Friday, February 19, 2016

Paul Bairoch on the Industrial Revolution, Imperialism and Capitalism

The economic historian Paul Bairoch (1930–1999) subjected some Marxist myths about Western capitalism and imperialism to critical scrutiny in his now classic book Economics and World History: Myths and Paradoxes (New York and London, 1993).

First, was the Western industrial revolution dependent on energy from the Third World?

Bairoch (1993: 59) notes that right up until the post-WWII era the West was almost completely self-sufficient in energy, and as late as the 1930s much of the developed world had an export surplus in products used to create energy, such as coal (Bairoch 1993: 59). The energy-dependence of the First World on the Third World arose after WWII long after the industrial revolution, so one cannot claim that energy imports by imperialism were a necessary condition for the West’s industrialisation.

Production and use of oil as a source of energy for Western industrial civilisation only really began in the late 19th century, but it remained a tiny percentage of total energy consumption right up until WWI, and even here the West was mostly self-sufficient (Bairoch 1993: 61–62). An often forgotten fact is that US consumption of energy petroleum only rose above domestic production in 1957 (Bairoch 1993: 61), so that industrialisation in the US was not dependent on imports of oil.

What about iron ore? Iron ore was crucial for Western industry, since as late as 1910 iron ore represented 95% of all metal production (Bairoch 1993: 63). However, the West was almost wholly self-sufficient in iron ore too: most production occurred in Europe where in around 1914 Europe produced 28 million of the 32 million tons in global production (Bairoch 1993: 63). In 1914, the West only depended for 2% of its total metal ore consumption on Third World production – an extraordinarily low figure which means that 98% of metal ores were produced domestically (Bairoch 1993: 65).

In production of glass, cement, paper and clay products the West was almost completely independent and not reliant on imports (Bairoch 1993: 68).

Even in raw materials that were imported from the Third World, we can note that textile fibres were mostly produced domestically in Western countries and imports from the Third World only accounted for about 22% of domestic consumption as late as the 1909–1913 (Bairoch 1993: 67).

Bairoch (1993: 68) estimates that in terms of value the West was about 94–96% self-sufficient even in raw materials around 1913.

Of the raw materials that did need to be imported from the Third World such as rubber, fertilisers, and phosphates, their total value in relation to Western exports was not large, and could easily have been obtained by international trade and paid for through export earnings: there was simply no economic need for imperialist conquest of the Third World to obtain these goods.

Bairoch’s conclusion is very important:
“… if in fact from 1955 onwards the large dependence on raw materials from the Third World was a reality, before that period it was a complete myth. The developed countries were thus able to reach a very high level of industrialization on the basis of local raw materials and also on the exploitation of their local workforces …. .” (Bairoch 1993: 70).
In other words, the vulgar Marxist explanation of Western imperialism as motivated largely or ultimately by an evil capitalist need to plunder the Third World and steal raw materials and energy necessary for industrialisation is a myth.

Now what about the Marxist and Leninist thesis that Western imperialism – especially after the 1880s – was driven by the need to find new markets for Western manufactured commodities and that this was the primary economic cause of imperialism? This was the famous thesis of Lenin’s Imperialism, the Highest Stage of Capitalism (1982 [1917]).

Once again, Bairoch demonstrates that this is a myth. Of total exports from the West from 1900 to 1938, Bairoch estimates that about 17% of exports were sent to the Third World and only 9% to actual Western colonial territories (Bairoch 1993: 72).

And – even more catastrophically for Marxist ideology – the export sector accounted for only about 8–9% of GNP of most developed nations, and total exports to the Third World were as low as 1.3 to 1.7% of the total volume of production. Exports to actual Western colonial territories accounted for as little as 0.6 to 0.9% of the total volume of production (Bairoch 1993: 73).

Throughout the 19th century, for example, the United States only exported about 0.5–0.9% of its total GNP to the Third World (Bairoch 1993: 73).

Even Great Britain – the colonialist superpower of the 19th century – exported only about 4–6% of its total production (Bairoch 1993: 73), and not all of that to its colonies, a figure which remains a low percentage. At most, Bairoch notes, exports to the Third World might have helped certain given UK sectors for limited periods of time (such as textiles), but this hardly vindicates Marxism, since it does not follow at all that this was a necessary condition for the British industrial revolution nor that British imperialism had a fundamental and underlying economic motive.

Did Western manufacturing need a captive Third World market from imperialism? The evidence shows that it did not. For a period where the data is very good, Bairoch estimates that from 1899–1938 manufacturing exports to the Third world accounted for about 5–8% of total Western manufacturing production (Bairoch 1993: 74): but this was a marginal outlet compared with domestic markets.

Even for the 19th century as a whole, Bairoch’s research suggests that perhaps on average 10% of Western manufacturing output was exported to the Third World (Bairoch 1993: 74).

Now it is true that free trade policies imposed on the Third World in the 19th century caused de-industrialisation in a number of countries, but none of this was necessary for Western capitalist development:
“… the damage caused to Third World industries by colonialism through the influx of manufactures did not in fact have a correspondingly large positive effect on the developed countries. Taken as a whole, access to Third World markets was no more than a small stimulus to the developed countries’ industries.” (Bairoch 1993: 74).
So in reality the industrial revolution and economic development of the West right up until the mid-20th century did not require as a necessary condition Western imperialism.

Without empires, the West would still have industrialised and its per capita wealth would still have spectacularly soared above the rest of the world: the miracle of capitalism would still have happened. At most, real capita GDP would have been slightly lower, but not by much.

Lenin, Vladimir Il’ich. 1982. Imperialism, the Highest Stage of Capitalism. Progress, Moscow.

Bairoch, Paul. 1993. Economics and World History: Myths and Paradoxes. Harvester Wheatsheaf, New York and London.


  1. 17% is an enormous number! Not to mention the enormously important trade surpluses that Britain ran with the Empire to establish demand for Sterling and give rise to its financial dominance until the end of the gold standard.

    Anyway, the "imperialist" hypothesis was picked up by Keynes in the General Theory via Hobson and was formalised into what came to be Post-Keynesian economics in the work of Michal Kalecki which was derived from Rosa Luxemburg.

    Your attacks on "Marxism" are really just attacks on Post-Keynesian theory.

    1. Is there something wrong with your reading comprehension, Illusionist?

      Yes, about 17% of exports were sent to the Third World, but export sectors accounted on average for only about 8–9% of GNP of most developed nations, and actual total exports to the Third World were as low as 1.3 to 1.7% of the total volume of production. Exports to actual Western colonial territories accounted for as little as 0.6 to 0.9% of the total volume of production (Bairoch 1993: 73).

      This is, as Bairoch says, surprisingly small. As I said, if even this small trade had been greatly reduced, the miracle of capitalism and the industrial revolution would still have happened.

      The Marxist imperialist conspiracy theories aren't vindicated by this.

      If Kalecki fell for it, then so much the worse for Kalecki.

      Your new found defence of Marxism is odd to say the least, especially as in the past you complained of the LTV as being "ideological" and worse than marginalism.

    2. Oh, and Robinson's ignorant writings on communist states and badly flawed assessments of China and North Korea show how deeply careful Post Keynesians need to be about command economies, communism and any kind of flirtation with crackpot Marxist ideologies.

    3. Illusionist, the funny thing about LK's criticism of Marx is that it actually makes it look more reasonable. Just read his posts!

      In this last post what is under discussion is not Marx but Hobson and Lenin's plagiarism of him. And here i think LK actually nailed it well.

  2. Economic planning is good, though. That's what Keynes advocates. Just not enough of it.

    1. Economic planning is what the private sector is supposed to do.

  3. "Without empires, the West would still have industrialised and its per capita wealth would still have spectacularly soared above the rest of the world:"

    Yes, and non-Western countries like the Asian Tigers too, which became industrialized and wealthy and had no colonial empires. And Japan, of course, that become a highly developed country after the WW2 without having a colonial empire either.

    1. Most of them became developed as well as countries (taiwan singapore japan south korea) as well as germany and u.s and uk through protectionism which helped them develop the right industries

  4. LK i have a question out of curiosity how much of a role played the wealth gained from early imperalism on early investments in industrial revolution?

    1. The evidence shows that colonialism was not necessary as a precondition of the industrial revolution:

    2. Thanks LK you always provide a lot of interesting information.