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I want to know the justification for the posture that "free trade/liberalism caused the industrial revolution".

I would like to get arguments, books and video conferences about it.

I was told that the industrial revolution happened mainly in Britain, but it could not be caused by free markets because Britain "was protectionist", and yet it had ample smuggling with Netherlands.

That's an example of shallow arguments, and I would like to read better ones.

1muflon1
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jipome
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    Various commentators have pointed out the inequities of the British Empire, but industrialisation was largely in the UK. There the inhabitants (we still aren't citizens) had no voting rights - that came in 1918 for men and 1928 for women. Industrialisation fed on a captive labour market of people who had been thrown off the land centuries earlier by various Enclosures. To be clear it was largely worse in the Empire than in the UK, but the inclusive political institutions didn't include democracy, – Nick Greenwood Aug 01 '21 at 11:26
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    I am rolling back the edit, please note vandalization of questions that have answers is against the spirit of stack exchange – 1muflon1 Aug 25 '21 at 09:19
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    @1muflon1 Your answer as socialist propaganda? lol – Giskard Aug 25 '21 at 09:42
  • @Giskard apparently Fox News managed to convince people that mere existence of some government backed up institutions is socialism now – 1muflon1 Aug 25 '21 at 09:57

2 Answers2

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TL;DR

It is fair to say that free markets played a non-trivial role in industrialization and that protectionism in Britain hindered industrialization. However, the Industrial Revolution was caused by many other factors than having relatively free markets. It required Britain to generally adopt set of inclusive institution (of which relatively free markets are just one example), and it also required some historic luck.

Full Answer

In economics, it is accepted that countries with good 'inclusive' institutions, such as strong property rights, are more productive and able to develop faster (or even develop at all) than countries with bad 'extractive' institutions, such as forced labor (see Acemoglu 2008, Acemoglu & Robinson 2000a, 2000b, 2001, 2006, 2008; Olson 1984, Bates 1981, 1983, 1989 and sources cited therein)

An industrialization, is just a period of a rapid economic development where the share of national income from manufacturing also increases (Bagchi 2016), so it requires that country predominantly accept inclusive institutions which are thought to be the main precondition for an economic development.

Inclusive institutions are institutions that allow people broadly to participate in the economy, so free markets and free trade are generally inclusive institutions. However, they are not the only inclusive institutions and not even the most important ones. For example, a far more important institutions are strong and secure property rights, without which people would be afraid of making large capital investments (see Acemoglu & Robinson Why Nations Fail) which are obviously pre-requisite for industrialization to naturally occur. Next, having a central government that can impose peace and security from violence and coercion is also extremely important, forced labor or other types of coercive extractive institutions are antithesis to economic development (again see Acemoglu & Robinson).

Protectionism, is also an extractive institution, and Britain indeed was protectionist during its main industrialization phase, but in the grand scheme of things having few extractive institution, while relaying mostly on inclusive institutions won't hinder economic development. But generally it is argued and it was already recognized by contemporary economists that the Britain's protectionist policies (e.g. corn laws) hindered the industrialization and that it happened in spite of them rather than thanks to them, since its protectionist policies primarily advantaged agriculture (see Hirst, (1925) From Adam Smith to Philip Snowden).

In addition, it was likely also due to some historical luck. Other countries at that time, such as the Netherlands, had by all accounts more advanced economic system to that of Great Britain (see Mokyr 2000). In fact, while industrialization proper, started in the Britain, the Netherlands was already experiencing proto-industrialization at small scale far earlier (Bavel 2003). However, in the end the industrialization first took of in England, and it is argued that was because the Industrial Revolution at its inception requires a close cooperation between scientists, engineers and businessmen (see Mokyr 2000) . Mokyr argues it was the "closeness of natural philosophers, engineers, and entrepreneurs was a key to success in Britain."

Consequently, it would be fair to say that free markets played an important role in Britain's industrialization, but they were certainly not the only cause, far from it. Industrialization required a system built predominantly of inclusive institutions where private property, security, fair set of laws (at least relatively fair for their time) etc dominate. In addition, there already were countries that were undergoing proto-industrialization for much longer time than UK, but those countries did not undergo proper industrialization because share of income generated from manufacturing was still small. This was because for manufacturing to be really productive you need to apply some technology to it and UK happened to be a place where cooperation between scientists, engineers and business people was more common. Hence you should not just try to pin the industrialization in the UK on one single factor.

1muflon1
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    Either I do not understand what "fair set of laws" means, or I have read about a different British empire in history books. – Giskard Aug 01 '21 at 09:21
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    @Giskard well that is the phrase used by Acemoglu and Robinson, by fair I think that they mean a legal system that generally treats people equally. Also it is important to have sense of proportion, relatively for its time British legal system was arguably fair when compared to excesses of absolutist regimes that were the norm – 1muflon1 Aug 01 '21 at 09:24
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    It is true that I also dislike the popular book of Acemoglu and Robinson. This is an empire without universal suffrage, slavery has yet to abolished, a small ethnic minority colonizes and rules over a vast population. Perhaps something like "relatively fair compared to the contemporary countries" would be a better description than "fair". I also recommend reading about the Peterloo Massacre. – Giskard Aug 01 '21 at 09:26
  • @Giskard I edited my answer to add the caveat about relative fairness. Also, I think you are being bit uncharitable to Acemoglu and Robinson, I don't think you can read their text as some sort of endorsement of slavery or colonialism. I think it should be read more charitably. – 1muflon1 Aug 01 '21 at 09:35
  • That is not how I read it, and I don't think I made any such claim. What I do think is that the book greatly oversimplifies situations and celebrates free market institutions a bit too much. We all know that people do exist who think the free market is a panacea to all ills, so I dislike texts that give clout to such arguments. – Giskard Aug 01 '21 at 09:47
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    @Giskard well Acemoglu & Robinson are definitely not free market fundamentalist, and the text is based on rigorous and mostly empirical research, so credit where credit is due, these institutions were quite important. They also stress importance of inclusive political institutions and consider provision of public goods and redistribution inclusive as well. There will always be some free market crackpots that take some work throw away all nuance and just run with that. It's not like Saez or Atkinson's work on inequality are not fueling some crackpots on other side of spectrum. – 1muflon1 Aug 01 '21 at 09:59
  • Thanks for all your links. I'm still checking them. What you call "inclusive institutions" may be better named liberal institutions? Respect for property and personal liberty, is a liberal institution, meanwhile the "inclusive" word is today used by socialists to negate respect for property and restrict personal liberties. – jipome Aug 01 '21 at 20:28
  • @jipome I would not call them liberal. For example, unemployment insurance and wide access to healthcare (like in many European countries) would also count as inclusive institutions. Providing basic education free of charge would also be example of an inclusive institution (as it allows people to participate in our complex economy based on contracts etc). There is for sure non-trivial overlap between what you can call liberal institutions because liberalism typically favors destruction of arbitrary barriers, but definitely the overlap is not large enough to just equate them. – 1muflon1 Aug 01 '21 at 20:35
  • @Giskard I would start by questioning if the British Empire had much to do with the Industrial revolution at all. The idea that the empire was somehow a single unified economic entity seems far fetched. Maybe the requirement for a navy (and also a merchant navy) that could operate worldwide had some effect on developing improved technology, but that was hardly the main driving force for the Industrial Revolution. – alephzero Aug 01 '21 at 21:27
  • ... for example, in what way would the existence of millions of individual small land-owners have "benefited" the development of the early British canal and railway networks? If modern history is any guide, it would have done precisely the opposite. For example It is much easier to persuade 10 wealthy individuals that they will personally benefit from supporting something (and to invest their own wealth in the enterprise), than to persuade 10,000 barely-literate subsistence farmers of the same hypothetical benefits. – alephzero Aug 01 '21 at 21:33
  • @alephzero Well, if the railway investor is allowed to profit from the railway, he has an incentive to build a railway to transport the produce from the farmers to the cities, and then he needs better engines, and better engines need to understand entropy, and that finances investigation of physics, which in turn allow to build better engines. Instead, on a country where profits are expropriated, there is no incentive to make a railway, and to finance engine factories. – jipome Aug 01 '21 at 22:22
  • you really need to ask yourself: Have I seen evidence that free markets played a role? I'm a big fan of free markets, but I don't believe they played any role here. – PatrickT Aug 02 '21 at 06:38
  • What when strong property rights turn extractive, as in the current worldwide housing crisis? Then are they still good? – user253751 Aug 05 '21 at 08:38
  • You lied to me. You made socialist propaganda. – jipome Aug 25 '21 at 07:08
  • @jipome 1. I am not lying about anything. 2. The above is based on current economic research, also nothing above advocates socialism- which is by definition government ownership of means of production – 1muflon1 Aug 25 '21 at 09:07
  • @1muflon1 you are replacing liberty and property with "inclusive", which is a strawman troyan horse made by the Frankfurt school – jipome Aug 25 '21 at 14:03
  • @jipome I am not replacing anything. 1. "inclusive institution" is a technical term coined by Acemoglu and Robinson, the authors have no connection to the Frankfurt school, nor they are socialists. 2. also I am not replacing anything. Inclusive institutions is an umbrella term, the same way as a mammal is umbrella term for many animals, property rights are categorized as an inclusive institution. 3. This is original terminology that was used for such institutions, previously there was no taxonomy, and the term has little to do with use of word "inclusive" in contemporary English language – 1muflon1 Aug 25 '21 at 14:05
  • @ 1muflon1 The Frankfurt school created the term "inclusive institutions", "inclusive language", and all the "inclusive buzzwords", because it is a socialist think thank focused on language as a manipulation tool. Their main tactic is to create multiple homonym words, to use the homonym as no pun intended word puns, to create logical fallacies, confuse people, and control them. For example, "neoliberalism" are many homonyms. One homonym means liberalism, and the other homonyms are many different kind of evil strawman. – jipome Aug 26 '21 at 03:39
  • @ 1muflon1 one homonym of "inclusive institutions" are the liberal concept of property and liberty, but the other homonyms are "social justice", or plain socialism. – jipome Aug 26 '21 at 03:41
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    @jipome 1. Frankfurt school did not coined term inclusive institutions in economics that is blatantly false statement as in economics the terminology can be traced directly to work of Acemoglu and Robinson, just google it. 2. Inclusive institution has nothing to do with inclusive language. 3. Socialism (as defined in economics) is literally an extractive institution not inclusive in Acemoglu and Robinson work, so inclusive institutions are not homonym to socialism but antonym. Acemoglu and Robinson even use USSR as an example of a country where institutions are extractive not inclusive – 1muflon1 Aug 26 '21 at 09:54
  • @1muflon1 The Frankfurt school has penetrated the entire academy, because they believe that they need to achieve cultural hegemony first, to take control of the society later. Because they take control by manipulating language, first, they enforce troy horse terminology, including "inclusive anything". When you say that "inclusive institutions mean XXX", that's exactly what the Frankfurt school planned yo to do, but you are not understanding (more probably you are maliciously pretending ignorance) that in parallel, they are using the exact same phrase as an homonym for "social justice". – jipome Aug 26 '21 at 11:39
  • @1muflon1 The Frankfurt school always turn antonyms into homonyms. For example, they call "antifascists" to his own fascist groups. The Frankfurt school calls "antiracist" to his racism, and they call "inclusive institutions" to his "social justice". That's a combination of the works of Focault, Gramsci and Chomsky. They purposely create confusion, to be able to argue against logic. – jipome Aug 26 '21 at 11:42
  • @1muflon1 The Frankfurt school enforces his terminology on the academics, and the ones who refuse get cancelled, fired, and banned from publication, so everybody is forced to adhere to their ideology. – jipome Aug 26 '21 at 11:49
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A wide range of factors are generally considered to have worked together, such as:

The end of medieval structures changed economic relations and allowed change.

A higher population due to fewer diseases and lower infant mortality allows for a larger industrial workforce.

The Agrarian Revolution liberates people from the land, allowing - or leading - them to cities and construction. Proportionally large amounts of reserve capital were available for investment.

Inventions and the scientific revolution allowed technology to increase and production to decrease.

The colonial trade networks allowed the import of materials and the export of processed products.

The presence of all the required resources is close, like coal close to iron.

A culture of hard work, risk-taking and idea development. Demand for goods

Pegasus
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    Hi, welcome to Economics:Stack Exchange. Please consider improving the answer by adding references from reputable and scholarly sources. As many other science stacks do, we require formal proofs, statistical evidence or links to external sources for answers making claims which are not common knowledge. Unsourced material can be edited or deleted. For more details see our help center and FAQ on community standards for answers – 1muflon1 Aug 01 '21 at 22:38