The British Economy in the Eighteenth Century

The British economy expanded significantly in the eighteenth century, particularly with the development of factory manufacturing. By the middle of the century, it had begun to alter the northern English landscape. "From the Establishment of Manufacturers, we see Hamlets swell into Villages, and Villages into Towns," exclaimed one gentleman in the 1770s. The production of manufactured goods doubled in the second half of the century. Cotton manufacturing led the way: from 1750 to 1770, British cotton exports doubled. The production of iron followed in importance, along with wool and woolen fabrics, linen, silk, copper, paper, cutlery, and the booming building trades. Coal was substituted for wood as fuel.

Despite its relatively small size, Britain had significant economic advantages over the other nations of Europe, helping to explain why the manufacturing revolution began in Britain. Unlike the German or Italian states, Britain was unified politically. People living in England spoke basically the same language. France and the Italian and German states still had internal tariffs that made trade more costly, whereas in Britain there were no internal tariffs once the union between England and Scotland had been achieved in 1707, creating Great Britain. The system of weights and measures in Britain had largely been standardized. Indeed, Great Britain was by far the wealthiest nation in the world. Its colonies in faraway parts of the world provided raw materials for manufacturing and markets for goods produced in Britain; for example, the amount of raw cotton imported from India increased by twenty times from 1750 to 1800.

England's stable banking and credit arrangements also contributed to England's advantage by facilitating the reinvestment of agricultural and commercial profits in manufacturing. London's banks, particularly the giant Bank of England, were profitable and respected. Merchants and manufacturers accepted paper money and written orders for payment, or bills of exchange, with confidence. Gentry, or those who owned land, invested in overseas trade expeditions and in manufacturing without the reticence of landowners on the European continent. London's financial market could provide information twice a week on what investments were worth in Amsterdam and Paris. Joint-stock companies, which had begun in the late seventeenth century, offered investors shares in their businesses together with limited personal liability, which meant that in the case of a company's financial disaster, individual investors would be liable only to the extent of their investments.

Expanded demand for manufactured goods led to a dramatic improvement in Britain's transportation systems. A new process of road surfacing—using small pieces of stone mixed with tar—improved travel on the main routes. Major roads were extended and improved, as investors formed turnpike trusts, repairing the highways and turning a profit by charging a toll to travelers using them. In 1700 it took 50 hours to travel the 180 kilometers from Norwich to London by coach; by 1800 the journey could be achieved in 19 hours. Moreover, England's water transportation was unmatched in Europe, a gift of nature. Rich sources of coal and iron ore lay near waterways and could be transported with relative ease along the coast. No part of England stands more than 70 miles from the sea. Navigable rivers and canals built in the middle decades of the century also facilitated the transportation of raw materials and manufactured goods.

Finally, the British government offered businesspeople more assistance than any Continental rivals could anticipate from their own governments. The powerful Royal Navy protected the merchant fleet, which tripled during the first three-quarters of the century. Laws forced foreign merchants to ship export goods to Britain in British ships. Bowing to pressure from woolens producers, the British government in 1700 had imposed protective tariffs on imported silk and calico (printed cotton fabric). Agreements with the Dutch Republic and France in the late 1780s reduced trade tariffs with those states, which helped British exports. Furthermore, the political influence of businesspeople kept taxes low.

Yet the British government rarely interfered in operations of the economy in ways that businesses might have considered intrusive. Adam Smith (1723-1790), who emerged as the most important economic theorist of the time, rejected prevailing theories that prescribed more government control of the economy, instead extolling economic liberalism—that is, relatively little government intervention.