[PEN-L:11654] Re: Role of Total Foreign Trade (Deane!!)

["Mathew Forstater" <forstate@xxxxxxxx>]

Darity on Deane:

Much attention has been given to the idea that the industrial revolution was
primarily characterized not by an increase in the available factors of
production in Britain but by increased productivity of the available
factors....But what prompted such a rapid rate of technical change?  For
Smith, it was the widening of markets that stimulated more efficient
organization of labor and the development of new machinery [see my previous
posts summarizing Smith, Kaldor, mentioning Allyn Young, polarisation
hypothesis, etc.].  The colonies in the Americas could play a prominent role
in sustaining "the extension of the market."  Phyllis Deane (1965: 51-68)
has offered an intensely Smith-like reading of the industrial revolution
premised on exactly this chain of reasoning [note 7 -- Deane (1965: 51)
echoing Smith, wrote: "One of the ways--the commonest way perhaps--by which
an economy can develop from a pre-industrial state to an industrial state is
to exploit the opportunities open to it from international trade.  By
selling goods abroad which are in surplus at home [my--mat forstater's note:
this surplus may be the result of joint production, so no reason for excess
supply to only be temporary.  the domestic production of wool might be
determined by the demand for mutton and so have no necessary relation to the
domestic demand for wool. this is smith's "vent-for surplus" theory, see
Heinz Kurz] in return for goods that are scarce at home, it is possible both
to widen the range of goods and services coming on to the home-market and to
increase the value of domestic output, and so to improve the national
standard of living both qualitatively and quantitatively.  In widening the
potential market for domestic producers, foreign trade encourages them to
specialize, to develop special skills and techniques of economic
organization, and to reap the economics of large-scale production.  This
broadening of their economic horizons constitutes an incentive to greater
productive activity and helps to break up the economic inertia which so
often inhibits material progress."].  Since there were serious limitations
in the prospects for growth in continental demand for British products, the
development of the West Indian islands and North America was crucial.

Deane (ibid.: 55) strssed, inparticular, the immense growth in British
reexports of colonial produce to the rest of Europe: "By the 1790's Europe
was absorbing between 80 and 90 per cent of Britain's re-exports, and the
West Indies and the Far East were supplying about half of Britain's imports"
to meet the rapidly expanding "European demand for the commodities which
could not be produced in temperate climates."O'Brien (1982: 14) contends
that the most important trading partner for Western Europe as a whole was
the Baltic region (Russia, Poland, Prussia, Estonia, and Scandinavia), a
source of "grain, timber, and other intermediate goods for shipbuilding."
Deane (1965: 53) said that trade with that region could not have been as
extensive for Britain in particular without reexports of tropical produce.
[note 8 -- Deane (1965: 53-54) observed: "The immense importance of the
tropical commodities lay in the fact that they increased British purchasing
power on the continent of Europe.  Britain needed her European imports for
vital productive purposes and not merely to meet the upper-class demand for
wine and brandy.  She needed foreign timber, pitch, and hemp for her ships
and buildings, high-grade bar iron for her metal trade, raw and thrown silk
for her textile trades.  Her industrial expansion along traditional lines
was severely restricted by the fact that the demand for woollen products was
inelastic and already near [the] saturation point in traditional markets.
Had it not been for the tropical products with their elastic demand and
growing markets in temperate regions it would have been difficult to expand
British trade with Europe.
    "The tropical products also had to be paid for, of course, and it was
not easy to buy them with woollen manufactures.  The tropical demand for
woollen goods was naturally limited by climatic considerations, and there
were no other British goods with a special advantage in most markets.  In
Africa, for example, the demand for British manufactures was further
restricted by low incomes, in China by the fact that local manufactures were
often as good and always a great deal cheaper.  In the end the solution to
the numerous problems of matching demand and supply in the international
market was found by developing a complex world-wide network of trading
transactions centered on London.  In this network the West Indian islands,
administered by a British plantation *elite* on the basis of a slave
society, constituted the most valuable and intimate link.  Weapons,
hardware, spirits from Britain and calicoes from India were shipped to West
Africa and exchanged for slaves, ivory, and gold.  The slaves were sold in
the West Indies for sugar, dyestuffs, mahogany, logwood, tobacco, and raw
cotton.  The gold and ivory was shipped to the East and Near East for teas,
silks, calicoes, coffee, and spices.  The tropical goods were sold in Europe
for Baltic timber, hemp, pitch and tar (all essential naval stores), Swedish
and Russian iron; and, in the fourth quarter of the century, they paid for
the foreign grain which was vital when the harvest failed and which was
regularly required in most years even when the harvest had not failed."

more to come..............