Why the Industrial Revolution Started in 18th Century Britain, Not China, from the Perspective of Globalization

Li Zhang ()
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Li Zhang: Department of Economics, School of Humanities and Social Sciences, Beihang University, Beijing 100191, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2021, vol. 16, issue 1, 124-169

Abstract: The research examines the role of market expansion and international labor division in the British Industrial Revolution from the perspective of globalization. The research shows that British cotton textile output in pieces grew 275 times from the 1770s to the mid-1850s and documents that such growth would never have happened without a vast overseas market for the supply of raw cotton and the sale of products. The paper argues that the continuous and dramatic expansion of overseas markets allowed the British cotton industry to expand greatly without hitting the ceiling of marginal returns, leading not only to the great expansion of production, but also to technological and institutional innovations, and that international labor division made it possible for the industry to import ample amounts of raw cotton and export large amounts of cotton textiles. In contrast, foreign demand for Chinese cotton textiles increased significantly in the late 18th and early 19th centuries, but accounted for only 0.3% of production capacity, which was too little to lift the law of diminishing marginal returns and to induce either technological or institutional changes. As a result, only Smithian growths could be achieved through optimal resource utilization and specialization in production.

Keywords: market expansion; international labor division; Industrial Revolution; Smithian growth; Britain; China; India; US; raw cotton; cotton textile (search for similar items in EconPapers)
JEL-codes: B15 B25 N00 N10 N40 N50 N70 (search for similar items in EconPapers)
Date: 2021
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