What Caused the Industrial Revolution?

What caused the Industrial Revolution? Economist Deirdre McCloskey, in Bourgeois Dignity, has looked at the possible causes from every conceivable angle. This is the second book in a series (the first was Bourgeois Virtues, which sets out to answer this question:

What caused the spectacular growth in the economy from the late 18 century to the present day, going from an income of approximately $3 per day to $137 today?"

It’s even larger than that if you take into account the quality of goods and services available today versus then. One simple example is antibiotics. Simple infections that once killed incredibly wealthy people can now be cured with five dollars and a trip to the drugstore. Estimates put the growth in the quality of goods and services at a factor of 40 to 190—I believe even that is an understatement.

In 1875, the average family spent 74% of its income on food, clothing and shelter. In 1995 they spent 13%. This is one reason why my colleague Ed Kless says he’d rather be poor anywhere in the world today than in 1800.

This is an incredible accomplishment, and historians, economists, sociologists, poets, along with many others, have offered a plethora of explanations to explain it. McCloskey explores them all, but she reaches a totally different conclusion than most economists. In fact, the subtitle of the book is “Why economics can’t explain the modern world.”

All Transformation is Linguistic

McCloskey believes that economic change depends on what people believe—their talk, their ethics, and their ideas, especially as related to dignity and innovation. It’s what Alexis de Tocqueville called “habits of the mind.”

Yet “ideas about ideas are unscientific” and ignored by economists who naturally gravitate towards materialist explanations for growth and dynamism. McCloskey writes:

To be able to detect the dark matter we will need a new, more idea-oriented economics, which would admit for example that language shapes an economy."

One of my favorite lines discovered recently is Werner Erhard’s “All transformation is linguistic. If we want to change our culture, we need to change our conversation.”

McCloskey’s argument is this statement on steroids. In other words, our conversations about dignity and liberty changed, launching the Industrial Revolution. Here’s how McCloskey expresses this phenomena:

A big change in the common opinion about markets and innovation, I claim, caused the Industrial Revolution, and then the modern world. The change occurred during the seventeenth and eighteenth centuries in north-western Europe. More or less suddenly the Dutch and British and then the Americans and the French began talking about the middle class, high or low—the “bourgeoisie”—as though it were dignified and free. The result was modern economic growth.

"That is, ideas, or “rhetoric,” enriched us. The cause, in other words, was language, that most human of our accomplishments."

McCloskey here is using the word rhetoric in its ancient sense, “the means of [unforced] persuasion,” which includes logic and metaphor, fact and story. She’s written many books on this topic, criticizing economists for not telling better stories, two of which I thoroughly enjoyed: The Rhetoric of Economics, and If You’re So Smart: The Narrative of Economic Expertise.

In the spirit of words being crucial, she’s attempting to rid the world of the dreaded “Capitalism,” preferring “Innovation” instead to explain the wonders of a free market.

Rhetoric Over Matter

Most causes of the Industrial Revolution rely on a materialist explanation, from natural resources and climate to geography, transportation and foreign trade. Yet in chapter after chapter, McCloskey definitively falsifies the following list of reasons often cited as the cause of the Industrial Revolution:

• The Weber Thesis—The Protestant (particularly Calvinism) ethic
• Michael Porter’s thesis of competitive strategy of nations (this is deftly ripped apart by McCloskey, and R.I.P. as far as I’m concerned)
• Rise of rationality
• The exchange of ideas. Ideas having sex, in Matt Ridley’s phrase from The Rational Optimist. It helps, but it’s simply not large enough to have caused the Industrial Revolution
• Education. In fact, too much education can impair growth. An interesting discussion is provided by McCloskey, and in Thomas Sowell’s work as well.
• Thrift (savings accumulation)
• Investment (capital accumulation)
• Economies of scale
• Division of labor
• Greed
• Expropriation or imperialism
• Human capital. Not that this is unimportant, but McCloskey would argue that social capital—specifically, our conversations and beliefs—are more important
• Transportation
• Foreign trade. This simply reshuffles goods and services, it doesn’t discover or lead to innovation
• Geography. Jared Diamond’s thesis is thoroughly shot down
• Natural resources. McCloskey believes there’s no such thing as a natural resource, except the imagination of man
• Unions
• Eugenics
• Institutions. No doubt important, but no way did they cause the spectacular growth, and mostly were formed afterwards
• Property rights. Again, they are important, but they existed in all sorts of places prior to Great Britain (China, e.g.)
• Science. This is more a result, not a cause

Thankfully, she also takes down the happiness literature that’s beginning to sprout up in economics, which is just so much hokum.

One discussion that runs through the narrative is the “California School”—why so many scholars (who tend to be disproportionately located in California universities) believe that numerous discoveries were originally from China, giving error to the idea of European exceptionalism. McCloskey is more and more convinced of the findings of this school of thought, and so will you after reading about it.

In the final chapter, she summarizes the “Bourgeois Deal”:

Give a woman some rice, and you save her for a day. Give a man some seed and you save him for a year. That’s the plan of investment in capital, tried for decades in foreign aid, without much success. But give a man and a woman the liberty to innovate, and persuade them to admire enterprise and to cultivate the bourgeois virtues, and you save them both for a long life of wide scope, and for successively wider lives for their children and their grandchildren, too. That’s the Bourgeois Deal, which paid off in the Age of Innovation.

I find McCloskey’s work compelling, and it certainly has changed my worldview on the causes of the Industrial Revolution. It truly gives weight to the saying “all transformation is linguistic.”

Photo: Csehak Szabolcs / Shutterstock