Observe And Explain VariablesPhenomenonNa Hegemon And Hegemonic Theory Dependent Variable F Independ

1
Observe And Explain Variables/Phenomenon/NaHegem
on And Hegemonic TheoryDependent Variable F
(Independent Variable/S)At International
LevelState LevelSocietal/Corporate
LevelIndividual Level
2
The Nature of Pre-industrial EconomyAgriculture
Self-sufficientSubsistent LevelLow Level of
/SpecializationLow Level of Product
DifferentiationLittle Need/Rationale for Trade
3
World Trade ShareAs Indication of British
Hegemony And Decline
4
Causes for the Rise of British HegemonyA First
Cut

• Industrial Revolution
• A Clustering of Innovations in Cotton Textile
  Production
• Application of Water and Steam Power to
  Manufacturing
• Gathering of Previously Dispersed Manufacturing
  Operations under One Factory
• Key to Remember Mechanical vs Human or Animal
  Power

5
Explain the Onset of Industrial
RevolutionDifferent HypothesesPure
Luck?Individual (Market) LevelWhat About
Religion?State (Institutional)
LevelInternational Level - ConstantContractsSt
ock Market in Britain 1698Stock Market in Paris
1724
6
Consequences/Implications of Industrial Revolution

• 1.Demand Increase for Raw Materials
  Implications for Ricardian Growth Strategies
• 2.Schumpeterian Gale of Creative Destruction
  Blow Away Nascent Industry in Other Regions
• 3. First Mover Advantage Britains Rise to
  Global Hegemony
• Core-periphery Relationship
• Rationale for Complementary Trade
• Steamboats/Rail Made Trade More Easily

7
British Hegemony An ObservationBedrock
Manufacturing (Textile) and RailroadComplementary
Trade Between Core and PeripheryBritish Market
(8) Labor Force in Rural Areas
8
British Industrial Dominance (Per Capita Level of
Industrialization Britain in 1900100)
9
Big Men and Big Ideas

• Adam Smith Division of Labor
• Joseph Schumpeter Creative Destruction
• David Ricardo Comparative Advantage
• Nicholas Kaldor Verdoorn Effect
• Alexander Gerscherkron Collective Action Problem

10
Decline of British Hegemony

• Complementary Economies
• Ok. But Long Term Limits Where Is the Market?
• Competitive Economies
• Alternative Core-Periphery Centers
• We Are Looking at International Variables
• Bad News!

11
More Bad News at State and Firm Levels

• Anti-trust in USA Sherman Act
• Professionalization of Management
• Electrification Of Production
• Taylorization Of Production Processes
• Economy Of Scales Stable Market Demand
• Results
• US Productivity Per Unit Labor Grew by 2 from
  1890 to 1907 Compared to British Growth of 0.1
  by 1909 US Productivity Was Over 2.5 Times as
  High as British Productivity in 15 Major
  Industries. From 1870 to 191, US GDP Grew 4.9
  Per Year Comparable Figures for Germany Was 3.9,
  and for Britain 2.6.
• US Steel Production Doubled Every 10 Years in the
  1880s and 1890s, and Doubled Every Five Years in
  the 1900s as Electtric Machinery and Taylorsim
  Swept the Industry

12
Last Straw of British HegemonyInternational
Finance

• The System
• Gold Standard Key Attraction and Problem
  Money Supply Cannot Be Increased Through Policy
  Decision
• An Efficient Functioning International Money
  Provides a Source of Liquidity That Grows in Line
  with the Growth Transaction and the Economy in
  General Otherwise, Inflation or Deflation
• From 1870 to 1914, That Gold Standard Worked
  Owed More to Growing Supply of Credit Instruments
  Than to Increased Supply of Metallic Money

13
WWI Killed Gold Standard

• Differential Rates of Inflations Destroyed Prewar
  Exchange Parities Reflecting Underlying
  Productivity
• 1913100
• Price Levels in 1920
• USA 221
• Japan 259
• Britain 307
• France 488
• Germany 1000
• Overvalue or Undervalue?
• Causes and Implications
• Capital Control and Trade Regulation

14
British Decline as a Reflection of Fundamental
Changes in International Political Economy

• International Investment From Portfolio to FDI
  From
• Agriculture to Manufacturing
• Overseas US Firms in Britain Created a Novel
  Problem For Britain to Adopt, Adapt or Create
  New Institutional Innovations to Compete with
  Best Practice
• Complementary Trade to Competitive Trade Fords
  or Mercedes
• Overroad Trucking Filled Holes of Rail and
  Steamships More Fierce Competition.