Skip to main content

Ben Franklin, Consumption and the Industrial Revolution

The idea that demand expansion was central for the Industrial Revolution, in Keynesian fashion, was at some point dominant among economic historians. It was, for example, explicit in both Phyllis Deane and David Landes famous books about it, both published in 1969 (The First Industrial Revolution and The Unbound Prometheus, respectively).

It is also well-known that Adam Smith recognized that productivity growth (the division of labor) was limited by the extent of the market (demand), so that growth and the wealth of nations, which depended on productivity growth, and not on the accumulation of foreign reserves (gold) or trade surpluses as defended by Mercantilists, was in a sense demand-led.

Ben Franklin is not often cited in relation to his economic writings, but he was knowledgeable in the main developments of his time.  He was both a defender of the labor theory of value, and of paper currency in his famous A Modest Enquiry into the Nature and Necessity of a Paper-Currency, and the consensus is that his ideas came essentially from William Petty, the father of the surplus approach according to Marx.

As it turns out Franklin had also something to say about the role of demand in the process of industrialization in Britain. He said in Observations Concerning the Increase of Mankind, Peopling of Countries, etc. (here) that:
"But in Proportion to the Increase of the Colonies, a vast Demand is growing for British Manufactures, a glorious Market wholly in the Power of Britain, in which Foreigners cannot interfere, which will increase in a short Time even beyond her Power of supplying, tho' her whole Trade should be to her Colonies."
In other words, he suggests that the role of higher demand by the colonies was essential in the process of industrialization. I should note that there is no consensus among those that defend the demand side story of the industrial revolution between domestic demand or foreign demand, but increasingly the literature associated to the changes in the patterns of consumption in Britain suggests that it was domestic markets (e.g. Maxine Berg and her discussion of the consumer revolution).


Popular posts from this blog

What is the 'Classical Dichotomy'?

A few brief comments on Brexit and the postmortem of the European Union

Another end of the world is possible
There will be a lot of postmortems for the European Union (EU) after Brexit. Many will suggest that this was a victory against the neoliberal policies of the European Union. See, for example, the first three paragraphs of Paul Mason's column here. And it is true, large contingents of working class people, that have suffered with 'free-market' economics, voted for leaving the union. The union, rightly or wrongly, has been seen as undemocratic and responsible for the economics woes of Europe.

The problem is that while it is true that the EU leaders have been part of the problem and have pursued the neoliberal policies within the framework of the union, sometimes with treaties like the Fiscal Compact, it is far from clear that Brexit and the possible demise of the union, if the fever spreads to France, Germany and other countries with their populations demanding their own referenda, will lead to the abandonment of neoliberal policies. Aust…

A brief note on Venezuela and the turn to the right in Latin America

So besides the coup in Brazil (which was all but confirmed by the last revelations, if you had any doubts), and the electoral victory of Macri in Argentina, the crisis in Venezuela is reaching a critical level, and it would not be surprising if the Maduro administration is recalled, even though right now the referendum is not scheduled yet.

The economy in Venezuela has collapsed (GDP has fallen by about 14% or so in the last two years), inflation has accelerated (to three digit levels; 450% or so according to the IMF), there are shortages of essential goods, recurrent energy blackouts, and all of these aggravated by persistent violence. Contrary to what the press suggests, these events are not new or specific to left of center governments. Similar events occurred in the late 1980s, in the infamous Caracazo, when the fall in oil prices caused an external crisis, inflation, and food shortages, which eventually, after the announcement of a neoliberal economic package that included the i…