Originally posted at Prometheus

Robert Allen, an Oxford professor, has a new book out with Cambridge University Press titled "The British Industrial Revolution in Global Perspective." Allen has a precis up over at VoxEU which provokes a few thoughts about efforts to spark a new green global economy.

Allen argues that a combination of factors led to the industrial revolution, among them international trade associated with the British Empire, an educated and wealthy populace which created a demand for the fruits of technology as well as the skills necessary to produce them, and, crucially, cheap energy. Allen provides the following graph, showing a comparison of energy costs across Europe in the early 1700s.

Allen writes:

The famous inventions of the Industrial Revolution were responses to the high wages and cheap energy of the British economy. These inventions also substituted capital and energy for labour. The steam engine increased the use of capital and coal to raise output per worker. The cotton mill used machines to raise labour productivity in spinning and weaving. New technologies of iron making substituted cheap coal for expensive charcoal and mechanised production to increase output per worker.

These technologies eventually revolutionised the world, but at the outset they were barely profitable in Britain, and their commercial success depended on increasing the use of inputs that were relatively cheap in Britain. In other countries, where wages were lower and energy more expensive, it did not pay to use technology that reduced employment and increased the consumption of fuel.

The French government was very active in trying to promote advanced British technology in the eighteenth century, but its efforts failed since the British techniques were not cost effective at French prices. James Hargreaves perfected the spinning jenny, the first machine that successfully spun cotton, in the late 1760s. In 1771, John Holker, an English Jacobite who held the post of Inspector General of Foreign Manufactures, spirited a jenny into France. Demonstration models were made, but the jenny was only installed in large, state supported workshops. By the late 1780s, over 20,000 jennies were used in England and only 900 in France. Likewise, the French government sponsored the construction of an English style iron works (including four coke blast furnaces) in Burgundy in the 1780s. The raw materials were adequate, the enterprise was well capitalised, and they hired outstanding and experienced English engineers to oversee the project. Yet it was a commercial flop because coal was too expensive in France.

Since the technologies of the Industrial Revolution were only profitable to adopt in Britain, that was also the only country where it paid to invent them. The ideas embodied in the breakthrough technologies were simple; the difficult problem was the engineering challenge of making them work. Responding to that challenged required research and development, which emerged as an important business practice in the eighteenth century. It was accompanied by the appearance of venture capitalists to finance the R&D and a reliance on patents to recoup the benefits of successful development. The Industrial Revolution was invented in Britain in the eighteenth century because that was where it paid to invent it.

The Economist reviews Allen's new book this week, writing that "when governments from America to Japan are reinventing industrial policy with each off-the-cuff bail-out, this study offers some useful reminders." Cheap energy and ample wealth as the mothers of invention appear to be among them. The importance of R&D in creating both should not be overlooked either.