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Gabriel Söderberg, Department of Economic History , Uppsala University

The Industrial Revolution: Birth of Modern Economic Growth and Skepticism Towards its Sustainability. Gabriel Söderberg, Department of Economic History , Uppsala University. This lecture. T he Industrial Revolution: - What was its core ? - How did it change the world ?

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Gabriel Söderberg, Department of Economic History , Uppsala University

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  1. The Industrial Revolution: Birthof Modern EconomicGrowth and Skepticism TowardsitsSustainability Gabriel Söderberg, DepartmentofEconomicHistory, Uppsala University

  2. Thislecture • The Industrial Revolution: • - Whatwasitscore? • - Howdid it change the world? • - Howdoes it affectus? • Skepticism towardsitssustainability: • - Early proponents • - End of skepticism during 20th century and returnaround the 1970s • - Relevanceofquestiontoday – withyourhelp

  3. Whatwas the Industrial Revolution? • England 1760-1830 • Replacementoforganicenergy (wood, animals, human work), water and windwith fossil energy • Replacementof human workwithmachines • Enormousincrease in productivity • Enormousincrese in useofnaturalresources

  4. Three Patterns ofDevelopment

  5. Breaking the Energy Barrier • Factoriesclosetoenergysources: water, wood lands • Transitionto fossil fuelthrough a numberoftechnological innovations • Expensivelabor incentives for machines • Problems withcoal mining: water in tunnels  steamengine for betterpumping  morecoal • Coal: portable, extremelycompact factoriescan be set upanywhere • Coal as energy, iron as material  better transport  increasedworldtrade

  6. ”The Dismal Science” Thomas Malthus 1766-1834 David Ricardo 1772-1823

  7. Malthus • Humans must havefood + foodsupplyincreasesslowly + humans cannotcontroltheirreproduction = Population willgrow faster thanfoodsupply • Increasedfoodsupplyincreasedpopulationreturn of misery optimists are wrong • Constrainingfactor: agricultural technology

  8. Ricardo • Growth not possible in the longrun – stationarystate • Diminishingreturn of the soilmoreexpensivefoodhigherwages less profits less investmentsend of growth • Twoways to counter this: technology and freetrade - technology not to be trustedfreetrade as ideal partlyexplained be technology pessimism!!

  9. World GDP/Capita 1900-2000

  10. ”The Golden Age” 1945-1970 • Time of great optimism, reduction of inequality, increase in general welfare for the masses, large and stableeconomicgrowth • Technology and science widely accepted as the driving force • The optimism of the Enlightenment and modernity is mixed witheconomictheory

  11. Post-War Technology Optimism Simon Kuznets 1901-1985 Robert Solow 1924-

  12. Technology and science important… • The reason for economicgrowthis:”…thevastincrease in the stock of usefulknowledge…the underlying capacity of the knowledge transmitted to control production processes, the emergence of experimental science and the empirical outlook which, building upon past attainments of mankind, provided the indispensible basis for modern economic growth” – Kuznets 1965

  13. …but taken for granted. • The Solowmodel (1956): Y=A+K+L  A=Y-K-L  technologicaldevelopment is the thingleft! • The mostimportantfactor, but is leftunexplained in the model! • Technologicaldevelopment is taken for granted, ”a gift” from public funding of science

  14. World GDP/Capita 1900-2000

  15. Worsetimes… • 1970s: oilcrisis, stagnantgrowth, ideological and theoreticalshift • Crisis of values: growthquestioned, environmental movementskepticalabouteternalgrowth

  16. Club of Romefounded 1968 • ”Limits to Growth” (1972) – population growth and consumptionneeds to be reduced; sells in 12 million copies, in 30 languages • Solow’sCriticism: ” "The authors load their case by letting some things grow exponentially and others not. Population, capital and pollution grow exponentially in all models, but technologies for expanding resources and controlling pollution are permitted to grow, if at all, only in discrete increments."

  17. World GDP/Capita 1900-2000

  18. Returnofgrowth (pre-2008) • Pro market shift in ideology and economictheory • Financialderegulations, innovations • Increasedglobalization • Chineseindustrialization cheapconsumergoods

  19. Present day • Financialcrisis part of end ofgrowth? • - Yes: No growthopportunity capital goes intofinancial assets buildingbubbles • -No: Depressions natural part ofindustrialsociety, followed by new growth • Yes: Environmental problems and depletionofoilwill stop growth • No: Science and technologycloseto major breakthroughs

  20.  Close todebatearound 1800 Questions and comments?

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