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Ref:Crafts"BritishEcGrowth",M&Dch6,Jones"Agriculture and Industrial Revolution", Wrigley People...ch7,O'Brien
"Industrial revolution can be interpreted in terms of structural change in the economy." (Crafts p48) It is a fundamental change in the economy - resources are shifted from primary to secondary and tertiary industries.
It is the evidence today that countries with higher per capita national incomes have lower percentage of workers in agriculture. Same applies to Britain - before the industrial revolution the national income was low and the proportion of people working in agriculture high. When Britain started the industrialisation, its national income grew and proportion of people working in agriculture fell (although absolute numbers rose as population was growing). Britain has been different from European countries because the industrialisation started very early.
|
No. of people in primary sector |
Per capita income |
|
66.7% |
300$ |
|
52.4% |
700$ |
|
15.9% |
2300$ |
Source: Chenery-Syrquin
Transition to 900$ per capita means that industrial revolution has occurred- investment, manufacturing income and export has risen, population moves to urban from rural (rural population was 76% in 1520, only 36% in 1801 (Wrigley)), intensive and extensive use of capital, greater market orientation.
At the same time (in 1801-31) agricultural productivity rose 0.9% but in manufacturing only 0.3% a year. Productivity was 30% higher in 1801 compared to 1520(Wrigley).
|
UK |
European norm |
|
|
%age of males in agriculture |
28.6 |
54.9 |
|
%age of national income from agriculture |
24.9 |
37.2 |
So as seen although the proportion of people in agriculture fell, the proportion that agriculture provided to GDP was high. That implies risen efficiency in farming and the use of new technology, industrial change helped to maintain the output of agriculture while at the same time reducing the number of workers in that sector.
Agriculture helped to feed cities. One agricultural worker fed 2.7 non-agricultural in 1841, the figure was 1 in 1760.
As the agriculture declined, it made more labour available and although this was not immediate source of labour for industry, it definitely benefited the ind. rev. But the role of labour could not be that big as it only employed a quarter of population. Much of the labour was not classified as agricultural, but did the same task. A lot of labour remained immobile in south and it was not possible to switch from skilled farmer to skilled worker in industry.
Landowners also provided capital and entrepreneurship for firms by transport, housing etc. Often they just let industry to use their land.
Net flow of savings from agriculture was transmitted to industry. Or at least it should have. It has been calculated that only max 20% of the investment done in industry was financed by agriculture, which is very little. If investment would have been done from non-wage savings in agriculture, 29,4% of income should have been saved. But according to Jones overall propensity to save still rose during Ind. Rev. Agriculture lacked in producing fixed capital, it produced 32.6% of gross domestic fixed capital formation in 1761-70, only 12,8% in 1821-30.
Agriculture its-self attracted manufactures to invest to less profitable farming in 1760-1815. This caused the decline in woollen industry, Berkshire etc.
However there was no particular shortage of funds. Furthermore, industrial created the demand for banking service. Ultimately interest rates fell and mortgage became more available for farms too.
Agriculture helped, with some success to save on foreign exchange as there was less need to import food. When industrial revolution progressed, the import increased, but manufacturing export could easily compensate food import. Late 17th century was called "commercial revolution" as export and re-export developed trade and yielded income for Britain.
Changes definitely led to more international specialisation, as countries were producing more of the goods that they had comparative advantage in producing and the welfare must have increased.
Agriculture provided a growing market for industrial goods. The effect was not as great as it should have been, landowners did not promote new techniques normally, except maybe in less developed places, but their agents still did. The production in agriculture became more flexible with the use of machinery that enabled different farming methods in different years. This helped to reduce food shortages. The capital labour ratio was rising steadily in 18-19 century, although output was growing even quicker.
Agricultural structure was changing towards bigger farms after the French revolution. This did not lead to an increase in productivity unless better farming practices were used, otherwise only different social group received the income.
The increased income from farming benefited industry, because income elasticity of food is less than 1, more money is left for industrial goods when income rises.
Wars put heavier demand on agriculture, were because of advancing technology and forced farmers to use machines(treshing) to save labour.