[PEN-L:11652] Role of Total Foreign Trade

["Ricardo Duchesne" <RDUCHESN@xxxxxxxx>]

In contrast to anyone else here, I have put together data that do not
favour my interpretation, which is/should be the true mark of all
scientific enquiry.  Science does not consist in the simple gathering of data
in justification of one's pre-determined views, but in looking for data that
may falsify one's interpretation.

Last post  I summarized some of  the basic arguments about the "vital"
role of total trade in the industrial revolution. Now, in addition to
the points already presented against the primary role of the colonial
trade, I would like to put forward the counter arguments, which show
that foreign trade was an important component of Britain's
industrialization, but not the "vital" sector.

If we consider the ratios of exports to gross national product for
the British economy over the 18th century, we have the following
numbers: the proportion of exports relative to GNP was
about 8.4% in 1700, growing  to 14.6% in 1760, falling to 9.4% in 1780
and then increasing to about 15.7% in 1801 (Engerman, 1994).
(Remember these numbers are on total exports - not the considerably smaller
colonial exports)

Now, there is indeed a rapid rise in the ratio of exports to GNP in
the period 1780 to 1800. Moreover, considering that most exports were
manufactured goods, the shares  of exports in industrial output were
higher than the shares of exports in national output. However, most of
these exports were textiles of cotton, wool and linen, which amounted
to almost 3/4 of  the value of exports around 1800, with cotton
textiles increasingly taking the lead. And cotton represented only 1% of
industrial production in 1770, and only 8% in 1815.

Moreover, these stats would seem to say that removing the export trade, say in
1801, would have resulted in a lowering of the national income by 15.7%.
Yet, this argument forgets that, if resources had not been used in the
foreign trade sector, they would have found employment elsewhere.
This is just a simple fact about the way the market operates;
every activity has a substitute (Thomas& McCloskey, 1981; Mokyr, 1985).
If they did  not export cotton - keeping in mind, too, that at lower prices
the home market would have consumed some of what was  exported -
the British could have engaged in another economic
activity, like paving new roads, constructing new buildings, or
making beer. As McCloskey reminds us, "exports are not the same thing as
new income. They are new markets, not new income" (1994).

All this talk about whether trade was a necessary or a sufficient
condition is meaningless unless we make a distinction between
slave profits, the colonial trade, and total foreign trade. My
conclusion, given the findings and arguments I have forwarded so far,
is that *slave profits*  played an insignificant role. Not only were such
profits *not* a sufficient cause; they were not necessary either:
Europe would have industrialized anyways.

Now, the *colonial trade* played a statistically moderate, not too
significant, role. Europe would also have industrialized  without it -
although at a lower rate, and at a later date.

Total foreign trade was significant but was not the major cause.