated investments into the industrial sector, giving rise to industrial revolution.
Nonetheless, others claim that the profits from colonial trade were insignificant and the Empire acted as a drain of British resources that could’ve been invested in domestic industry. One of the main argument points is that the empire resulted in significant expenditure in terms of military and navy. To ensure successful transatlantic trading system, Britain had to maintain protection of merchant ships on the high seas, which was provided by the Royal Navy. Throughout this period Britain was at war for 55 out of 140 years and maintained a wartime fleet of 185-350 vessels, giving it naval supremacy over the French and Spanish. This was expensive: to finance the navy, British taxes rose by a multiple of 14.4 between 1688-1815 (Brewer, 1989). This meant that the disposable income of the labour force at this time lowered significantly, and according to the economic theory, this means that the consumption and consequently output of the economy lowered over this time period. In addition to this, the contribution of the existing profits to industrial investment is unclear, with some evidence suggesting re-investments into domestic economy, such as the Pennant and Fuller families, and some evidence suggesting the opposite (Crossley and Saville, 1991). Finally, many historians also emphasise the significance of home market as the engine of growth, claiming that agricultural advances in domestic economy over the same time period were the main reason for industrial development (Bairoch, 1973), with a strong emphasis on the role of ‘consumer revolution’ as a stimulus. Despite these claims, the extent of the importance of home market is heavily disputed and there is no general consensus on its impact.
In conclusion, British Empire has definitely played some role in enabling Industrial Revolution. The timing of the rise of the British Empire and Industrial Revolution is no coincidence, as it provided the country with significant level of capital and demand for growth. The ability to finance technological developments and invest into industrial sector proved to be valuable to the British economy, facilitating Industrial Revolution. While there’s evidence that the empire hindered the progress, these factors do not outweigh the benefits that the empire brought. One could argue that while British Empire alone cannot explain the rise of the Industrial Revolution, its contribution was definitely one of the crucial factors in facilitating the development of the industrial sector.