Industrial Revolution · CHAPTER 11 ·
Great Divergence and global trade
Chapter 11 of The Industrial Revolution, 1750–1914: “A Global Transformation”
After 1850 steamships, the telegraph and the Suez Canal, opened in 1869, joined the world into one economy organised around the industrial countries. Britain opened markets through what historians call the imperialism of free trade, while most of Asia and Africa became colonies or were bound by unequal treaties.
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The map above is the world of The industrial world, 1913 — The first global economy.
Every state on the map that year: The world in 1914 · Europe in 1914.
Part of IB History: The Industrial Revolution →
SHORT EXPLANATION
By 1870 a London merchant could send an order to Bombay in minutes rather than wait weeks for a ship. Steamships ran to timetables, and the Suez Canal, opened in 1869, shortened the sea route from Britain to India by about 40 per cent. The same connections carried government orders for troops as well as merchants’ orders for cotton.
The resulting world economy had a particular division of labor. Industrial countries sold manufactures and bought raw materials. Much of Asia and Africa was ruled as colonies, shown in tan, or opened through unequal treaties, shown in blue. These agreements obliged weaker states to keep import taxes low and grant foreigners legal privileges; like a contract signed under threat, their terms were hard to refuse. Historians call this the first globalisation. Like globalisation since the 1990s, it joined markets across the world, but gunboats and empire enforced much of the earlier system.
Those connections could destroy a livelihood as well as create one. Machine-made cloth displaced the exports of Indian handloom weavers, especially around Dhaka. The loss of a region’s industry is called deindustrialisation; the decline of steel towns in the American Rust Belt after the 1970s offers a later comparison. Indian merchants nevertheless began building their own mills at Bombay in 1854.
The demand for rubber brought coercion on a vast scale in the Congo Free State, personally owned by King Leopold II of Belgium. Agents took hostages and used violence to make villagers gather rubber for tyres and cables. Estimates of the population loss range from about one to ten million; the map marks it as a memorial. By 1900 Europe and the United States made about 85 per cent of the world’s manufactured goods. The relatively modest difference between the industrial West and the rest in 1750 had become the Great Divergence.
The full story
A voyage between London and Bombay once required a long passage around Africa. The opening of the Suez Canal on 17 November 1869 reduced the route from about 10,700 to 6,300 nautical miles. Steam made the shorter route practical: from the 1860s iron steamships with compound engines used steam twice to save coal, and coaling stations such as Singapore supplied them along the way. Ships could make long journeys more cheaply and reliably.
Information moved faster than ships. A working Atlantic cable followed in 1866, and in 1870 a line from Porthcurno in Cornwall to Bombay brought messages that had taken weeks by mail in minutes. London investors could manage mines and railways on other continents. As the prices of grain, cotton and cloth converged across oceans, a producer’s competitors could be on the far side of the world.
What kind of economy did these routes connect? Industrial countries exported manufactured goods and capital, while other regions supplied food and raw materials. The terms were often imposed. John Gallagher and Ronald Robinson called Britain’s approach the imperialism of free trade: it opened markets with treaties and gunboats where possible, resorting to conquest where necessary. Powerful states today also use sanctions and loans to influence weaker ones.
China tried to stop British merchants selling Indian opium. Britain fought the Opium War and forced Chinese ports open in 1842. At the treaty port of Shanghai, foreigners lived and traded under their own laws; it became China’s first industrial city. Treaties in 1838–41 also forced the Ottoman Empire and Egypt to lower tariffs, or import taxes. That ended the effort of Muhammad Ali, Egypt’s ruler from 1805 to 1848, to build state cotton mills.
The cotton famine of 1861–65 exposed the reach of these connections. The American Civil War cut off Southern cotton, leaving Lancashire mills idle. Growers in India and Egypt prospered as cotton left through Bombay and Alexandria, but their boom collapsed when the war ended. A conflict in America could ruin spinners in Lancashire while enriching farmers in Gujarat and the Nile delta.
Competition had lasting effects in Bengal. Lancashire’s machine-made cloth destroyed the export trade of its handloom weavers, and Dhaka, which may have had 150,000 or more inhabitants around 1800, had fallen to about 50,000 by 1840. Yet India’s industrial story did not end with the weavers’ losses. Entrepreneurs, many of them Parsis descended from religious refugees from Persia, began building cotton mills at Bombay in 1854. By 1914 India had about 260 to 270 mills.
In central Africa, the spread of the air-filled tyre increased demand for rubber. King Leopold II of Belgium personally owned the Congo Free State, whose agents forced villagers to gather wild rubber through hostage-taking, mutilation and killing. Estimates of the population loss remain disputed, from about one million to perhaps ten million people.
The scale of the change in manufacturing is striking. Europe and the United States made about 23 per cent of the world’s manufactured goods in 1750 and about 85 per cent by 1900. Historians call this widening gap the Great Divergence. The connections that brought distant producers into one economy also left industrial production distributed very unevenly.
FULL EXPLANATION
Did Britain deindustrialise India?
Indian nationalists argued that British rule had drained India’s wealth and destroyed its industries. Dadabhai Naoroji made the case in Poverty and Un-British Rule in India (1901), as did R. C. Dutt in his economic histories. Amiya Kumar Bagchi later found evidence in Bihar, in the Ganges valley: the share of the population dependent on industry fell from about 18.6 per cent in surveys of 1809–13 to about 8.5 per cent in 1901. Spinners and weavers accounted for most of the loss. That decline did not mean that every form of hand weaving disappeared. Morris D. Morris and later Tirthankar Roy questioned the scale of the collapse. Roy shows weavers adapting to coarse cloth and specialized fabrics that machines could not easily copy. Their survival matters to the account, even while the losses in places such as Bihar remain substantial. David Clingingsmith and Jeffrey Williamson (2008) proposed two stages. The Mughal empire, which had ruled most of India since the 1500s, broke up, and eighteenth-century droughts helped raise food prices and wages. Indian textiles were becoming less competitive before Lancashire’s machines arrived; British factory productivity then completed the pressure. Colonial choices also mattered: Britain kept import taxes low and, in 1896, taxed Indian mill cloth to match the duty on British imports. The debate now asks how decline was distributed as well as why it occurred.
Measuring the Great Divergence
A country’s share of manufacturing and its income per person tell us different things. A large population may produce a great deal of the world’s output while its people remain poor on average. Both measures have been reconstructed to assess the Great Divergence, and both carry wide margins of error. Paul Bairoch estimated manufacturing shares. China accounted for about 33 per cent and the Indian subcontinent about 25 per cent in 1750; by 1900 their shares were about 6 and under 2 per cent. Britain rose from about 2 per cent to a peak of about 23 per cent in 1880. Angus Maddison’s estimates of income per person suggest that western Europe was already richer than China and India by 1820 and several times richer by 1913. The date at which the gap opened also affects its explanation. Kenneth Pomeranz, Roy Bin Wong and Jack Goldstone of the so-called California school—named for universities where several of its members taught—place divergence after 1750 or even 1800, emphasizing coal and colonies. David Landes and Stephen Broadberry find wage and productivity gaps well before 1750 and emphasize culture and institutions such as laws and property rights. A later divergence directs attention toward luck and circumstance; an earlier one suggests deeper differences between societies.
Free trade, gunboats and informal empire
Formal colonial rule was only one way to exercise power abroad. John Gallagher and Ronald Robinson argued in 1953 that British expansion was continuous: Britain preferred trade under informal control where possible and imposed rule where necessary. Treaties, debt and gunboats gave it influence over independent states in much of Latin America, China and the Ottoman world. The atlas colors territories opened by force or treaty blue. The arrangements differed. Robert Hart, a Briton, ran China’s maritime customs service, which taxed foreign trade, from 1863. From 1881 European lenders controlled part of Ottoman revenue through the Ottoman Public Debt Administration. Egypt’s debts reached about £91 million by 1876; Anglo-French financial control came first, followed by British occupation in 1882. Historians have questioned both the reach and the motive of this expansion. D. C. M. Platt argued that the British government rarely intervened for traders in Latin America. In British Imperialism (1993), P. J. Cain and A. G. Hopkins instead located the main drive in finance and services in the City of London, the capital’s financial district. They called this gentlemanly capitalism. The difference matters: empire might serve industry’s need for markets, or bankers and investors whose interests differed from those of the mills.
Key places on the map
On this day
Why it happened
Steam and cable shrank distance. Distance had once shielded local producers from some competition because moving goods and news was expensive. Steam and cable reduced that protection. Compound engines used steam twice and saved coal; iron and later steel hulls made ships larger, while stations from Gibraltar to Singapore supplied fuel. Undersea telegraph cables were insulated with gutta-percha, latex from Malayan trees. Grain and cotton could now be traded profitably across oceans, extending worldwide a change railways had brought to Britain.
Industry demanded raw materials. Factories needed supplies beyond those available locally. Cotton, jute, wool, rubber, copper, tin, palm oil and grain came from distant regions. West African palm oil supplied lubricants and soap for industrial Europe, Bengal jute made sacks for the world’s grain, and Congo and Amazon rubber went into tyres. Demand drew these regions into the industrial economy as suppliers, often with little power over the terms.
Free trade backed by force. Free trade meant commerce with few barriers, but markets could be opened by force. Britain fought the Opium War after China tried to stop British opium sales, opening China in 1842. Treaties imposed low import taxes on the Ottoman Empire, Egypt, Persia, Siam (now Thailand) and Japan; India’s colonial government kept taxes on British imports low. Gallagher and Robinson called the combination of trade and treaties, backed where necessary by conquest, the imperialism of free trade.
Capital from London. British investors held about £4 billion in overseas assets by 1914. Much went into railways, ports, mines and government bonds, or loans to governments. In India the colonial government guaranteed railway companies a return of about five per cent, paid from Indian taxes, so British investors bore little risk. Capital followed profit and political security into routes for exporting raw materials; relatively few factories were built that might compete with Britain’s.
THE TURNING POINT
The Suez Canal, 17 November 1869. The canal opened on 17 November 1869 and shortened the voyage between Britain and India by about 40 per cent. Its narrow passage and the Red Sea winds made it difficult for sailing ships, so the new route particularly favored steamships. Within a year the telegraph to Bombay ran alongside it. Britain’s stake in this connection grew: it bought the Egyptian ruler’s shares in 1875 and occupied Egypt in 1882. The route that joined markets had become a focus of political control.
What it changed
Nationalism grows from economic grievance. The loss of Indian wealth became an argument for political change. Dadabhai Naoroji charged that British rule drained the country, and the Indian National Congress, founded in 1885 as a party of educated Indians and later a leader of the independence movement, took up the claim. In 1905 Bengal’s swadeshi movement—“of one’s own country”—urged Indians to buy Indian goods and boycott British cloth. A product associated with economic loss became a means of resistance.
A world of migrants. Steam shortened a voyage that had taken six weeks under sail to about ten days, making passage cheaper. Tens of millions of Europeans crossed the Atlantic; Indian and Chinese workers traveled to plantations and mines across the tropics, many under indenture, contracts binding them to employers for years. The epilogue’s arrows trace these journeys and ask who gained and who left home under pressure from debt and coercion. Labor moved where capital sought it, changing the populations of whole continents.
The Great Divergence hardens. By 1900 Europe and the United States made about 85 per cent of manufactured goods, and the income gap between the industrial core and much of Asia and Africa had grown enormously. This Great Divergence became embedded in the world economy. Historians dispute how much industrial competition and empire each contributed. A difference that had been modest in 1750 now separated manufacturing countries from many suppliers; it would take a century to begin closing.
DISCUSSION QUESTION — Was the impoverishment of regions such as India the result of industrial competition or of imperial rule?
Lancashire’s machines made cloth cheaply enough to take Bengal weavers’ export markets. Clingingsmith and Williamson argue that India’s share of world manufacturing would have fallen steeply even under Indian rule: droughts and the fragmentation of the Mughal empire, which had ruled most of India, had already raised food prices and wages. Competition presented a serious challenge. Imperial rule affected the choices available in response. The colonial government kept taxes on British imports low, taxed Indian mill cloth from 1896 and paid guaranteed returns to British railway investors from Indian taxes. It also funded an army and administration that nationalists such as Naoroji called a drain. Tirthankar Roy warns against treating the result as total ruin: hand weaving adapted and Indian-owned mills grew. Industrial technology made a decline in Indian hand industry likely, while empire removed tools such as import taxes and an investing state that Germany, the United States and Japan used to industrialize. Competition posed the problem; political power shaped who could answer it.
An interesting fact
Nellie Bly’s journey around the world in 1889–90 took 72 days. The American journalist beat Phileas Fogg’s fictional record in Jules Verne’s Around the World in Eighty Days (1872), following routes visible on this map: steamers through the Suez Canal to Ceylon (now Sri Lanka), Singapore and Hong Kong, a Pacific crossing to San Francisco, and a train across the United States. Verne’s imagined circuit depended on new infrastructure too: the canal opened in 1869, and a railway first crossed India from Bombay to Calcutta in 1870.
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